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Competitive Leasing

What is competitive coal leasing?
The most common form of federal coal leasing is known as "competitive leasing," which provides an opportunity for any interested party to competitively bid for a federal coal lease.

Why are most federal coal leases issued competitively?
The Federal Coal Leasing Amendments Act of 1976 (FCLAA), amended Section 2 of the Mineral Leasing Act of 1920 to require that all public lands that are available for coal leasing be offered competitively. Two notable exceptions are:

  • Preference right lease applications that were submitted prior to enactment of FCLAA
  • Lease modifications for existing leases

Are there unique requirements that are part of a federal coal lease that is issued competitively?
Yes, several specific requirements that are part of every competitively issued lease exist:

  • A royalty rate of 12.5 percent for coal to be mined by surface mining methods and 8 percent for coal to be mined by underground mining methods.
  • A diligent development requirement that requires commercial quantities of coal be produced from the lease within 10 years of lease issuance.
  • Commercial quantities of coal has been defined by regulation to be 1 percent of the coal that potentially could be mined, including any coal that has already been mined. Failure to meet this requirement will result in termination of the lease.
  • A lease can only be issued if the competitive bid for the lease meets or exceeds the BLM's estimate of fair market value.
Are all competitive leases issued using the same procedures?
No, two distinct procedures for competitive leasing include:
  • Regional leasing, where the BLM selects tracts within a region for competitive sale
  • Lease by application (LBA), where an application from the public to lease a particular tract of coal is submitted

What are some of the specifics about how the regional leasing process works?
Regional coal leasing requires BLM to select potential coal leasing tracts based upon regional land use planning, expected demand for coal resources and potential environmental and economic impacts that could result from leasing. This process has not been used in recent years because demand for new leasing only has been for maintenance tracts for existing mines, which is done under the lease by application process. The key features of regional leasing include:

  • Consultation with local government and citizens through a federal/state advisory board known as a Regional Coal Team (RCT).
  • Balance of supply and demand for undeveloped coal.
  • Leasing performed under an Environmental Impact Statement (EIS) that considers regional coal development.
  • Extensive opportunity for public participation.

What is the process if I wanted to get a coal lease using the lease by application (LBA) process?
The general LBA process follows:

  • File an application with the appropriate BLM State Office indicating your interest in a specific coal tract. Each BLM State Office can provide you with further details of what is required in this application.
  • BLM will review your application to assure that it conforms to pertinent land use plans and determine that the coal tract you propose to lease is appropriate for coal leasing. BLM at this time will also review geologic information for the area to ensure the tract is reasonably configured so that federal coal will not be bypassed.
  • Your application is then reviewed by the RCT at a public meeting. Based upon all available information and public comment, the RCT recommends to BLM whether to continue with your application as applied for, to modify your application or to reject your application.
  • At this point, the preparation of an Environment Assessment (EA) or an Environmental Impact Statement (EIS) for the tract you proposed to lease is started. The EA or EIS requires preparation and publication of a draft document, receipt and analysis of public comments and publication of a final document. During this period, BLM will consult with other government agencies. Depending on the specific requirements and conditions of the coal tract you have proposed to lease, this could include a surface management agency, the state, Indian tribes or bands, the Department of Justice, or other agencies as needed. BLM will publish, at the expense of the successful bidder, public notice of the lease sale. This notice is published in a newspaper in the area of the tract and in the Federal Register. This notice provides some basic information concerning the tract and provides detailed sale and bidding instructions to anyone who might desire to bid on the tract.
  • An estimate of fair market value is prepared. The lease sale begins with the receipt of sealed bids prior to the sale. The sealed bids are opened at a public lease sale. The apparent high bid is accepted contingent upon it meeting or exceeding BLM's estimate of fair market value (FMV), that all adjudication requirements are met, and that the appropriate fees and payments are attached. At a minimum, one years annual rental payment ($3.00 per acre or fraction thereof) and one fifth of the bonus bid is required to be attached to the bid. The remaining four fifths of the bonus bid can be paid in equal installments over the next four years. By statute, half of the bonus bid and subsequent royalty are shared equally with the State in which the coal lease is located.
  • The minimum bid for a tract is $100.00 per acre or fraction thereof. The mimimum bid is not intended to represent fair market value.