Heat on Coal

Was it afire sale?

Bumptious Interior Secretary James Watt found himself at the center of a new embroilment last week. The cause of the row: Watt's alleged mismanagement of the Federal Government's coal-leasing program, which, according to a House Appropriations Committee report, permitted the energy industry to buy coal-leasing rights at "fire sale" prices and reap "windfall profits" at taxpayers' expense.

The 121-page study, issued after an eight-month investigation, focuses on the April 28, 1982, auction of leases to 13 tracts in the prized Powder River Basin area. Interior officials say the sale, involving more than 21,000 acres" and 1.6 billion tons of coal, was the largest in the nation's history.

The Powder River deal netted taxpayers $66 million, plus promises of hundreds of millions of dollars more in future royalties. But the House report charges the base price is $60 million less than the committee investigators feel the properties are worth. Moreover, says the report, "such large-scale leasing under poor economic conditions distorts the market by flooding it with leased coal." In sometimes acrimonious testimony before the committee's Interior Subcommittee, Garrey Carruthers, Assistant Secretary for Land and Water Resources, maintained that the sale brought the Government $11 million more than the department's original $55 million estimate. The congressional report is "a poorly prepared and deceitful political document," he fumed. "We do not give coal away."

In fact, fair market value, the crux of the issue, is virtually impossible to calculate. The Government, which owns an estimated 34% of the nation's 475-billion-ton coal reserve, has routinely leased public land for coal extraction since 1920. In 1971, in order to evaluate its procedures, the Government declared a moratorium on federal coal leases. The hiatus, which did not end until 1981, effectively froze the market for coal leases, making future evaluations of tracts difficult. A 1976 reform requiring new leaseholders to mine their fields within ten years or forfeit their rights further complicated the mathematics of mine leasing.

To set fresh guidelines for the Powder River Basin auction, the committee report said, experts in the regional office of Interior's Minerals Management Service (MMS) in Casper, Wyo., spent 4,000 man-hours trying to determine the fair market "value" for each tract. But, feeling that the figures were not reliable, department officials in Washington rejected them. Barely one month before the sale, Interior came up with its own "entry level" bids, some of which were as much as half the MMS recommendation. The new prices, said an MMS official who worked on the original set of figures, "were far too low, way out of line." Around the same time, regional Minerals Manager Dwayne Hull notified his superiors that the higher MMS prices had been mysteriously leaked to industry representatives. Carruthers last week refuted the charge that this disclosure tainted the sale because the MMS prices had been scrapped anyway.

Despite the dustup, President Reagan seemed as confident in his embattled Interior Secretary as ever. At a meeting of newspaper publishers in New York last week, he said he didn't know of "anyone in that department who has done a better job with regard to environmental protection." This file is automatically generated by a robot program, so viewer discretion is required.