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The Biden Administration Won't Explain Its Big Coal Handout
Climate Change

The Biden Administration Won't Explain Its Big Coal Handout


President Joe Biden signed a broad executive order aimed at “tackling the climate crisis at home and abroad” one week after being sworn in, with seemingly clear language about ending subsidies for the industry most responsible for global warming.

The order states that “the heads of agencies shall identify any fossil fuel subsidies provided by their respective agencies for the Director of the Office of Management and Budget and the National Climate Advisor, and then take steps to ensure that, to the extent consistent with applicable law, Federal funding is not directly subsidizing fossil fuels.”

The order also instructed the secretary of the interior to “consider whether to adjust royalties associated with coal, oil, and gas resources extracted from public lands and offshore waters, or to take other appropriate action, to account for corresponding climate costs.”

No one expected that to imply lowering the fees that drilling and mining companies pay to extract fossil fuels from federal lands.

However, as E&E News first reported last week, Biden's Interior Department quietly approved Arch Resource's request for royalty relief at two of its coal mines, West Elk in Colorado and Coal Creek in Wyoming.

Arch Resources, formerly Arch Coal, is the country's second largest coal supplier and a former client of Interior Deputy Secretary Tommy Beaudreau, though the rate cut was approved before Beaudreau's confirmation.

Mark Squillace, a professor of natural resources law at the University of Colorado Boulder, called the approval "outrageous" and said he hoped it was a mistake.

“A royalty reduction like this is essentially a subsidy,” he explained, adding, “Someone is sleeping at the switch here.”

Arch reported a net profit of $27.9 million in the second quarter of this year, when the cuts were approved, according to Squillace.

He stated, "They clearly do not require this relief."

According to E&E News, the administration agreed to reduce the royalty rate from 12.5% to 2% for two years at the open-pit Coal Creek mine, which Arch plans to close in the fall of 2022, and to 5% for three years at West Elk, an underground mine.

The administration has promised aggressive action to reduce greenhouse-gas emissions, but its explanation for the Arch royalty cuts is as perplexing as the decision itself.

“The royalty relief process allows the BLM to provide temporary relief for mines to determine if they may remain viable,” a spokesperson for the Interior Department’s Bureau of Land Management told Stardia by email. The breaks for Arch mines allow “time to see if potential technological advances, such as methane capture, will work,” the spokesperson added.

The BLM did not respond to several of Stardia's specific questions, including how the decision fits with the administration's climate goals. The White House, which told The New York Times this week that the administration "has been very clear about marshaling an all-of-government approach that makes climate change a critical piece of our domestic, national security, and foreign policy," also did not respond.

A request for comment from Arch Resources was not returned.

The Interior Department is under no obligation to grant companies' requests for royalty relief, and Squillace pointed out that promoting the "greatest economic recovery" could be used to justify eliminating royalty payments entirely.

“How is this reduction going to impact state and federal revenues, and how does this decision impact the Administration’s climate policies?” he inquired. “Just as the Secretary has the discretion to reduce royalties, she also has the discretion to refuse to reduce royalties, and I have little doubt that denying this request would have been a better decision both economically and environmentally.

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The Sierra Club and several other environmental organizations urged the director of the BLM's Colorado office in a March letter to deny Arch's request for royalty relief at the West Elk mine.

“Subsidizing coal mines through ongoing royalty relief directly contributes to the climate crisis, which contradicts this administration’s policy,” the organizations wrote at the time.

Biden has faced criticism from some of the same climate and environmental groups that lauded his early efforts. His administration has worked to maintain a number of Trump-era energy projects, including the previous administration's decision to approve ConocoPhillips' massive Willow Project in Alaska's National Petroleum Reserve last year.

On the campaign trail, Biden promised to “transition away from the oil industry,” and the Interior Department is reviewing the federal oil and gas leasing program; however, permits to drill for oil and gas on public lands have increased under Biden’s watch.

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