By Denise Dragoo, Natural Resources Partner, Snell & Wilmer, LLP
During the first six months of the new Administration, President Trump has delivered much needed relief to the coal industry. The President and Congress have been particularly effective at rolling back policies proposed at the end of the previous Administration. Half-way through this first year, a ban on federal coal leasing has been lifted, overly restrictive coal mining regulations regarding stream protection were revoked by Congress and, just yesterday, the Trump Administration published its repeal of coal valuation rules which were not finalized until January, 2017. These policies and rules have the common thread of being overly burdensome and pushed to decision in the final year of the Obama Administration. The repeal of these measures comes as welcome relief to the beleaguered coal industry. Hope has returned to the industry, particularly for development of coal on public lands.
The coal industry in Utah, largely dependent on federal coal reserves, has seen significant results from these policy changes.
New Policy Directives
On March 28, 2017, President Trump signed Executive Order 13783, aptly titled, “Promoting Energy Independence and Economic Growth”, announcing that “my administration is putting an end to the war on coal.” The President stated that, “with today’s executive action, I am taking historic steps to lift the restrictions on American energy, to reverse government intrusion, and to cancel job-killing regulations.” Key among the restrictions addressed in the Executive Order was a moratorium on federal coal leasing imposed on January 15, 2016 by former Secretary of Interior Jewell under Secretarial Order 3338. Ostensibly, the leasing ban was to extend for three-years to allow for agency review of the Federal Coal Program under a programmatic environmental impact statement. Although the Department would lose federal lease revenue during the ban, Secretary Jewell reasoned that the current federal program needed examination primarily because the coal program had failed to generate a fair return to the taxpayers. This rationale was challenged by the coal industry as inconsistent with existing safe-guards. Notably, the current leasing program involves an above-board competitive bidding process. Under current federal rules at 43 CFR Subpart 3420, a bid for coal reserves cannot be accepted at a competitive lease sale unless the bid meets or exceeds fair market value, as independently determined by the agency. Further, prior to lease issuance, the current rules require an anti-trust investigation by the US Department of Justice.
Despite questions regarding the need for Federal Coal Program reform and over the objections of the coal industry, Secretary Jewell pushed to prepare a scoping report on the EIS published only days prior to the end of the Obama Administration. Similarly, on January 1, 2017, the Department of Interior, Office of Natural Resources Revenue finalized a controversial rule changing the manner in which production royalties are valued for oil, gas and coal leases on federal and Indian lands. Also late to the game, the Office of Surface Mining Regulation and Enforcement finalized its stream protection rule effective as of January 19, 2017, one day before the change in Administration. In its rush to finalize the rule, OSMRE failed to engage State agencies with primary regulatory authority under the Surface Mining Control and Reclamation Act. The coal industry viewed these rules as overly burdensome, a duplication of state regulations and as usurping State authority over their coal regulatory programs.
The Trump Administration and Congress promptly responded to these overly burdensome rules and policies proposed at the tail end of the Obama Administration. Well prior to taking action by Executive Order, on February 16, 2017, President Trump signed into law House Joint Resolution 38, passed under the Congressional Review Act (‘CRA”) to revoke OSMRE’ s stream protection rule. The CRA authorizes Congress to review and invalidate regulations promulgated during the last 60 days of the prior Administration upon joint resolution of disapproval. As the result of repeal of OSMRE’ s rule, the prior stream protection and hydrologic protection rules remain in place.
On March 29, 2017, within one day of the President’s Executive Order 13783, new Secretary of Interior Zinke, lifted the moratorium on federal coal leasing, ceased the Federal Coal Program environmental review and reinstated the Federal Royalty Policy Committee. Secretary Zinke , critical of his predecessor’s use of a programmatic EIS as the vehicle for policy reform, fully reinstated leasing under the Federal Coal Program and invited comment on the need for further regulatory reform. To further implement the President’s Executive Order, on April 4, 2017, ONRR proposed to rescind the final Consolidated Federal Oil & Gas and Federal Indian & Coal Valuation Rule. 82 Fed. Reg. 16323. The final coal valuation rule was repealed yesterday by ONRR at 82 Fed. Reg. 36934 (August 7, 2017). ONRR also reinstated the valuation regulations that were in effect prior to January 1, 2017 and both the repeal and reinstatement will become effective in 30 days.
Impacts on the Utah Coal Industry
The actions of the Trump Administration, particularly the lifting of the coal moratorium, may have significantly helped the coal industry in Utah. Lifting the ban on leasing has the immediate effect of allowing the Alton Coal Tract Lease by Application (“LBA”) to proceed to final decision by the Bureau of Land Management (“BLM’). The Alton Coal Tract includes some 3,581 surface acres and an estimated 44.9 million tons of recoverable coal located on federal lands within Kane County, Utah. Pending review since 2004, the LBA was in the final stages of environmental review in January, 2016 when the previous Administration imposed the lease moratorium. The BLM is now moving to complete the Final Environmental Impact Statement ( EIS) and hopes to make a final leasing decision in early 2018. If the competitive lease is granted to Alton Coal Development it will extend the life of the Coal Hollow Mine and create additional jobs in rural Utah.
Even prior to lifting the federal lease moratorium, one of Secretary Zinke’s first actions in office was to issue a competitive lease to Bowie Resources, Inc. for some 55 million tons of coal reserves within Utah located in the Fishlake and Manti-La Sal national forests. The Greens Hollow Federal Coal Lease issued in early March, 2017, allows for expansion of the Sufco Mine located on 6,175 acres in Sanpete and Sevier Counties. The competitive lease sale generated $23 million in lease bonus revenues which, along with lease and production royalty, will be split equally between the State of Utah and the federal government. The lease will extend the life of the Sufco Mine which delivers coal to power the PacifiCorp’s coal-fired plants in central Utah.
While the federal leases will benefit existing coal operations, a new coal mine started production in Emery County, Utah in June, 2017. Bronco Utah Coal Company purchased land and coal reserves at the site of the Consol Energy mine. Operating under a newly approved mine plan, Bronco has begun production near the town of Emery, Utah. At full production the Bronco Utah Mine will employ some 100 workers. Coal will be delivered to both the local steam coal market and to be exported.
Looking to the future, federal coal reserves, locked up during the Clinton Administration may also become available for lease. By Executive Order issued on April 26, 2017, Secretary Zinke was directed to review national monuments created since 1996. Of particular interest to the Utah coal industry, Secretary Zinke has focused on narrowing the boundaries of the 1.88 million-acre Grand Staircase Escalante National Monument. The original proclamation issued in September, 1996 which created the national monument resulted in the cancellation of the Smokey Hollow Coal Mine which was on the verge of receiving a permit to operate. The Secretary has 120 days to report but is likely to propose that boundaries be re-drawn to allow the possible leasing and development of these federal coal reserves.
In sum, the coal industry in Utah continues to fuel more than 70 percent of the State’s electrical energy. The industry is valued at over $800 million and provides some 2,000 high-paying jobs and a significant portion of local tax bases. The actions of the Trump Administration during the past six months may be essential to allow leasing of needed federal coal reserves at fair market value. These actions allow the industry and regulators to return to the rules of the Federal Coal Program as applied prior the tail-end of the prior Administration.
 See, this Sunday’s edition of New York Times , focusing on the Powder River Basin in Montana and Wyoming, titled, ”Under Trump, Coal Mining Gets New Life on U.S. Lands.”
 Concerns about fair return are addressed at p.4, S.O. 3338.
 Federal Coal Program, Programmatic Impact Statement – Scoping Report, Section D. Comments (Jan. 2017).
 Federal Coal Program, Programmatic Impact Statement – Scoping Report, (Jan. 2017).
 Secretarial Order 3348, Section 4.
 B.Malfy,”Zinke finalizes Greens Hollow coal lease, would secure Utah’s oldest mine”. The Salt Lake Tribune, March 16, 2017
 Amy Joi O’Dnoghue, “Birth of a Utah Caol Mine in the Trump Era”, Deseret News, April 3, 2017.