The Federal Coal Leasing Program
This publication is distributed as a public service by the U. S. Department of the Interior's Bureau of Land Management (BLM). It provides general information about leasing coal resources on the public lands but it should not be exclusively to represent the program. More specific information on the subject is available from any of the BLM offices listed in the back of this publication.
Introduction
The Mineral Leasing Act of 1920, as amended, and the Mineral Leasing Act for Acquired Lands of 1947, as amended, give the Bureau of Land Management (BLM) responsibility for coal leasing on about 570 million acres of BLM, national forest and other Federal lands, as well as private lands where the mineral rights have been retained by the Federal Government. The BLM works to assure that the development of coal resources is done in an environmentally sound manner and is in the best interests of the Nation.
Regulations that govern the BLM's coal leasing program may be found in Title 43, Groups 3000 and 3400 of the Code of Federal Regulations (CFR). This publication is available in law libraries and most large public libraries. The CFR is also available on-line from the Government Printing Office (www.access.gpo.gov).
Lands Available for Leasing
Public lands are available for coal leasing only after they have been evaluated through the BLM's multiple-use planning process. In areas where development of coal resources may conflict with the protection and management of other resources or public land uses, the BLM may identify mitigating measures which may appear on leases as either stipulations to uses or restrictions on operations.
Lessee Qualifications and Limitations
Any adult citizen of the United States may obtain and hold Federal coal leases. Minors may not acquire leases, but a lease may issued to a legal guardian or trustee on behalf of a minor. Associations of citizens and corporations organized under the laws of the United States or of any State also qualify.
Aliens may hold interests in leases only by stock ownership in U.S. corporations holding leases and only if the laws of their country do not deny similar privileges to citizens of the United States. However, they may not hold a lease interest through units in a publicly traded partnership.
Types of Coal Leases
The Federal Coal Leasing Amendments Act of 1976 (FCLAA), which amended Section 2 of the Mineral Leasing Act of 1920, requires that all public lands available for coal leasing be leased competitively. There are two notable exceptions to this requirement: (1) preference right lease applications where a lease may be issued on a noncompetitive basis to owners of pre-FCLAA prospecting permits; and (2) modifications of existing leases where contiguous lands of less than 160 acres are added non competitively to an existing lease.
Competitive Leasing Process
There are two distinct procedures for competitive coal leasing: (1) regional leasing where the BLM selects tracts within a region for competitive sale; and (2) leasing by application where the public nominates a particular tract of coal.
Regional coal leasing requires the BLM to select potential coal leasing tracts based on multiple land use planning, expected coal demand and potential environmental and economic impacts. This process requires close consultation with local governments and citizens through a Federal/State advisory board known as a Regional Coal Team. However, because demand for new coal leasing has dropped in recent years, all current leasing is done by application.
Leasing by application begins with BLM review of an application to lease a coal tract to ensure that it conforms to existing land-use plans and contains sufficient geologic data to determine the "fair market value" of the coal. Upon review of the application and consideration of public comments, the BLM will reject, modify or continue to process the application.
Once the BLM accepts an application, the agency begins either an Environmental Analysis (EA) or Environmental Impact Statement (EIS). When a draft version of the EA or EIS has been prepared, the BLM seeks public comment on the proposed lease sale. At the same time, the BLM will also consult with other appropriate State, Federal and Indian government agencies.
Preparations for the lease sale start with the BLM formulating an estimate of the "fair market value" of the coal. This number is kept secret and is used to evaluate the bids received during the sale.
Sealed bids are accepted prior to the date of the sale and are publicly announced during the sale. The winning bid will be the highest one meeting or exceeding the coal tract's fair market value, assuming that all eligibility requirements are met and the appropriate fees and payments are attached (at a minimum, this amounts to the first year's annual rental payment and one-fifth of the amount bid).
Remittances associated with the coal leasing process may be made by personal check, cashier's check or money order made out to the Department of the Interior. Although cash will not be accepted, VISA or Master Card may also be used.
Lease Terms and Conditions
A Federal coal lease grants the right to explore for, extract, remove and dispose of some or all of the coal deposits that may be found on the leased lands.
Coal leases are granted on the condition that the lessee will obtain the appropriate permits and licenses from the BLM, the Office of Surface Mining and any affected State and local governments.
Bonding
Before the BLM issues a coal lease, the lessee must furnish a bond in an amount determined by the agency to ensure compliance with all lease terms and conditions. At a minimum, a bond is required that will cover any remaining balance of the bonus bid, as well as one year of advance rental and one-quarter year of advance royalties if the lease is in production. In addition, the Surface Mining Control and Reclamation Act of 1977 requires sufficient bonding to cover anticipated reclamation costs. This bond is submitted to the Office of Surface Mining Reclamation Enforcement or the State regulatory office.
The BLM may require a change in bond amount, either higher or lower, at any time the agency believes it is warranted.
Rentals
The annual rental rate for coal leases is $3 per acre (or fraction thereof). After the lease is issued, rentals must be received by the Department of Interior's Minerals Management Service (MMS) on or before the lease anniversary date to prevent statutorily required automatic termination of the lease. This generally requires mailing of the annual payment at least a week to 10 days in advance of the anniversary date to ensure timely receipt by the MMS.
Royalties
The royalty for surface-mined coal has been established by law at 12% of the gross value of the coal produced. For coal mined by underground methods, the BLM requires an 8% royalty. In both cases, royalty receipts are shared equally with the State in which the lease is located.
Transfer or Sale of a Lease
The BLM may assign a lease in whole or in part to another entity that is qualified to hold a Federal coal lease. The rights of the entity receiving the lease, however, will not be recognized by the BLM until the assignment is approved and the original lessee remains responsible for all obligations of the lease until the approval occurs.
Under certain circumstances, an exchange of coal leases may be allowed for the purposes of compensation, or when it is in the public interest.
Termination of a Lease
A Federal coal lease has an initial term of 20 years, but it may be terminated in as few as 10 years if the coal resources are not diligently developed. In addition, if the lessee fails to comply with the provisions of the Mineral Leasing Act of 1920, as amended, or fails to comply with any applicable regulations, lease terms or stipulations, the BLM may take legal steps to terminate the lease.
A lessee may, at any time, seek to surrender a lease in whole or in part by filing a written request for relinquishment with the jurisdictional BLM office. However, the lessee must be in compliance with all lease terms and conditions and have paid all payments and fees. The lease bond may be used to assure compliance with the terms and conditions of the lease.
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