Analysis of the Powder River Basin Federal Coal Lease Sale: Economic Valuation Improvements and Legislative Changes Needed
RCED-83-119
Published: May 11, 1983. Publicly Released: May 11, 1983.
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Highlights
In response to a congressional request, GAO evaluated many sensitive and controversial issues surrounding the April 28, 1982, sale of coal leases in the Powder River Basin Federal Coal Region and its implications for the overall success of the Federal Coal Management Program.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| Congress should amend the Mineral Lands Leasing Act of 1920, as amended, to: (1) authorize Interior to negotiate captive or maintenance-type leases; and (2) require Interior to publish for public comment information derived at sequential phases in the lease negotiation process. To ensure public and industry awareness of the lease negotiation process, and to provide ample opportunity for affected parties to influence the process, Interior should be required to publish its: (1) intent to negotiate a proposed maintenance lease; (2) decision to negotiate the lease as proposed and its evaluation of public comments; (3) intent to sell the lease and the proposed sale terms; and (4) decision to sell the lease as proposed, or under modified terms, and its evaluation of public comments. To facilitate future evaluations of the negotiation process, Congress should amend the Mineral Lands Leasing Act of 1920 to require that detailed records be kept of the negotiations, including evidence presented by government and industry representatives, and of its disposition. | In revamping the Federal Coal Management Program, Interior considered proposing legislation to negotiate the sale of captive or maintenance-type bases. The idea was abandoned because it felt that the negotiations would be too difficult to administer. GAO disagreed because its analysis shows negotiated sales to be the most effective means of obtaining fair market value for captive lease tracts. |
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of the Interior | The Secretary of the Interior should postpone scheduled regional coal lease sales until Interior has had an opportunity to correct deficiencies in its valuation, leasing, and fair market value determination procedures. |
Interior complied with this recommendation and corrected deficiencies identified in the reports by GAO, the Commission on Fair Market Value Policy for Federal Coal Leasing, and the Office of Technology Assessment. No further follow-up is warranted.
|
| Department of the Interior | The Secretary of the Interior should not resume coal leasing until Interior has developed: (1) a detailed analysis of the economic and geologic variables affecting the value of a federal coal lease; (2) new internal procedures for conducting coal lease valuations; (3) new guidelines for using untried or experimental bidding systems, such as entry level and interact bidding, at regional coal lease sales; (4) minimum regulatory selling prices for coal leases in each federal coal region on a cents per ton basis; and (5) revised fair market value determination procedures that include specific quantitative tests which are applicable whether or not adequate bidding competition is present and place greater reliance on prior comparable sales and recent arm's length sales in the absence of bidding competition at the actual sale. |
As a result of this report, a special commission was established to review the fair market value policies for federal coal leasing. Interior has made programmatic changes in response to the Commission's recommendations. No further follow-up is warranted.
|
| Department of the Interior | The Secretary of the Interior should direct the Bureau of Land Management to establish written, bureauwide, internal procedures for safeguarding coal lease pricing, economic valuation, and other proprietary data. |
Interior complied with this recommendation immediately after the report was issued. No further follow-up is warranted.
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Topics
Coal fieldsCoal leasesCoal pricesEnergy costsInformation disclosureLand managementPrice regulationProprietary dataSalesCoal