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Fair Market Secret (and Updated Powder River Basin Map)

On the heels of news that more than one billion tons of coal have been auctioned off from the Powder River Basin of Wyoming just in the last year, the Bureau of Land Management yesterday stunningly rejected a bid from Peabody Energy for one of the biggest coal leases ever to be offered.

The lease in question, called South Porcupine, would have added 400 million tons of coal to Peabody’s North Antelope Rochelle mine, the second largest in the U.S.

The reason for rejecting Peabody’s bid?  According to the Bureau of Land Management, their 90¢ per ton offer for the lease was below fair market value.

But what is fair market value?  Funny you should ask, because the fact is, we don’t know.

That’s because the Bureau of Land Management won’t tell us.  In fact, not only will they not tell us what fair market value is, they won’t even tell us how they calculate fair market value.

In a 2011 response to a Freedom of Information Act request from WildEarth Guardians asking for fair market value records for several coal leases that were already sold, the Agency refused to provide any documents.  Their reason?  Well, read for yourself:

In this case, the government is involved in a commercial endeavor and is statutorily required to ensure that it receives at least fair market value (FMV) for the coal being sold. We are withholding coal reservoir appraisal data, coal reservoir geological analysis data, and the FMV data that were derived from the appraisal and geological data. Disclosure of the referenced data could cause substantial harm to the competitive position of the government by creating an unfair or “gamed” bidding processt thereby suppressing the value of bids for pending sales, as well as in subsequent sales of adjacent lands.

The Agency went on to assert:

We are also withholding the information in these documents pursuant to exemption 5 because disclosure of this information could interfere with the deliberative process leading up to BLM’s final decisions on FMV estimates. The documents reveal BLM staff opinions and recommendations that are considered in development of the FMV estimate. Disclosure of that information could create confusion about the primary factors considered in FMV decisions and would have a chilling effect on the agency’s candid discussion of the various factors that influence the FMV estimates.

You can read the full response here (page 10 has their response on the fair market value data).  In other words, fair market value is secret and the process for calculating fair market value is secret.  If this sounds a bit odd, it’s because it is.

Because the Bureau of Land Management is basically claiming not only that it can’t release fair market value data for leases that have already been sold, but it can’t even release records that explain how fair market value is calculated.

It would be like an appraiser not only refusing to share with us the appraised value of our home, but also refusing to share with us the procedures for appraising our home.  That would be a huge problem, especially when it came time to, oh, I don’t know, sell our home.

Yet that’s exactly what’s going on here.  Because the coal being auctioned off in the Powder River Basin is owned by the federal government, which means it’s owned by us.  That means it’s supposed to be sold to make money for us.

Of course, how do we know we’re making money if we don’t even know the value of what we’re selling?

We don’t know.  And, unfortunately, we apparently can’t know because according to the Bureau of Land Management, the value of our public assets and the process for valuing those public assets, is secret.

While this may be convenient for the federal government, ultimately, it leaves the American public with little reason to believe that we’re actually recovering the full value of this coal.

As for all the Bureau of Land Management’s excuses about “substantial harm” to the competitive position of the government and the “chilling effect” of releasing fair market information, this all seems to be a ruse.

Although the Agency has a point that releasing fair market value data for pending leases could lead to rigged bidding (in fact, that’s exactly what happened in the late 70’s and early 80’s, read the declaration of economist Tom Sanzillo at page 18-22, which was filed in conjunction with WildEarth Guardians’ most recent lawsuit over coal leasing in the Powder River Basin), the fact is, it’s a rigged process already.  That’s because, for the most part, there is no bidding for Powder River Basin coal.  In the last 22 years, 27 coal leases have been sold and only five have had more than one bidder.  If that’s not rigged bidding in and of itself, then I don’t know what is.

Regardless, there should be no problem in releasing fair market value data for leases that have already been sold.  The only thing this data would ever “chill” is public concern over whether the government is doing its job.

So what is the Bureau of Land Management hiding?  Honestly, I think they’re hiding the fact that for years now, they’ve been offering Powder River Basin coal at bargain prices.

That’s not say they haven’t been selling the coal at fair market value.  It’s just that fair market value, in all reality, probably isn’t really, truly, actually fair market value.

Perhaps they’re waking up to this.  I hope so.  The South Porcupine coal lease threatens to lead to the release of more than 660 million metric tons of carbon dioxide.  According to the U.S. Environmental Protection Agency’s handy online greenhouse gas equivalency calculator, that’s equal to the annual emissions of 156 coal-fired power plants.

The Bureau of Land Management seems to be taking a newfound stand against artificially cheap coal and in turn, global warming.  Let’s hope this trend continues.

In the meantime, I challenge the Agency to come clean with its fair market value assessments.  Just like no reasonable homeowner would ever allow an appraiser to keep their appraisals secret, the American public has a right to know how the Bureau of Land Management is assessing our coal and what the value really is.

UPDATED MAP!

On other fronts, check out our updated interactive Powder River Basin coal map (view the larger map for easier navigation).  And if you’re into Google Earth, download this .kml file with more detailed data and learn more about this coal producing region.  The map is always available on our Powder River Basin map page.

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