COAL LEASING

BLM Could Enhance 

Appraisal Process, 

More Explicitly 

Consider Coal 

Exports, and Provide 

More Public 

Information

Report to Congressional Requesters 

December 2013

GAO-14-140

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-140, a report to 

congressional requesters 

December 2013

COAL LEASING

BLM Could Enhance Appraisal Process, More 

Explicitly Consider Coal Exports, and Provide More 

Public Information

Why GAO Did This Study

In fiscal year 2012, about 42 percent of 

the 1.05 billion tons of coal produced in 

the United States came from coal

tracts leased under the federal coal 

leasing program. Interior’s BLM is 

responsible for managing this program, 

including estimating the fair market 

value of the coal to be leased. GAO 

was asked to examine this program. 

(Representative Markey originally 

made this request as Ranking Member 

of the House Committee on Natural 

Resources. He is now a member of 

the United States Senate.) This report 

examines (1) the number of tracts 

leased, along with the trends in 

associated coal production and 

revenues generated since 1990; (2) 

BLM’s implementation of the process 

to estimate fair market value for coal 

leases; (3) the extent to which BLM 

considers coal exports and domestic 

coal reserve estimates when 

estimating fair market value; and (4) 

the extent to which BLM communicates 

information on federal coal lease sales 

to the public. GAO analyzed data on 

coal leasing activity, examined 

regulations and case files for coal 

lease sales, and interviewed BLM and 

other officials. 

What GAO Recommends

GAO recommends, among other 

things, that BLM require state offices to 

use more than one approach to 

estimate fair market value where 

practicable, develop a mechanism to 

ensure that reviews of appraisal 

reports take place, and take steps to 

release additional summary 

information on its websites, including 

past lease sales. Interior concurred 

with these recommendations.

What GAO Found

Since January 1990, the Bureau of Land Management (BLM) has leased 107 

coal tracts, and associated coal production and revenues have grown. Most 

lease sales have had a single bidder and were leased the first time offered. The 

amount of coal produced from federal leases and associated revenues have 

increased since 1990, although production has leveled off since 2002. Revenues 

from federal coal leases have generated about $1 billion annually in recent years. 

Royalties paid when coal is sold and bonus bids paid for the right to mine a 

federal coal tract account for nearly all of these revenues. 

BLM’s guidance offers flexibility in how to estimate fair market value, and BLM 

state offices vary in the approaches they used to develop an estimate of fair 

market value. In estimating fair market value, some BLM state offices used both 

the comparable sales approach––where bonus bids received for past sales are 

used to value the tract being appraised––and the income approach––which uses 

estimates of the future net revenue streams from the sale of coal from the 

appraised tract. However, some offices relied solely on the comparable sales 

approach and may not be fully considering future market conditions as a result. 

In addition, GAO found that BLM did not consistently document the rationale for 

accepting bids that were initially below the fair market value presale estimate. 

Furthermore, some state offices were not following guidance for review of 

appraisal reports, and no independent review of these reports was taking place. 

Adequate review of the fair market value process is critical to ensure that its 

results are sound and key decisions are fully documented. In addition, BLM is not 

currently taking advantage of a potential independent third-party reviewer with 

appraisal expertise within the Department of the Interior (Interior), specifically, the 

Office of Valuation Services. 

BLM considers exports to a limited extent when estimating fair market value and 

generally does not explicitly consider estimates of the amount of coal that can be 

mined economically, known as domestic reserve estimates. As a result, BLM 

may not be factoring specific export information into appraisals or may not be 

fully considering the export potential of a lease tract’s coal as called for in agency 

guidance. The Wyoming and Montana BLM state offices considered exports, but 

they generally included only generic statements about exports in the reports they 

prepared. In the other seven states with leasing activity, exports were generally 

not considered during the appraisal process. According to BLM officials, 

domestic reserve estimates, which vary based on market conditions and the 

costs to extract the coal, are not considered due to their variable nature. 

BLM generally provides limited information on federal coal lease sales to the 

public because of the sensitive and proprietary nature of some of this 

information. The Wyoming BLM state office posts information on its website, 

including information on past lease sales, but most state office websites provide 

only general information. BLM’s guidance states that redacted public versions of 

its appraisal reports should be prepared, but no BLM state office has prepared 

such reports. BLM supplied redacted versions of fair market value documents in 

response to a recent public information request only after being advised to do so 

by Interior’s Solicitor’s office. 

View GAO-14-140. For more information, 

contact Anne-Marie Fennell at (202) 512-3841 

or fennella@gao.gov.
Page i GAO-14-140 Coal Leasing

Letter 1

Background 5

Since 1990, Over 100 Coal Tracts Have Been Leased, and Coal 

Production and Associated Revenues Have Generally Grown 15

BLM’s Implementation of the Fair Market Value Process Lacks 

Sufficient Rigor and Oversight 28

BLM Considers Coal Exports to Limited Extent When Estimating 

Fair Market Value and Does Not Consider Domestic Reserve 

Estimates Because of Their Variable Nature 36

BLM Provides Limited Information on Federal Coal Lease Sales to 

the Public 40

Conclusions 46

Recommendations for Executive Action 47

Agency Comments 48

Appendix I Objectives, Scope and Methodology 50

Appendix II Federal Coal Lease Sales, January 1990 through

December 2012 55

Appendix III Summary Information from File Reviews of Selected 

Federal Coal Lease Sales 63

Appendix IV Comments from Department of the Interior 68

Appendix V Comments from Department of Agriculture 69

Appendix VI GAO Contact and Staff Acknowledgments 70

Contents
Page ii GAO-14-140 Coal Leasing

Tables

Table 1: Number of Federal Tracts Leased and Associated Amount 

of Coal by State from 1990 to 2012 16

Table 2: Summary of Approaches BLM Uses to Estimate Fair 

Market Value for Federal Coal Lease Tracts 29

Table 3: Summary of Federal Coal Leasing Information Contained 

on BLM Websites 43

Table 4: Federal Coal Lease Sales, January 1990 through December 

2012 55

Table 5: Summary Information on Coal Lease Sale Files Reviewed 64

Figures

Figure 1: U.S. Coal Production by Region 11

Figure 2: U.S. Coal Exports, 2002-2012 14

Figure 3: Number of Bids Received for Federal Coal Tracts Leased, 

1990-2012 17

Figure 4: Map of Powder River Basin Coal Operations on Federal 

Coal Leases 18

Figure 5: Share of U.S. Coal Produced from Federal Leases, Fiscal 

Years 1990-2012 21

Figure 6: Coal Produced from Federal Leases by State, Fiscal Year 

2012 22

Figure 7: Total Royalties Generated from Federal Coal Leases, 

Fiscal Years 1990 to 2012 (2013 dollars) 24

Figure 8: Bonus and Royalty Revenue Generated from Federal Coal 

Leases, Fiscal Years 2003-2012 (2013 dollars) 26
Page iii GAO-14-140 Coal Leasing

Abbreviations

BLM Bureau of Land Management

Btu British thermal unit

EIA Energy Information Administration

EPA Environmental Protection Agency

FCLAA Federal Coal Leasing Amendments Act of 1976

FOIA Freedom of Information Act

IEA International Energy Agency

NEPA National Environmental Policy Act

OMB Office of Management and Budget

ONRR Office of Natural Resources Revenue

USGS United States Geological Survey

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Page 1 GAO-14-140 Coal Leasing

441 G St. N.W.

Washington, DC 20548

December 18, 2013

The Honorable Peter DeFazio

Ranking Member

Committee on Natural Resources

House of Representatives

The Honorable Edward J. Markey

United States Senate

Coal is an important domestic energy source, and in 2011, coal-fueled 

electric power plants supplied about 42 percent of the nation’s electricity.

The Department of the Interior’s Bureau of Land Management (BLM) is 

responsible for managing the coal resources on about 570 million acres 

of federal, private, and state land under the federal coal leasing program.1

Under this program, BLM leases out federal coal tracts to mining 

companies who extract the coal from both surface and underground 

mines. In fiscal year 2012, about 42 percent of the 1.05 billion tons2 of 

coal produced in the United States came from federal coal lease tracts.3

The coal leasing program also generates significant revenue for federal 

and state governments; in fiscal year 2012, about $1.2 billion was 

generated from coal leasing.4

 1

The federal government owns and manages the mineral resources on and below these 

lands but the state, in cases of state land, or a private party, in the case of private land,

owns the surface land. Federal land where coal leasing takes place includes land 

managed by BLM and other federal agencies, including the U.S. Forest Service. In those 

instances where a proposed federal lease would be on lands managed by another 

agency, the federal agency managing the land must consent to offer the lands for lease. 

In these cases, BLM is still responsible to overseeing the leasing process. 

These revenues come primarily from 

royalties paid on the coal when it is sold and payments made by 

companies to obtain the rights to mine on a federal lease tract, known as 

bonus bids.

2

This report uses tons when describing amounts of coal. One ton is 2,000 pounds. 

3

We did not include coal produced from tribal lands in our review of federal coal leasing 

because they are governed by a different set of regulations and do not involve the same 

leasing process as the federal coal leasing program. As of December 31, 2012, there 

were four operations mining tribal coal.

4

Generally, revenues from federal coal leases are split equally between the federal 

government and the state in which the coal lease is located.
Page 2 GAO-14-140 Coal Leasing

Since 1990, all federal coal leasing has taken place through a lease-byapplication process where coal companies propose tracts of land to be 

put up for sale by BLM.5 At these sales, known as lease sales, companies 

can bid for the rights to lease tracts of land that contain federal coal for a 

set period of time; during the lease period, they can mine and sell coal 

from these tracts. In most cases, these lease tracts are adjacent to 

companies’ existing coal mines, and the additional coal would allow these 

operations to continue. In preparation for a lease sale, BLM develops a 

confidential estimate of fair market value, which can generally be defined 

as the amount that a knowledgeable seller would obtain from a 

knowledgeable buyer for the coal deposit.6 This estimate of fair market 

value is documented in an appraisal report prepared by BLM.7 When 

conducting the lease sale, BLM leases the tract to the highest qualified 

bidder, as long as its bonus bid meets or exceeds BLM’s estimate of fair 

market value.8

According to the Energy Information Administration (EIA),

In response to a lease application, BLM will also determine 

the amount of the coal that can be extracted from the lease tract and the 

environmental impacts of the proposed mining activity.

9

 5

Another way for companies to obtain the rights to mine coal is through the lease 

modification process where a company may request a certain amount of contiguous land 

be added to an existing lease. BLM considers this request and, if granted, the lands are 

added to the existing lease without competitive bidding. The lease modification process 

was not part of our review.

coal exports 

have increased in recent years––particularly exports to Asia and Europe, 

6

More specifically, fair market value is defined as “that amount in cash, or on terms 

reasonably equivalent to cash for which in all probability, the coal deposit would be sold or 

leased by a knowledgeable owner willing but not obligated to sell or lease to a 

knowledgeable purchaser who desires but is not obligated to buy or lease.” 43 C.F.R. § 

3400.0-5(n) (2013). The Federal Coal Leasing Amendments Act of 1976 require that BLM 

obtain fair market value for the coal lease tracts and that coal leasing generally be done 

on a competitive basis. 

7

For the purposes of this report, we are using the term appraisal to mean the valuation of 

federal coal property offered for lease, in keeping with BLM’s guidance. See BLM, H3070-1 Economic Evaluation of Coal Properties (Washington, D.C.: 1994). The value 

estimated for federal coal lease sales is used to ensure receipt of at least the fair market 

value as required by the Federal Coal Leasing Amendments Act of 1976.

8

Before the lease can be issued, the high bidder must also provide a bond to ensure 

performance of lease conditions, and must undergo an antitrust review by the Department 

of Justice.

9

EIA is a statistical agency within the Department of Energy that collects, analyzes, and 

disseminates independent information on energy issues.
Page 3 GAO-14-140 Coal Leasing

where coal prices are generally higher than U.S. domestic prices. In 

2012, the United States exported about 126 million tons of coal—an 

increase of 54 percent over 2010 levels. This recent increase in coal 

exports has raised questions about whether BLM’s process for estimating 

fair market value is taking these changes into account, and whether the 

agency considers the total amount of coal that can be mined in the United 

States economically, known as domestic reserve estimates. In addition, 

some stakeholders, particularly environmental groups, have raised 

concerns about the amount of publicly available information on the federal 

coal leasing program and, specifically, documents BLM prepares as part 

of estimating fair market value. Interior’s Inspector General also recently 

issued a report examining aspects of the federal coal leasing program, 

including the process for estimating fair market value and the coal lease 

inspection and enforcement program.10

You asked us to examine the federal coal leasing program. (This request 

was originally made by Representative Edward J. Markey as Ranking 

Member of the Committee on Natural Resources, House of 

Representatives. Mr. Markey is now a member of the United States 

Senate.) Our objectives for this report were to examine: (1) federal coal 

leasing, including the number of tracts leased, along with the trends in 

associated coal production and revenues generated since 1990; (2) 

BLM’s implementation of the process to develop an estimate of fair 

market value for coal leases; (3) the extent to which BLM considers coal 

exports and domestic coal reserve estimates when developing an 

estimate of fair market value; and (4) the extent to which BLM 

communicates information on federal coal lease sales to the public.

To provide information on trends in federal coal leasing, we analyzed data 

from BLM’s LR2000 database—which BLM uses to track federal land and 

mineral resources, including coal—and summarized federal coal lease 

sale activity and bonus bids accepted since 1990. We also analyzed data 

on coal production and revenues generated from federal coal leases from 

1990 to 2012 from the Department of the Interior’s Office of Natural 

Resources Revenue (ONRR), which is responsible for collecting and 

distributing revenues associated with federal mineral leases including 

federal coal leases. To assess the reliability of these data, we conducted 

 10Office of Inspector General, U.S. Department of the Interior, Coal Management 

Program, U.S. Department of the Interior (Washington, D.C.: 2013).
Page 4 GAO-14-140 Coal Leasing

interviews with BLM and ONRR officials regarding these data and 

reviewed documentation on their data systems, and we determined the 

data we used to be sufficiently reliable for our purposes, unless otherwise 

indicated.

To examine BLM’s implementation of the process to develop an estimate 

of fair market value, we reviewed applicable regulations and BLM’s 

guidance for the coal leasing program and interviewed BLM officials in 

both headquarters and state offices on how they implement these 

regulations and guidance. In addition, we reviewed appraisal standards 

developed by appraisal organizations in the United States and in other 

countries and spoke with officials from some of these groups. We also 

selected and reviewed a nonrandom sample of case files prepared by 

BLM officials as part of 31 coal lease sales using a data collection 

instrument we developed. Specifically, we focused on recent lease sales 

and examined case files for lease sales that generally took place from 

January 1, 2007, to July 31, 2012.11

To determine the extent to which BLM considers coal exports when 

developing an estimate of fair market value, we used the results of our 

case file review to examine what types of information BLM included on 

exports. We interviewed BLM officials to learn about the information they 

consult in estimating fair market value and also spoke with 

knowledgeable stakeholders, such as academics, about future projections 

for coal exports. To determine the extent to which BLM considers 

domestic coal reserve estimates, we interviewed various BLM officials at 

headquarters and all of the BLM state offices where there are coal leases.

In addition, we examined available export and domestic coal reserve 

information from government sources and coal mining companies.

For those states that did not oversee 

a lease sale during this time frame, we examined files from their two most 

recent sales.

To examine the extent to which BLM provides information to the public on 

coal lease sales, we analyzed BLM’s policies for making information 

publicly available, reviewed BLM websites related to federal coal leasing, 

and reviewed a sample of documents that are made publicly available 

during the coal leasing process. We also interviewed BLM officials, 

 11This nonrandom sample cannot be generalized to all coal lease sales held. However, 

the results of this sample provide illustrative examples of the coal leasing process used 

and the documentation prepared.
Page 5 GAO-14-140 Coal Leasing

representatives from industry, and environmental groups to get their 

perspectives on the information made publicly available on federal coal 

leases.

We conducted this performance audit from June 2012 to December 2013 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. A more detailed description of 

our objectives, scope and methodology is presented in appendix I.

Coal is an important domestic energy source, and BLM is responsible for 

managing coal resources on about 570 million acres of federal, state, and 

private land. Since 1990, all federal coal leasing has taken place through 

a lease-by-application process where companies propose lease tracts to 

be put up for sale by BLM. In fiscal year 2012, about 1.05 billion tons of 

coal was produced in the United States, including production from federal 

coal leases, and the biggest coal production area for federal coal was the 

Powder River Basin in northeast Wyoming and southeast Montana. Coal 

is also an important fuel source worldwide and consumption of coal 

continues to increase. To meet this growing demand, there has been an 

increase in global trade of coal, including exports from the United States.

The Federal Coal Leasing Amendments Act (FCLAA) of 1976 amended 

the Mineral Leasing Act of 1920 to generally require that all federal coal 

leases be offered competitively.12

 12Prior to the enactment of FCLAA, some coal leases were awarded noncompetitively 

through preference right leases, which were awarded in areas where coal deposits were 

not known to exist and were discovered by the applicant. Competitive lease sales were 

held for coal tracts located in areas with known coal reserves.

Competitive leasing provides an 

opportunity for any interested party to competitively bid for a federal coal 

lease. There are two procedures that can be used for competitive leasing: 

(1) regional leasing, where the Secretary of the Interior selects tracts 

within a region for competitive sale based on, among other things, 

expected demand for coal resources and potential economic impacts and 

(2) lease-by-application, where companies submit an application to 

Background

Coal Leasing Program 

and the Transition from 

Regional Leasing to 

Lease-by-Application
Page 6 GAO-14-140 Coal Leasing

nominate lease tracts that they are interested in leasing. Under both of 

these methods, BLM examines the potential environmental impact that 

could result from coal leasing.

In April 1982, the first regional coal lease sale was held for 13 lease tracts 

containing 1.6 billion tons of coal located in the Powder River Basin in 

Montana and Wyoming, and a follow-up sale was held in October 1982 

for 2 lease tracts. Controversy surrounded the 1982 sale. Specifically, 

there were allegations that confidential appraisal information was 

disclosed to coal companies prior to the lease sale and that appraisal and 

sale procedures failed to assure that the public received fair market value 

for the leased coal tracts. These allegations led to an investigation by the 

House Appropriations Committee and a report that we issued in May 

1983.13

By 1990, BLM had shifted from regional coal leasing to lease-byapplication as the primary method of conducting federal coal lease sales. 

From 1987 to 1990, Interior decertified six coal regions it had established 

under the regional leasing program, citing declining interest in coal leases 

and poor coal market conditions.

Later that year, Congress directed the Secretary of the Interior to 

establish a commission to review the coal leasing procedures to ensure 

the receipt of fair market value, known as the Commission on Fair Market 

Value Policy for Federal Coal Leasing or the Linowes Commission.

Congress imposed a moratorium on lease sales until after the 

commission’s final report was issued in 1984. Among its key findings on 

the fair market value process, the Linowes Commission found that Interior 

used appraisal methods that were widely accepted by industry and 

government, but that Interior needed to, among other things, enhance its 

capacity to perform appraisals and seek independent reviews of its 

appraisals and, more broadly, of the federal coal leasing program. From 

March 1984 through February 1987, coal leases were subject to another 

moratorium to enable development and implementation of revised coal 

leasing procedures based on the commission’s recommendations.

14

 13GAO, Analysis of the Powder River Basin Federal Coal Lease Sale: Economic Valuation 

Improvements and Legislative Changes Needed, 

Decertification meant that regional 

sales were no longer conducted, but that lease-by-application was 

available so that current mines could maintain production at their existing 

GAO/RCED-83-119 (Washington, D.C.: 

May 11, 1983).

14Two other coal regions were decertified in 1981 and 1982.
Page 7 GAO-14-140 Coal Leasing

mines or new mines could begin operations. Under the lease-byapplication process, companies may submit applications to BLM state 

offices to nominate lease tracts to be put up for sale.15

Tracts nominated under the lease-by-application process, commonly 

referred to as maintenance tracts, are generally adjacent to existing 

mining operations and are nominated by companies that own these 

operations. The BLM state office where the tract is located will review the 

application to determine whether it is consistent with applicable 

regulations, or if leasing the proposed property would be contrary to the 

public interest. For example, a lease application may be rejected if BLM 

determines that the land is unsuitable for coal mining or if a qualified 

surface owner does not consent to surface mining.

This contrasts with 

the regional leasing process where Interior would decide which lease 

tracts would be put up for sale.

16 During this review 

process, BLM may also choose to redraw the lease tract boundaries in 

the public interest, a process known as tract modification. Reasons for 

tract modification include ensuring that economically recoverable coal 

adjacent to the original lease tract not be bypassed, or enticing another 

mining company to bid on a lease tract by making the boundaries of the 

proposed tract adjacent to more than one potential bidder, according to 

BLM officials. Once BLM accepts an application, it will begin either an 

environmental assessment or an environmental impact statement in 

accordance with the National Environmental Policy Act (NEPA).17

 15BLM has 12 state offices, with most of these located in the western part of the United 

States. These state offices are located in Alaska, Arizona, California, Colorado, Idaho, 

Montana, Nevada, New Mexico, Oregon, Utah, Virginia, and Wyoming. 

16There are instances where the surface is owned by an entity other than the federal 

government, but the underlying minerals are owned and managed by the federal 

government. In these cases, known as split estates, the qualified surface owner must 

consent to any surface mining, but this consent is not required for underground mining.

The qualified surface owner does not receive any royalties or other revenues for mining 

activities but may receive compensation from the lessee. 

17Enacted in 1970, NEPA has two principal purposes: (1) to ensure that an agency 

carefully considers detailed information concerning significant environmental impacts and 

(2) to ensure that this information will be made available to the public. NEPA requires 

federal agencies to evaluate the likely environmental effects of proposed projects using an 

environmental assessment or, if the projects would likely significantly affect the 

environment, a more detailed environmental impact statement evaluating the proposed 

project and alternatives must be completed.
Page 8 GAO-14-140 Coal Leasing

In preparing for a lease sale, BLM will also develop a presale estimate of 

fair market value of the lease tract’s coal, which is generally expressed in 

cents per ton of coal that is recoverable from the lease tract.

“Recoverable” refers to an estimate of the amount of coal that can be 

commercially mined from the tract and excludes coal that is not mined, 

such as top and bottom sections of a coal seam, which are typically 

mixed with less valuable rock.18

The presale estimate of fair market value is generally documented in an 

appraisal report prepared by the BLM state office overseeing the lease 

sale.

There are also instances when fair 

market value is expressed on a per acre basis.

19 Other reports, such as geologic, engineering, and economic 

reports, may also be prepared during the appraisal process by either the 

relevant BLM state office or an associated BLM district or field office in 

the state.20 The geologic report contains a legal description of the tract, 

along with an estimate of the amount of coal that can be recovered on the 

lease tract along with the characteristics of the coal, including its heating 

content.21

Prior to a lease sale, BLM is required to publicly announce in the Federal 

Register and a local newspaper when and where a lease sale will be held 

and the bidding procedures. Any company is free to bid on the lease 

using a sealed bid process. The amount that a company will pay to lease 

the tract—known as a bonus bid—is a function of the cents per ton they 

are willing to pay multiplied by the estimated recoverable tons of coal 

An engineering report generally contains a mining plan, along 

with estimates of the costs to extract the coal based on the number of 

employees and capital equipment necessary to carry out this plan, among 

other costs. An economic report provides information on future coal 

market conditions, including price and demand levels for the lease tract’s 

coal.

 1843 C.F.R. § 3480.0-5(a)(32).

19Some of these state offices oversee leasing activities across multiple states. For 

example, the New Mexico state office oversees New Mexico, Oklahoma, Kansas, and 

Texas. There are no federal coal leases in Kansas or Texas according to BLM officials.

20There are generally multiple BLM field offices that report to a specific BLM state office.

For example, there are 10 BLM field offices in Colorado and 3 of these oversee federal 

coal leasing. 

21Heating content is usually expressed as British thermal units (Btu) per pound of coal. A 

Btu is the amount of energy needed to heat 1 pound of water by one degree Fahrenheit. 
Page 9 GAO-14-140 Coal Leasing

from a lease tract. These bonus bids are then reviewed by a BLM sales 

panel, which includes officials from the relevant BLM state office and BLM 

headquarters. Bids are accepted or rejected based on whether they meet 

the estimate of fair market value, and the lease is awarded to the highest 

qualified bidder that meets or exceeds this estimate of fair market value.22

In addition to paying a bonus bid for the rights to mine the coal on a lease 

tract, companies also pay rents and royalties on the coal they extract.

This successful bidder must either pay the total bonus bid in full at the 

time of lease sale or pay 20 percent of the bonus bid at the lease sale 

followed by four equal payments on the first four anniversary dates of the 

lease. The minimum bid that BLM can accept for a lease tract is 

$100/acre. If a lease sale does not receive a qualified bid at or above the 

estimate of fair market value, the lease tract can be renominated again 

through the lease-by-application process by the company that originally 

nominated the tract or by another interested company. If there is no 

interest in the lease tract, the application is closed by BLM.

23

 22Before a lease is issued, the high bidder must also provide a bond to performance of 

lease conditions, and the lease issuance is subject to a Department of Justice antitrust 

review.

Rent amounts are at least $3 an acre and royalties are 8 percent of the 

sale price for coal produced from underground mines and at least 12.5 

percent of the sale price for coal produced from surface mines. These 

royalties are paid on the price of the coal received at the first point of sale 

after it is removed from the ground. Tracts are leased out for an initial 20-

year period, so long as the lessee produces coal in commercial quantities 

within a 10-year period and meets the condition of continued operations.

23The Mineral Leasing Act, as amended, directs the Secretary of the Interior to establish 

annual rentals and royalties for leases but establishes a minimum royalty rate of not less 

than 12.5 percent of the value of coal recovered by surface mining operations. 30 U.S.C. § 

207(a) (2013). The regulation establishing the minimum rental rate—43 C.F.R. § 3473.3-

1(a)—and the regulation establishing the minimum royalty rate for surface mining—43 

C.F.R. § 3473.3-2(a)(1)—were issued in 1979. The regulation establishing the royalty rate 

for underground mining—43 C.F.R. § 3473.3 -2(a)(2)—was initially issued in 1979 with a 

regulatory minimum (of a 8 percent royalty rate) that could be lowered (to a 5 percent 

royalty rate) but in 1990 the regulation was amended to establish a 8 percent royalty rate. 

The regulations also authorize BLM to waive, suspend, or reduce the rental, or reduce the 

royalty, for the purpose of encouraging the greatest ultimate recovery of federal coal, and 

in the interest of conservation of federal coal and other resources, whenever it is 

necessary to promote development or when the lease cannot be successfully operated 

under its terms, but in no case can the royalty on a producing federal lease be reduced to 

zero.
Page 10 GAO-14-140 Coal Leasing

Lease terms can be extended if a company is actively producing coal on 

the lease tract.

According to EIA data, about 1.1 billion tons of coal was produced in the 

United States in 2011 from 1,325 mines, which employed over 91,000 

people.24 Coal is produced from three major regions––Appalachia, the 

interior United States, and the western United States (see fig. 1). More 

than half of U.S. coal came from the western region, which includes the 

Powder River Basin in northeast Wyoming and southeast Montana. The 

Powder River Basin is the largest coal-producing region in the United 

States, and all 10 of the top-producing U.S. coal mines are in the Powder 

River Basin, with 9 of these located in the Wyoming portion of the basin, 

according to EIA data. Coal in the Powder River Basin has less sulfur 

than eastern coals, making it attractive to utilities for meeting Clean Air 

Act requirements.25

 24EIA. Annual Coal Report 2011 (Washington, D.C.: 2012).

Close to 100 percent of federal coal is produced from 

leases located in the western region and, in fiscal year 2012, federal coal 

accounted for nearly 80 percent of the western region coal production 

totals. Production from the western region is expected to continue to be 

the largest source of coal production in the future—in 2040, an estimated 

56 percent of total U.S. coal production will come from western mines 

according to our analysis of EIA data.

25According to Environmental Protection Agency (EPA) data, coal-fueled electric power 

plants are among the largest emitters of sulfur dioxide (SO2) and nitrogen oxides (NOx), 

which have been linked to respiratory illnesses and acid rain. The Clean Air Act requires 

EPA to establish national ambient air quality standards for six pollutants, including sulfur 

oxides and nitrogen oxides, which states are primarily responsible for attaining. States 

attain these standards, in part, by regulating emissions of these pollutants from certain 

stationary sources, such as electricity generating units In addition, the Clean Air Act 

Amendments of 1990 established a national cap-and-trade program to reduce SO2

emissions from fossil-fuel electric generating units and required EPA to establish NOx

emissions limitations for coal-fueled electric power plants. In response to these Clean Air 

Act requirements, many utilities installed scrubbers and switched to burning low-sulfur 

coal such as that from the Powder River Basin to reduce SO2 emissions.

U.S. Coal Production
Page 11 GAO-14-140 Coal Leasing

Figure 1: U.S. Coal Production by Region 

There are two primary methods used to mine coal: underground mining 

and surface mining. Deeper coal resources require use of underground 

mining, which entails digging a series of mine entries and shafts and 

using equipment to extract the coal and transport it to the surface.

Underground mining is more expensive than surface mining, which is 

used where coal deposits are buried within a few hundred feet of the 

surface. In surface mining, soil and rock above the coal—known as 

overburden—is blasted with explosives and removed using large 
Page 12 GAO-14-140 Coal Leasing

equipment, and the uncovered coal is then extracted. Mining on federal 

leases involves both underground and surface mining. According to BLM 

officials, underground mining is generally used on federal leases in 

Colorado and Utah, and surface mining is generally used in Montana and 

Wyoming.

Domestically, coal continues to be an important energy source and fuels 

a large portion of the electric power sector in the United States, according 

to EIA data. In 2011, coal-fueled electric power plants supplied about 42 

percent of the nation’s total electricity and, within the past decade, coal 

has provided as much as 50 percent of electricity in the United States.

More than 90 percent of the coal consumed in the United States is used 

by the electric power sector. According to EIA, for this reason, coal 

production trends are strongly influenced by coal demand in the electric 

power sector, which is sensitive to both changes in the overall demand for 

electricity generation and changes in the mix of fuel sources. Recently, 

there has been a general decline in the amount of coal used to generate 

electricity in the United States due to a combination of factors including a 

decline in overall electricity demand and shifts in the relative prices of 

other fuels.

Coal used in electricity generation is referred to as steam coal, as the 

coal is burned to produce steam which turns turbines that generate 

electricity. Most of the coal that is leased out through the federal leasing 

program is steam coal, according to BLM officials. In addition to its use in 

the generation of electricity, coal can also be used for a variety of 

industrial uses. For example, metallurgical coal is baked at high 

temperatures to make coke, which is used as fuel to make steel. 

Metallurgical coal has low sulfur and ash content, among other properties 

needed for making coke.

The amount of coal produced and consumed worldwide continues to 

increase. The International Energy Agency (IEA) reported that worldwide 

coal production increased by 6.6 percent in 2011, the twelfth straight year 

Market for Coal 

and Coal Prices
Page 13 GAO-14-140 Coal Leasing

of growth.26

The United States exports a small but increasing amount of coal primarily 

to Europe and Asia and, in 2011, the United States ranked fourth globally 

in coal exports behind Indonesia, Australia, and Russia. According to EIA 

data, total U.S. coal exports more than tripled from 2002 to 2012, as 

shown in figure 2 below. In 2012 about 126 million tons of coal was

exported––about 12 percent of the total coal produced in the United 

States. The majority of this coal is exported to Europe and Asia.

Metallurgical coal, which is generally not mined on federal coal leases, 

has historically made up the majority of U.S. coal exports. Nonetheless, 

there has been growth in exports the last few years of steam coal––the 

primary type of coal mined on federal coal leases. Specifically, from 2010 

to 2012, steam coal exports from the United States more than doubled, 

rising from 25.6 million tons to 55.9 million tons. Based on EIA data, 

exports from Wyoming and Montana, the two largest states in terms of 

production from federal leases, accounted for less than 2 percent of total 

U.S. coal production in 2011. In addition, coal companies have 

announced plans to further increase steam coal exports in the future, and 

there are several coal export facilities that are being proposed on the 

West Coast to transport coal to growing Asian markets.

In addition, as of 2011, coal supports 28 percent of the total 

primary energy consumption worldwide and is the second primary energy 

source behind oil. China continues to drive much of the world coal 

markets as its consumption and production of coal accounted for about 

45 percent of both global consumption and production totals in 2011 

according to IEA data. To respond to this growing international demand, 

there has been an increase in coal exports with global coal trade 

increasing 7 percent in 2011 according to IEA.

 26IEA, Coal Medium-Term Market Report. Paris, France, 2012. IEA is an autonomous 

organization established in 1974 that works to ensure reliable, affordable and clean 

energy for its 28 member countries and beyond. The IEA’s four main areas of focus are: 

energy security, economic development, environmental awareness, and engagement 

worldwide. Among its key objectives are to improve transparency of international markets 

through collection and analysis of energy data.
Page 14 GAO-14-140 Coal Leasing

Figure 2: U.S. Coal Exports, 2002-2012 

The price for coal varies widely across the United States. Among the four 

states with the most production from federal coal leases—Colorado, 

Montana, Utah, and Wyoming—the average prices for coal originating in 

these states in 2011 were $39.88/ton in Colorado, $16.02/ton in Montana, 

$33.80/ton in Utah, and $13.56/ton in Wyoming, according to EIA’s 2011 

Annual Coal Report.27 This large difference in price is tied to coal quality, 

which is referred to as coal rank.28

 27This price per ton of coal is for all coal sold in that state and may include coal from 

mines that are not on federal lease tracts. This price per ton of coal is the “free on board”

price for the coal, meaning it is the price paid for the coal before it is loaded on to a train or 

barge for transport to its final destination. Thus, this price does not include the cost to 

transport the coal. 

Among other factors, coal rank is 

determined by the amount of carbon that the coal contains and the 

amount of heat energy it can produce, with higher rank coal having more 

28Coal is classified into four major ranks (from highest to lowest): (1) anthracite, (2) 

bituminous, (3) subbituminous, and (4) lignite.
Page 15 GAO-14-140 Coal Leasing

energy content. The total amount of coal that an electric utility will need to 

fuel a power plant is tied to the heat content of coal. For example, a utility 

will need to buy more tons of coal with lower energy content to achieve 

the same output of energy that could be attained using less coal with a 

higher energy content. Other factors that affect a coal’s quality are sulfur, 

moisture, and ash content. The sulfur content of the coal affects the sulfur 

dioxide emissions that result when coal is burned, and using coal with 

less sulfur content can help electric utilities meet air quality requirements.

Coal with higher moisture and ash content is lower rank because both of 

these impact the amount of energy obtained from burning the coal. For 

example, coal with lower moisture content has greater energy content.

Since January 1990, BLM has leased 107 coal tracts under the lease-byapplication process, and both coal production and the associated 

revenues have grown. Most lease sales had a single bidder, and the 

successful bid amounts––typically expressed in cents per ton––have 

varied by state, with the greatest increases over time observed in 

Wyoming. The amount of coal produced from federal leases and 

associated revenues increased from fiscal year 1990 to fiscal year 

2002.29 Since fiscal year 2002, coal production from federal leases has 

remained relatively steady, but revenues continued to grow. In total, 

revenues from federal coal leases have generated about $1 billion 

annually in recent years.

In 1990, BLM began using the lease-by-application process as the 

primary method to lease out coal, and since then BLM has leased 107 

coal tracts, 31 of which were in Wyoming. (See app. II for a complete list 

of lease sales held since 1990.) The coal from the Wyoming lease tracts 

comprise approximately 8 of the 9 billion tons, or about 88 percent, of the 

coal available from federal tracts leased since 1990, as shown in table 1.

 29In this section, the information we present on coal production is based on data from 

ONRR on the volume of coal sold from federal coal leases. As mentioned earlier, we did 

not include coal produced from tribal lands in the scope of our report. Thus, the production 

and revenue information we present does not include tribal lands. 

Since 1990, Over 

100 Coal Tracts 

Have Been Leased, 

and Coal Production 

and Associated 

Revenues Have 

Generally Grown

Of the 107 Tracts 

Leased Since 1990, 

About 90 Percent Had 

a Single Bidder, and 

Most Were Leased the 

First Time Offered
Page 16 GAO-14-140 Coal Leasing

Table 1: Number of Federal Tracts Leased and Associated Amount of Coal by State 

from 1990 to 2012

State

Number of federal 

tracts leased Acres

Tons of 

recoverable coal 

(Millions)

Percentage

by tons of 

recoverable coal

Wyoming 31 77,137 7,967 88.4% a

Colorado 20 26,375 289 3.2%

Utah 15 30,082 214 2.4%

Montana 4 5,349 187 2.1%

North Dakota 12 8,386 135 1.5%

New Mexico 3 10,926 93 1.0%

Oklahoma 9 16,339 71 0.8%

Alabama 6 11,097 44 0.5%

Kentucky 7 2,952 10 0.1%

Total 107 188,243 9,011 100.0%

Source: GAO analysis of BLM data.

a

In Wyoming, we are reporting primarily mineable tons of coal while, for the other states, we are 

reporting recoverable tons of coal. This estimate of mineable tons of coal is generally a larger number 

than the recoverable estimate, because it includes coal that is generally left in place during actual 

mining operations, such as coal along property boundaries or coal left in place as pillars for structural 

reasons in an underground mine. Wyoming BLM typically does not report recoverable tons publicly 

because officials in this state office consider this sensitive information.

Of the 107 leased tracts, sales for 96 (about 90 percent) involved a single 

bidder (see fig. 3), which was generally the company that submitted the 

lease application. More than 90 percent of the lease applications BLM 

received were for maintenance tracts used to extend the life of an existing 

mine or to expand that mine’s annual production.
Page 17 GAO-14-140 Coal Leasing

Figure 3: Number of Bids Received for Federal Coal Tracts Leased, 1990-2012

According to BLM officials and coal industry representatives, there is 

limited competition for coal leases because of the significant capital 

investment and time required to establish new supporting infrastructure to 

start a new mine or to extend operations of an existing mine to a tract that 

is not directly adjacent to it. For these reasons, there have not been many 

new mines established on federal leases recently. For example, 

according to BLM officials the last new mine started on a federal lease in 

the Powder River Basin in Wyoming was the North Rochelle mine, which 

began operations in 1982. Officials from coal companies told us they 

typically submit new applications for federal coal leases to maintain a 10-

year coal supply at their existing mining operations. In 1983, we noted a 

similar lack of competition for federal coal leases following the 1982 

regional coal lease sale in the Powder River Basin and concluded that the 

market for coal leasing was largely noncompetitive because lease tracts 

sold “appear captive to adjacent mining operations.”30

 30

According to BLM 

officials, this same issue remains relevant today, and it is difficult to 

attract multiple bidders on a lease tract if it is not adjacent to multiple 

GAO/RCED-83-119.
Page 18 GAO-14-140 Coal Leasing

mining operations. For example, as shown in figure 4, tracts submitted for 

lease-by-application that are north and west of the Black Thunder mine 

are less likely to be bid on by the operators of the North Antelope 

Rochelle or Antelope mines. This is because it would be too costly and 

take significant time for these mine operators to move their heavy 

equipment to extract coal from these lease tracts, which are not directly 

adjacent to their existing operations. In contrast, the lease tracts that are 

located between two mines are more likely to be bid on by multiple mine 

operators, according to BLM officials.

Figure 4: Map of Powder River Basin Coal Operations on Federal Coal Leases

a

This map is a general representation of coal mining operations in the Powder River Basin. The Black 

Thunder, North Antelope Rochelle, and Antelope mines are each composed of several lease tracts, 

but we have combined this into a single entity for representation purposes.
Page 19 GAO-14-140 Coal Leasing

BLM officials told us that, where possible, BLM uses the tract modification 

process to encourage competition for lease sales. For example, Wyoming 

BLM officials told us that they recently divided an applicant’s proposed 

tract into two distinct tracts to be sold in two separate coal lease sales 

upon realizing that one segment may potentially interest another mining 

company. Colorado BLM officials told us that they altered boundaries of 

one coal lease application to allow for multiple entry points to the coal for 

underground mining to make the tract attractive to other companies. In 

our review of case files related to 31 recent lease sales, we found that 

BLM modified boundaries for seven tracts (23 percent) to enhance 

competition.31

Of the 107 leased tracts, 89 (about 83 percent) were leased the first time 

they were offered for sale. According to representatives of appraisal 

organizations we spoke with, this high acceptance rate of initial bids may 

reflect the reliance of existing mines on federal coal leases to maintain 

their operations and a willingness of mine owners to submit slightly higher 

bids to ensure they win federal coal leases. The remaining 18 tracts were 

leased after being reoffered for sale one or more times because the initial 

bonus bid offered was below the estimate of fair market value.

Six of these tracts were located in Wyoming and comprised 

more than half of the 11 Wyoming lease sales we reviewed; 1 was 

located in Utah. None of these leases, however, received multiple bids 

when sold.

32 Of the 18 

tracts that were reoffered for sale, 8 were in Wyoming and 5 were in 

Colorado.

 31We included only those tracts where the documentation explicitly said the tracts were 

modified to enhance competition. We did not include those tracts modified for other 

reasons, such as to ensure federal coal was not bypassed.

32Fifteen tracts were leased after a second sale; two tracts leased after a third sale; and 

one tract was leased after a fourth sale.
Page 20 GAO-14-140 Coal Leasing

The total amount of coal produced from federal leases has nearly doubled 

since fiscal year 1990. Growth in coal production from federal coal leases 

was largest from fiscal years 1992 to 2002, when it grew from 239 million 

tons to 444 million tons. The proportion of coal produced from federal 

leases relative to the total amount of U.S. coal production also grew over 

this same period from about 24 percent in fiscal year 1992 to about 40 

percent in fiscal year 2002 (see fig. 5). During this period there was an 

increase in U.S. western coal production, where a majority of federal coal 

is located, and a corresponding decline in production from eastern coal 

regions. In particular, BLM officials told us that Powder River Basin coal 

grew in demand over eastern coal because it enabled utilities to meet the 

stricter emissions limits due to its low sulfur content. Powder River Basin 

coal was also attractive to utilities because of its low production costs and 

access to transportation networks, both of which help to decrease the 

market price that a utility must pay for the coal. A United States 

Geological Survey (USGS) study reported that this shift reflected the fact 

that western mines, which typically rely on surface mining, can extract 

coal more cheaply than eastern mines, where coal is generally mined 

using underground methods.33

 33J.A. Luppens, T.J. Rohrbacher, L.M. Osmonson, and M.D. Carter, “Coal Resource 

Availability, Recoverability, and Economic Evaluations in the United States—A Summary,”

in The National Coal Resource Assessment Overview: U.S. Geological Survey 

Professional Paper 1625–F, eds. B.S. Pierce, and K.O. Dennen, chapter D (Reston, Va.:

2009).

Amount of Coal Produced 

from Federal Leases 

Gradually Increased in the 

1990s Before Leveling Off 

in Fiscal Year 2002, with 

Most Production Taking 

Place in Wyoming
Page 21 GAO-14-140 Coal Leasing

Figure 5: Share of U.S. Coal Produced from Federal Leases, Fiscal Years 1990-2012

Note: Non-federal coal sources include private, state, and tribal coal.

Since fiscal year 2002, coal production from federal leases remained 

relatively steady, averaging near 450 million tons annually, or about 41 

percent of total U.S. production. Production peaked in fiscal year 2008 at 

483 million tons and has since declined by 8 percent to 442 million tons in 

fiscal year 2012. In October 2012, we reported the amount of electricity 

generated using coal has decreased recently due to a decline in overall 

electricity demand and growth in the use of natural gas to fuel power 

plants.34

In fiscal year 2012, 85 percent of the coal produced from federal leases 

came from Wyoming. As shown in figure 6, Wyoming and three other 

western states—Montana, Colorado, and Utah—accounted for 97 percent 

of coal produced from federal leases. The remaining 3 percent of coal 

 34GAO, Electricity: Significant Changes Are Expected in Coal-Fueled Generation, but Coal 

is Likely to Remain a Key Fuel Source, GAO-13-72 (Washington, D.C.: Oct. 29, 2012).
Page 22 GAO-14-140 Coal Leasing

(about 12 million tons) was produced from federal leases in five other 

states—Alabama, Kentucky, New Mexico, North Dakota, and Oklahoma.

Figure 6: Coal Produced from Federal Leases by State, Fiscal Year 2012

The total revenue generated from federal coal leases has nearly doubled 

from $682 million in fiscal year 2003 to $1.2 billion generated in fiscal 

year 2008 and again in fiscal year 2012.35,36

 35All dollar figures in this section have been adjusted for inflation to 2013 dollars using the 

gross domestic price index, unless otherwise noted. 

Total revenues from federal 

coal leases have remained relatively steady since fiscal year 2005 

averaging about $1.0 billion per year according to our analysis of ONRR 

data. There are three sources of revenue from federal coal leases––

royalties, bonus bids, and rents––but royalties and bonus bids account for 

nearly 100 percent of the revenues from the federal coal leasing program.

36 Bonus bid and rent data prior to fiscal year 2003 initially provided by ONRR was limited 

due to a data system conversion the agency undertook. ONRR ultimately provided 

updated bonus bid data for this period, but it did so late in our review process, and we 

were unable to determine its reliability. ONRR provided royalty data for the entire period of 

our review, starting in 1990, which we assessed to be reliable.

Revenue from Federal 

Coal Leases Has Nearly 

Doubled Since 2003 

and Generated About 

$1.2 Billion in Fiscal 

Year 2012
Page 23 GAO-14-140 Coal Leasing

Royalties. Royalties comprised the majority of the revenue from federal 

coal leases—nearly two-thirds of the total revenue over the period from 

fiscal years 2003 to 2012.37 Royalty rates for coal depend on the mine 

type and are generally calculated based on a proportion of sales value, 

less allowable deductions, such as transportation and processing 

allowances.38 BLM generally sets royalty rates at 12.5 percent for surface 

mines, the required minimum royalty rate, and 8 percent for underground 

mines, the rate prescribed by regulation.39

 37These royalty amounts do not include advance royalties, which lessees, if authorized by 

BLM, can pay in advance of actual production in lieu of meeting the lease’s minimum coal 

production requirements. In fiscal year 2012, ONRR officials told us that revenue from 

advance royalties amounted to about $2.1 million or about 0.2 percent of total revenue 

from coal. If, in years subsequent to paying the advance royalty, the lease meets the 

minimum coal production requirement, the lessee’s royalty will be reduced on a dollar for 

dollar basis by the amount of the advance royalty. If the lease is relinquished, cancelled, 

or terminated for any reason, the lessee forfeits any advance royalties paid or due.

In total, royalties generated 

from federal coal leases have more than doubled since fiscal year 1990, 

from $392 million to $796 million in fiscal year 2012 (see fig. 7). In 

addition, as with coal production from federal leases, royalties generated 

from the sale of coal from federal leases in Wyoming comprise an 

increasing proportion of the royalty stream ranging from 50 percent of 

total royalties in 1990 to 80 percent in 2012 (see fig. 6).

38An allowance is an allowable deduction from the value of a mineral for royalty purposes.

A processing allowance includes reasonable, actual costs incurred by the payer for 

processing a mineral commodity. A transportation allowance includes reasonable, actual 

costs incurred by the payer for moving a mineral commodity to a point of sale remote from 

the lease or unit area, or away from a processing plant; it excludes costs to gather the 

commodity.

39For all types of coal leases, BLM is authorized to reduce the royalty for the purpose of 

encouraging the greatest ultimate recovery of federal coal, and in the interest of 

conservation of federal coal and other resources, whenever it is necessary to promote 

development, or when the lease cannot be successfully operated under its terms, but in 

no case can the royalty on a producing federal lease be reduced to zero. 43 C.F.R. §§ 

3473.3-2(e), 3485.2(c)(1) (2013).
Page 24 GAO-14-140 Coal Leasing

Figure 7: Total Royalties Generated from Federal Coal Leases, Fiscal Years 1990 to 

2012 (2013 dollars)

Coal prices have been a major driver of the increases in royalty revenues.

For instance, from fiscal years 1990 to 2000, royalty revenues remained 

relatively steady even though production of federal coal increased over 

this period related to a decline in coal prices. Since then, coal royalty 

revenues have steadily increased, even with a recent decline in 

production. Specifically, from fiscal years 2008 to 2012 the amount of coal 

produced from federal leases declined by about 41 million tons of coal (or 

8 percent); however the reported sales value of this coal increased 15 

percent from $6.7 billion to $7.7 billion, reflecting growth in coal prices.

The effective royalty rate—the rate actually paid by lessees after 

processing and transportation allowances have been factored in along 

with any royalty rate reductions––generated from coal produced from 

federal leases has remained on average at about 11 percent since fiscal 

year 1990. Royalty rate reductions may be approved by BLM in cases 

where a reduction is needed to promote mining development. For 

example, BLM officials told us they may approve royalty rate reductions to 
Page 25 GAO-14-140 Coal Leasing

enable continued operations in cases where mining conditions may be 

particularly challenging and costly, or to enable expanded recovery of 

federal coal. The effective royalty rate varies by state due to differences in 

mine type and other factors. For example, the effective royalty rate is 

higher in Wyoming and Montana where most coal is extracted using 

surface mining. In fiscal year 2012, the effective royalty rates for the top 

federal coal producing states were: Wyoming (12.2 percent), Montana 

(11.6 percent), Utah (6.9 percent), and Colorado (5.6 percent).

Bonus bids. Bonus bids are generally expressed in cents per ton of coal 

that is recoverable from the lease tract. The total bonus bid paid is the 

cents per ton multiplied by the estimated recoverable tons of coal from 

the lease tract. According to BLM officials, typically an initial payment of 

20 percent of the total bonus bid is provided with the sealed bid, and the 

remaining 80 percent is paid in four equal annual installments over a 4-

year period, but it may also be paid in full by the lessee at the time of a 

lease sale. ONRR revenue data from fiscal years 2003 to 2012 show total 

bonus bids received from all federal coal leases averaged $335 million 

annually, or about one-third of the total revenues from federal coal leases, 

as shown in figure 8. Since fiscal year 2003, revenue from bonus bids has 

fluctuated from year to year related to lease sale activity. For example, 

since fiscal year 2003, revenue from bonus bids has fluctuated from a 

peak of about $521 million in fiscal year 2005, when bonus bids made up 

49 percent of the total revenue generated from coal leases, to a low of 

$116 million in fiscal year 2010, when bonuses comprised 13 percent of 

total revenue.
Page 26 GAO-14-140 Coal Leasing

Figure 8: Bonus and Royalty Revenue Generated from Federal Coal Leases, Fiscal 

Years 2003-2012 (2013 dollars)

Note: Rents and other income account for less than 1 percent of the revenues collected from federal 

coal leases and are not shown in the above figure.

Based on our analysis of BLM data on coal lease sales, BLM accepted 

$6.4 billion in total bonus revenue for the 107 tracts leased since 1990, 

with total bids ranging from $5,000 to more than $800 million for a lease 

tract. In addition, successful bonus bid amounts for coal leases varied 

across states, with bonus bids received in Wyoming showing the greatest 

increase since 1990 when compared with the other seven states with 

active federal coal leases. Successful bonus bids for lease sale tracts in 

Wyoming ranged from $0.04 to $1.37 per ton of coal, after adjusting for 

inflation, and generally increased from 1990 to 2012. In comparison, 

successful bonus bids in Colorado bids ranged from $0.02 to $0.55 per 

ton and slightly increased from 1990 to 2012, and in North Dakota all 

successful bonus bids were $100 per acre in nominal dollars, the 

minimum bid BLM can accept for a lease tract and did not vary 

meaningfully over time when measured on a per ton scale. In other 

states, trends in bonus bids were not discernable due to variation in the 
Page 27 GAO-14-140 Coal Leasing

successful bids over time or there being too few sales in these states.

According to officials from coal companies we spoke with, bonus bids for 

federal coal leases depend on many factors, including coal quality, mine 

type (e.g., underground or surface mining), and the price of coal at the 

time of the sale.

Even when coal quality, mine type, and price are similar, successful 

bonus bids can vary greatly because of other factors. For example, 

mining conditions in Colorado and Utah are similar in several respects—

most mines are underground, the energy content of the coal being mined 

generally exceeds 11,500 BTUs per pound of coal, and coal prices were 

in a similar range from 1990 to 2011.40

Rents. Rents, which are set at $3 per acre, are also collected annually 

from federal coal leasing tracts but comprise an insignificant amount of 

the revenue stream.

Yet, the total bonus bids accepted 

by Colorado since 1990 have been about $22 million less after adjusting 

for inflation than those accepted by Utah despite the fact that Colorado 

has leased out almost 76 million tons more coal than Utah. When asked 

about the differences in total bonus bids, BLM officials reiterated that 

differences in conditions affecting coal marketability across these states, 

such as access to transportation options and proximity of customer base, 

make direct comparison of bonus bid values across these states difficult.

Specifically, BLM officials told us that most of the coal produced in Utah is 

consumed locally by power plants in state; this proximity to the customer 

could be considered an advantage. In contrast, much of the coal 

produced in Colorado needs to be transported out of state.

41 In fiscal year 2012, $1.4 million in rent revenue was 

generated from federal coal leases, composing 0.1 percent of the annual 

revenue related to coal.

 40From 1990 to 2011, adjusted average prices for all coal sold in Colorado ranged from 

$23 to $42 per ton and Utah coal prices ranged from $21 to $35 per ton.

4143 C.F.R. § 3473.3-1(a).
Page 28 GAO-14-140 Coal Leasing

BLM’s guidance offers flexibility in how to estimate fair market value, and 

BLM state offices vary in the approaches they use to develop an estimate 

of fair market value. Some state offices use both the comparable sales 

and income approaches in their appraisals while others rely solely on the 

comparable sales approach and may not be fully considering future 

market conditions as a result. In addition, we found that BLM did not 

consistently document the rationale for accepting bids that were initially 

below the fair market value presale estimate, and some state offices were 

not following guidance for review of appraisal reports. Furthermore, no 

independent review of appraisals is taking place, as is recommended by 

commonly used appraisal standards, despite Interior having expertise that 

could be leveraged to do so.

According to BLM guidance, the goal of BLM’s appraisal process is “to 

provide a well-supported estimate of property value that reflects all factors 

that influence the value of the appraised property,” and it gives state 

offices flexibility in how they do so.42 BLM’s guidance lays out two 

approaches to develop an estimate of fair market value—comparable 

sales and income—but does not say that both approaches must be 

used.43

 42BLM, H-3070-1 Economic Evaluation of Coal Properties, I-7.

Under the comparable sales approach, bonus bids received for 

past sales are used to value the tract being appraised. Adjustments may 

be made to these comparable sales based on how the characteristics of 

these past lease tract sales compare with the lease tract being appraised.

For example, if a past lease sale involved coal that had lower heating 

content than the lease tract being appraised, BLM might conclude that the 

current tract should have a higher fair market value than the bonus bid 

received for this past sale. In contrast, under the income approach, the 

revenues received from selling the coal and costs to extract it are 

projected into the future, and this net revenue stream is discounted back 

to the present. The resulting net present value of this revenue stream 

becomes an estimate of the fair market value for the lease tract. See 

43There is also a third appraisal approach called the cost approach. Under this approach, 

the value of a property is appraised based on the cost to rebuild or replace the 

improvements on it. For example, the value of a property with a house on it could be 

based on the cost to rebuild the house, less any depreciation that has occurred. The cost 

approach is generally not used to appraise minerals because most of their value is tied to 

the minerals themselves and not capital improvements.

BLM’s 

Implementation 

of the Fair Market 

Value Process 

Lacks Sufficient 

Rigor and Oversight

BLM’s Guidance 

Offers Flexibility in 

How to Estimate Fair 

Market Value
Page 29 GAO-14-140 Coal Leasing

table 2 for a summary of methods used and information needed for the 

comparable sales and income approaches.

Table 2: Summary of Approaches BLM Uses to Estimate Fair Market Value for Federal Coal Lease Tracts

Appraisal approach General methods and steps Information needed

Comparable sales approach Uses past sales prices of coal tracts to estimate 

fair market value for tract being appraised.

Compares characteristics of past lease tracts to 

tract being appraised to identify the most 

applicable sale(s) for use in the analysis and 

determines if any adjustments should be made to 

past sales prices.

Reconciles, as necessary, results of the most 

applicable sale(s) and uses these results to 

estimate the fair market value.

Bonus bids paid in prior coal lease sales.

Characteristics of lease tracts sold in prior 

transactions, such as:

• Time of sale.

• Coal quality (heating content value, 

sulfur content, ash content).

• Type of mining to be used 

(surface or underground).

• Physical characteristics of mining 

(i.e., depth to deposit, seam thickness).

• Market conditions at time of sale. 

Income approach Estimates future net revenues from the sale of coal 

extracted from the lease tract using annual costs 

and revenue projections over the period of time 

that a deposit is expected to be mined, which 

could be more or less than 20 years, 

corresponding to the length of time that leases are 

initially issued for.

Discounts, or converts, the future net revenue 

streams back to a single number to the present—

referred to as the net present value. (BLM’s 

guidance suggests using a 10 percent real 

discount rate to determine this net present value.)

Uses the calculated net present value of the 

projected after-tax net revenue of the mine 

operation to estimate the fair market value of the 

lease tract.

Determine whether and how to incorporate 

uncertainty surrounding future market conditions 

into the analysis.

Mine plan based on geologic and engineering 

data.

Lease development plan and coal production 

schedule based on the mine plan.

Coal price projections.

Anticipated capital and operating costs, taxes, 

and other expenses for extracting the lease 

tract’s coal.

Source: GAO summary of BLM guidance.

BLM’s guidance states that the comparable sales approach is preferred to 

the income approach when similar comparable sales are available 

because it is assumed that this method will provide the best indication of 

value. When comparable sales are not available, the guidance states that 

the income approach is a viable alternative, but the guidance highlights 

the uncertainty associated with using the income approach. This 

uncertainty stems from its reliance on projections of future market 

conditions, such as demand for coal, coal prices, and the costs to extract 
Page 30 GAO-14-140 Coal Leasing

the coal. The guidance also provides examples for how the results of the 

comparable sales and income approaches can be used together. For 

example, information from comparable sales can be used as a 

comparison point for results from the income approach. In addition, 

results from the income approach can be used to adjust past comparable 

sales. Specifically, if the net present value of the tract being appraised is 

less than the net present value of a past lease sale, a conclusion can be 

made that the tract being appraised is less valuable than the past lease, 

and a numeric adjustment can be made to the actual sales prices of the 

past lease sale to account for this difference.44

During our interviews with BLM officials, we found that BLM state offices 

use different approaches to develop an estimate of fair market value of 

coal leases, and we confirmed this during our case file review. For 

example, for lease sales in Wyoming, Montana, and New Mexico,45

 44Adjusting comparable sales using the results of the income approach can be done using 

the arithmetic and/or proportional approach. In the arithmetic approach, the net present 

value of the comparable sale is subtracted from the net present value of the tract being 

appraised. This difference is then added to the actual sale price of the comparable sale. In 

the proportional approach, the net present value of the tract being appraised is divided by 

the net present value of the comparable sale, and this adjustment factor is then multiplied 

by the actual sales price of the comparable sale to adjust it.

the 

BLM state offices use both the comparable sales and income 

approaches, based on our review of case files. Moreover, the BLM 

Wyoming state office goes a step further to numerically adjust its 

comparable sales using the results of the income approach. In contrast, 

for lease sales in Colorado, North Dakota, Oklahoma, and Utah, the BLM 

state offices have generally used just the comparable sales approach in 

recent years. For the two lease sales we reviewed in both Alabama and 

Kentucky, one of the sales used both approaches, while the other used 

just the comparable sales approach. When using the comparable sales 

approach, BLM state offices generally only used sales information for coal 

sales that occurred in their state. (See app. III for specific information on 

the approaches used for the lease sales that we reviewed.)

45The Montana/Dakotas state office manages federally owned minerals in Montana, South 

Dakota, and North Dakota. There are not any federal coal leases in South Dakota. The 

New Mexico state office oversees federally owned minerals in New Mexico, Oklahoma, 

Kansas, and Texas. There are no federal coal leases in Kansas or Texas according to 

BLM officials.

BLM State Offices Differ 

in Their Appraisal 

Approaches, and Some 

Offices May Not Be Fully 

Considering Future Market 

Conditions as a Result
Page 31 GAO-14-140 Coal Leasing

BLM officials in some state offices said that they did not have the 

resources to perform appraisals using the income approach. In particular, 

the income approach may require the help of an economist, and some 

BLM state offices do not have an economist on staff. For example, 

officials in both the Utah and Colorado state offices said they did not have 

economists on staff. For this reason, the Utah BLM office recently 

contracted with a firm to help them perform the income approach for a 

lease under consideration. However, BLM headquarters officials told us 

that the income approach did not require an economist and that some 

mining engineers in state offices could perform appraisals using this 

method. Officials in other state offices said they could not justify using the 

income approach due to the market for coal in their states. For example, 

they said that most coal mining in Oklahoma involves privately held coal, 

and a bonus bid is not required to obtain the rights to mine the coal, while 

in North Dakota, bonus bids offered as part of private sales have 

generally been less than or equal to the $100/acre minimum required for 

federal coal leases. When using these private sales as comparable sales, 

BLM officials in these states concluded that the minimum bonus bid of 

$100/acre should be the estimate of fair market value. BLM officials told 

us that if they did not set fair market value at this level, the coal on the 

federal lease tracts would be bypassed and never mined.

The reliance solely on the comparable sales approach among certain 

BLM state offices contrasts with the recommendations of officials from 

appraisal organizations we spoke with, who generally supported using 

both the comparable sales and income approaches when conducting 

mineral valuations. Representatives from three U.S. appraisal 

organizations told us that the income approach can provide helpful 

information and should be used along with the comparable sales 

approach.46

 46We spoke with officials from the Appraisal Institute, the Appraisal Foundation, and the 

American Institute of Mineral Appraisers.

Specifically, the income approach can serve as a check on 

the results of the comparable sales approach. In addition, we reviewed 

general appraisal standards in the United States and industry-developed 

standards for mineral valuation in Canada and Australia, as identified by 

appraisal organizations we spoke with, and we found that mineral 

valuation standards in Canada were the most prescriptive in terms of 
Page 32 GAO-14-140 Coal Leasing

using multiple appraisal methods.47 Specifically, the Canadian standards 

require that more than one appraisal approach be used unless 

justification is provided, and these standards recommend use of both the 

income and comparable sales approaches.48

Because the income approach examines estimates of future market 

conditions while the comparable sales approach focuses on past coal 

lease sales, BLM state offices that rely solely on the comparable sales 

approach may not be fully considering current or new trends in coal 

markets when estimating fair market value. This is particularly true if a 

state office is using comparable sales from a time during which market 

conditions were different. During our case file review, we found there 

were several comparable sales used that were over 5 years old. One 

official from an appraisal organization told us that he would hesitate to 

use comparable sales that were older than 5 years because of changes in 

All of the standards we 

reviewed stated that appraisal reports should include a discussion of the 

rationale for the appraisal approaches used, as well as the rationale for 

any approaches not used. Similarly, representatives from one of the 

appraisal groups we interviewed said that if only a single approach is 

employed, the reasons for doing so should be documented and justified.

According to BLM’s guidance, officials must document the rationale for 

choosing a certain appraisal approach in the appraisal report but, during 

our review of case files, we generally did not find this rationale 

documented in states where one approach was used. In contrast, 

appraisal reports prepared for lease sales in New Mexico, North Dakota, 

Montana, and Wyoming contained explanations for the appraisal 

approaches they chose to use.

 47These standards included the Uniform Standards of Professional Appraisal Practice 

prepared by the Appraisal Standards Board of the Appraisal Foundation in the United 

States, the Uniform Appraisal Standards for Federal Lands Acquisitions prepared by the 

Interagency Land Acquisition Conference in the United States, Standards and Guidelines 

for Valuation of Mineral Properties prepared by the Canadian Institute of Mining, 

Metallurgy, and Petroleum, and the Code for Technical Assessment and Valuation of 

Mineral and Petroleum Assets and Securities for Independent Expert Reports prepared by 

several groups, including the Australasian Institute of Mining and Metallurgy. 

48Special Committee of the Canadian Institute of Mining, Metallurgy, and Petroleum on 

Valuation of Mineral Properties, Standards and Guidelines for Valuation of Mineral 

Properties, (February 2003). These standards are required by the Toronto Stock 

Exchange, and recommended to be followed in mineral valuations required by regulatory 

bodies in Canada.
Page 33 GAO-14-140 Coal Leasing

market conditions. BLM officials noted that the usefulness of sales over 5 

years old would depend on the extent to which the market has changed.

During our case file review of 31 selected lease sales, we found four 

lease tracts in three states where the bonus bid offered was below the fair 

market value presale estimate, but BLM accepted these bids after 

additional consideration was given to them.49

We also found inconsistencies in the appraisal reports prepared as part of 

coal lease sales. In particular, some states consistently updated past 

In total, the accepted bonus 

bid amounts related to all four tracts was more than $2 million below the 

presale estimate of fair market value. Three of these sales occurred in the 

1990s, and one occurred in 2007. As outlined in BLM’s guidance, bonus 

bids below the presale estimate of fair market value may be considered 

as long as the bid is above the minimum bonus bid requirement of $100 

per acre, among other factors. Furthermore, BLM’s guidance allows for 

additional information to be considered or additional analysis to be 

completed as part of a postsale review process to address technical 

errors or in cases where appraisal standards are not met. BLM’s 

guidance states that postsale analysis be documented and any revised 

fair market value be reviewed, but it does not clearly describe what 

postsale documentation is needed. According to BLM headquarters 

officials, this postsale analysis must be documented and a new estimate 

of fair market value needs to be completed and reviewed. We did not, 

however, find this documentation in the case files we reviewed for these 

four sales. Specifically, we found no documented evidence of a single, 

revised fair market value estimate against which to compare the bids. The 

files contained general statements about additional information that was 

considered during the postsale review process, such as changes in 

mining plans or changes in coal prices. In each of the four cases, BLM 

found that the respective bids fell within an “acceptable range of values”

close to the initial presale fair market value estimate and, as a result, BLM 

determined in each of these cases that the bid should be accepted.

Without better documentation of these decisions, including specifying the 

revised fair market value estimate and clear justification for the revision, 

BLM has not demonstrated that the accepted bids met or exceeded the 

fair market value estimate as required under the Mineral Leasing Act.

 49For the other 27 lease sales we reviewed, the initial bonus bid met or exceeded BLM’s 

presale estimate of fair market value for 26 lease sales. For 1 of the 2 lease sales we 

reviewed in Utah, no bids were received. 

BLM Did Not Always 

Document the Rationale 

for Accepting Bids and 

Inconsistently Prepared 

Appraisal Reports
Page 34 GAO-14-140 Coal Leasing

comparable sales for inflation while others did not. For example, we found 

instances where the Montana/Dakotas and New Mexico state BLM offices 

used comparable sales that were more than 5 years old, but did not 

adjust them for inflation. In contrast, the Colorado, Utah, and Wyoming 

BLM state offices generally updated sales that were more than 5 years 

old for inflation. BLM headquarters officials told us that past comparable 

sales should be adjusted for differences in market conditions over time.

State offices also varied in the number of comparable sales they 

consulted when using the comparable sales approach. For the 31 lease 

sales we reviewed, the number of comparables used in the appraisal 

ranged from a low of 2 to a high of 10 comparable sales.

In addition, we found instances where BLM did not fully document its 

estimate of fair market value. Specifically, we found three related lease 

sales in Oklahoma where a formal appraisal report was not prepared to 

justify using the minimum bid amount of $100/acre as the estimate of fair 

market value. In the case file, there was discussion of the general market 

for coal in Oklahoma, including the fact that private coal sales did not 

involve up-front payments, such as bonus bids, but there was no 

description of the methods used to develop an estimate of fair market 

value. A BLM official said that he believed comparable sales were 

reviewed to determine that the fair market value estimate would be below 

the minimum bid value for these leases, but this was not documented in a 

formal appraisal report.

From our review of 31 case files, we found differences in the appraisal 

review process used by different state offices and, in some cases, states 

had not followed BLM guidance. According to BLM guidance, appraisal 

reports must be signed by three BLM officials—the chief of the regional 

evaluation team, a qualified mineral reviewer, and the deputy state 

director—to ensure technical accuracy of the fair market value estimate 

and conformance with BLM’s appraisal guidance. The chief of the 

regional evaluation team is an outdated position that no longer exists 

because BLM no longer leases coal on a regional basis, but the guidance 

has not been updated to reflect this. BLM headquarters officials said they 

expected that the mineral appraiser’s signature would take this official’s 

place. However, we found that appraisal reports were not consistently 

signed by the three officials, and there was no mechanism in place to 

ensure that this review was taking place. While appraisal reports in 

Some State Offices 

Did Not Follow BLM’s 

Guidance for Reviewing 

Appraisal Reports and 

Currently There Is No 

Independent Review 

of Appraisals
Page 35 GAO-14-140 Coal Leasing

Wyoming were signed by three officials—the mineral appraiser, mineral 

reviewer, and deputy state director—other state offices had appraisal 

reports that were reviewed and signed by a single official.50

Currently, review of appraisal reports takes place primarily at the state 

office level, and there is no review by an independent third party outside 

of BLM state offices. In its review of the coal leasing procedures in 1984, 

the Linowes Commission concluded that periodic independent review of 

coal activities by a group with clear independence from the coal leasing 

program was desirable. Furthermore, both the Uniform Standards of 

Professional Appraisal Practice and the Uniform Appraisal Standards for 

Federal Land Acquisition note that independent appraisal review is an 

important tool for ensuring that the valuation estimate is credible. BLM 

headquarters officials currently have a very limited role in reviewing 

appraisal reports prior to a lease sale, and they told us that headquarters 

officials receive copies of between 5 and 10 percent of appraisal reports 

prior to a lease sale occurring. These officials told us that they are

provided with these appraisal reports so that they can participate in sale 

panel meetings where BLM considers whether to accept bids for lease 

tracts. BLM headquarters officials do not sign off on these reports or 

provide comments to the state officials during the period when the 

appraisal reports are being developed. As a result of not regularly 

reviewing all appraisals, BLM headquarters officials were unaware of 

some of the differences in appraisal practices and documentation issues 

that we found across BLM state offices.

For example, 

two appraisal reports in Colorado were signed only by the branch chief of 

solid minerals, while in Alabama, one appraisal report was just signed by 

an economist. Of the two appraisals we reviewed for lease sales in 

Kentucky, one was signed by only an economist, and one was not signed 

at all. Without clear guidance on who is supposed to be reviewing reports 

and consistent reviews by these officials, BLM does not have assurance 

that proper oversight is taking place in all state offices responsible for coal 

leasing.

In addition, BLM is not currently taking advantage of a potential 

independent third-party reviewer with appraisal expertise within Interior, 

specifically, the Office of Valuation Services. The Office of Valuation 

 50Appraisal reports prepared in the Wyoming BLM state office also contained a signature 

by a fourth official, the branch chief of solid minerals.
Page 36 GAO-14-140 Coal Leasing

Services, established by secretarial order in May 2010 and reorganized in 

Interior’s Departmental Manual in June 2011, is responsible for providing 

real estate valuation services to the department’s bureaus and offices, 

including “appraisals, appraisal reviews, consultation services, and 

mineral evaluation products for Department and client agencies.”51 Within 

the Office of Valuation Services, the Office of Mineral Evaluation is 

responsible for providing mineral evaluations for Interior’s bureaus and 

offices, according to the Departmental Manual. Because the Office of 

Mineral Evaluation is a small office with about six staff, it is not feasible 

for this office to take over the mineral valuation function for the entire coal 

leasing program, according to officials in this office, and it would not be 

practical given the knowledge and expertise that state and field BLM staff 

have regarding coal in their respective regions. Rather, officials in this 

office said they were amenable to helping BLM in other ways by, for 

example, providing independent third-party review of appraisal reports, 

which is critical for ensuring the integrity of the appraisal process. Without 

additional oversight of the appraisal process by an independent reviewer, 

BLM is unable to ensure that its results are sound, key decisions are fully 

documented, and that differences we noted across state offices are 

warranted.

BLM considers coal exports to a limited extent when developing an 

estimate of fair market value and generally does not explicitly consider 

estimates of the total amount of coal in the United States that can be 

mined economically, known as domestic reserve estimates. In the few 

state offices that did consider exports, we generally found the same 

generic statements in appraisal and economic reports that stated in 

general terms the possibility of future growth in coal exports, and there 

was limited tracking of exports from specific mines. As a result, BLM may 

not be factoring specific export information into appraisals or keeping upto-date with emerging trends. Domestic reserve estimates are not 

considered due to the variable nature of these estimates according to 

BLM officials.

 51Interior, Departmental Manual, part 112, chapter 33 (June 1, 2011).

BLM Considers Coal 

Exports to Limited 

Extent When 

Estimating Fair 

Market Value and 

Does Not Consider 

Domestic Reserve 

Estimates Because of 

Their Variable Nature
Page 37 GAO-14-140 Coal Leasing

BLM’s guidance states that appraisal reports should consider specific 

markets for the coal being leased, and that “export potential” may be 

considered as part of the appraisal process. The export potential for coal 

from a particular mine can be influenced by several factors, including the 

quality of the coal and whether there is a transportation system nearby 

that can ship the large volume and weight of coal to a port for export.52

Some coal mines, such as those in Wyoming’s Powder River Basin, are 

part of a national coal market and, in 2011, Wyoming mines shipped coal 

to 34 states in the United States according to EIA data.53

In our review of BLM case files for 31 coal lease sales, we found that coal 

exports were generally mentioned in appraisal and economic reports for 

the 13 federal lease sales held in Montana and Wyoming. Mines in these 

states exported 17.7 million tons of coal in 2011, according to EIA data, or 

about three-quarters of the total amount of coal exported from western 

states.

Other mines 

supply coal only to neighboring power plants, known as mine mouth 

operations, meaning that their export potential is limited, and exports 

would not factor into the fair market value estimation, according to BLM 

officials.

54 Exports from these states represented less than 2 percent of 

total U.S. coal production and about 17 percent of total U.S. exports of 

coal in 2011.55 Of the 13 Montana and Wyoming case files we reviewed, 

one provided specific export information for the mine that was adjacent to 

the lease tract being appraised. This appraisal report, which was 

prepared for a lease tract in Montana, provided detailed information from 

IHS Global Insight and Wood Mackenzie, two private providers of 

information on coal.56

 52Due to its volume and weight, most coal is transported in the United States by train. 

In addition, we found that economic and appraisal 

reports in Wyoming typically contained generic boilerplate statements 

53EIA, Annual Coal Distribution Report (Washington, D.C.: 2011). 

54In 2011, coal exports from Montana mines were 13.2 million tons, and coal exports from 

Wyoming mines were 4.5 million tons. These export amounts may include coal from mines 

that are not on federal coal leases. EIA, Annual Coal Distribution Report. 

55In 2011, coal exports from states east of the Mississippi River totaled about 84.3 million 

tons or about 79 percent of total coal exports from the United States. As mentioned 

earlier, there is little federal coal leasing east of the Mississippi River.

56IHS Global Insight is a firm that provides comprehensive economic and financial 

information on countries, regions, and industries. Wood Mackenzie provides industry and 

analysis on energy and minerals industries around the world.

BLM Considers Coal 

Exports for Some Lease 

Sales in Certain States, but 

Associated Reports 

Provide Little Information 

on Current or Future 

Export Activity
Page 38 GAO-14-140 Coal Leasing

about the possibility of coal exports in the future and the uncertainty 

surrounding them, rather than specific information on actual or predicted 

coal exports––even for proposed lease tracts that were adjacent to mines 

on federal leases that are currently exporting coal. Wyoming BLM officials 

told us that coal exports made up such a small portion of total production 

from Wyoming that they did not believe it was necessary to provide 

specific information on exports in their economic or appraisal reports.

Wyoming BLM officials told us that future appraisal reports may provide 

more specific export information if exports became a more significant 

issue, but they did not identify a threshold for including it.

We generally did not find mention of coal exports in the other states with 

federal coal leasing activity: Alabama, Colorado, Kentucky, New Mexico, 

North Dakota, Oklahoma, or Utah.57

BLM officials said that they examine projections of future coal prices 

during the appraisal process, and these projections would account for 

exports. However, only the income approach for appraisals explicitly 

considers future prices, so the state offices that use only the comparable 

sales approach would not explicitly factor export potential into their fair 

market value assessments. Two states in particular—Colorado and 

Utah—have coal exports from mines on federal leases, but they generally 

State BLM officials in these states 

told us they did not consider exports when estimating fair market value 

because there were few or no coal exports from their state. However, we 

found an example in Utah where the lease tract was adjacent to a mine 

that, according to EIA data, was exporting coal, but the appraisal report 

did not mention coal exports. EIA officials told us that they began 

collecting mine-level information on coal exports in 2008 and received a 

request from one BLM state office for these data. BLM state and 

headquarters officials generally told us they were not aware that EIA 

collects these data. Similarly, Wood Mackenzie has mine-level data on 

coal exports, but not all state BLM officials were aware that this 

information was available to them through a BLM subscription. By not 

tracking and considering all available export information, BLM may not be 

factoring specific export information into appraisals for lease tracts that 

are adjacent to mines currently exporting coal or keeping abreast of 

emerging trends in this area.

 57Utah BLM officials reported that they were currently preparing for a lease sale and that 

they would be considering exports as part of this sale. In order to determine the impact of 

exports on fair market value, the Utah state office contracted with a private firm. 
Page 39 GAO-14-140 Coal Leasing

use the comparable sales approach to estimate fair market value, 

therefore their fair market values would not explicitly reflect the potential 

impact of coal exports.

BLM officials told us that they are aware that some coal companies plan 

to export more coal in the future but voiced some concern about 

weighting these plans too heavily in estimating fair market value because 

major port infrastructure upgrades are needed on the West Coast to 

handle increased coal exports. Several stakeholders with expertise in 

coal markets that we interviewed shared this view. In addition, IEA said it 

is difficult to predict future coal exports from Wyoming’s Powder River 

Basin to countries such as China because of a lack of infrastructure in 

place to handle exports and the uncertainty of market conditions.58

BLM officials told us that BLM does not consider domestic coal reserve 

estimates during the fair market value process.59,60 One reason they gave 

was these estimates can vary greatly depending on market conditions.

Domestic coal reserve estimates reflect the amount of coal that can be 

economically recovered at a given point in time; as a result, these 

estimates can change as coal prices fluctuate and mining technologies 

advance. For example, USGS estimated reserves of 10.1 billion tons in 

the Gillette coal field of the Powder River Basin at a sales price of $10.47 

per ton in 2007,61 but it changed this estimate to 18.5 billion tons when 

prices rose to $14.00 per ton in March 2008.62

 58IEA, Coal Medium-Term Market Report, 2012: Market Trends and Projections to 2017, 

(2012). 

A more recent USGS 

assessment estimated that there was 25 billion tons of coal that can be 

59According to BLM officials, BLM does develop an estimate of the economically 

recoverable tons of coal for each lease by application for use in valuing each lease. 

60Coal reserves are different from coal resources. To be classified as reserves, coal must 

be considered economically producible at the time of classification. Coal reserves are a 

subset of coal resources. 

61The Gillette coal field is the largest producing coal field in the Powder River Basin.

62James Luppens et. al, USGS, Assessment of Coal Geology, Resources, and Reserves 

in the Gillette Coalfield, Powder River Basin, Wyoming (Reston, VA.: 2008). Spot market 

prices for Powder River Basin coal were $10.55/ton as of April 2013, according to EIA.

Spot prices are prices received on very short-term contracts, generally lasting a few 

months in length. 

BLM Generally Does Not 

Consider Domestic Coal 

Reserve Estimates 

Because of Their Variable 

Nature
Page 40 GAO-14-140 Coal Leasing

economically recovered in the entire Powder River Basin at the time of 

study, but notes that “mining costs and coal prices are not static as both 

tend to increase over time.”63

Some BLM officials told us they do not consider domestic reserve 

estimates when estimating fair market value because the United States 

has ample coal supplies to meet demand over the next 20 years, the time 

horizon that BLM uses when evaluating coal lease-by-applications. For 

example, EIA estimated that the United States has over 190 years of coal 

reserves, at the time of its most recent Annual Energy Outlook in April 

2013.

The report goes on to state that “if market 

prices exceed mining costs, the reserve base will grow (the converse is 

also true).”

64 While BLM does not consider reserve estimates explicitly, those 

BLM state offices that prepare an economic report as part of estimating 

fair market value examine future demand and price projections for coal, 

which impact reserve estimates as mentioned previously.

BLM generally provides limited information on federal coal lease sales to 

the public. Environmental documents produced as part of the NEPA 

process and required coal lease sale announcements are the primary 

source of detailed written information made available on coal lease sales.

The amount and type of information provided on websites vary by state 

office, with the most comprehensive information of the websites we 

reviewed provided by the Wyoming BLM state office. In addition, BLM 

does not typically make documents used to estimate fair market value 

publicly available due to the sensitive and proprietary information they 

contain, although its guidance states that a public version of the appraisal 

document should be prepared.

 63USGS, Assessment of Coal Geology, Resources, and Reserve Base in the Powder 

River Basin, Wyoming and Montana (Reston, Va.: 2013).

64EIA projects that U.S. coal production will increase at about 0.2 percent per year for the 

period from 2011 to 2040. If that growth rate continues into the future, estimated

recoverable coal reserves would be exhausted in about 194 years if no new reserves are 

added. 

BLM Provides Limited 

Information on 

Federal Coal Lease 

Sales to the Public
Page 41 GAO-14-140 Coal Leasing

BLM provides some information on coal lease sales in environmental 

documents developed to meet NEPA requirements and in lease sale 

announcements. BLM is required to share these documents with the 

public, and these documents are made available for review in public 

reading rooms in relevant BLM state and field offices and are also 

typically available on BLM’s websites during the period of leasing activity. 

These environmental documents include environmental assessments and 

environmental impact statements,65 which evaluate the likely 

environmental effects of leasing and mining the proposed lease tract. 

These documents generally include information on the lease applicant, 

mining methods at the existing operation, alternatives considered, and 

anticipated environmental effects. For example, an environmental 

assessment for a recent coal lease in Montana included an overview of 

the mine’s history, the mining methods used at the site, the mine’s layout, 

and information on potential effects of alternatives considered. In addition 

to environmental documents, a decision document summarizing the 

results of the process and the agency decision regarding the lease sale is 

also issued.66

BLM is also required to announce forthcoming coal lease sales in the 

Federal Register and a newspaper in the area of the lease tract. These 

announcements typically include general characteristics of the lease tract 

up for sale, such as the size of the tract, and the amount and quality of 

the coal being offered, including its estimated heating value, ash and 

moisture content, and the thickness of the coal beds. In addition, the 

announcements list the applicant and potential use of the tract, such as 

whether it will be used to extend existing mining operations or the tract’s 

location adjacent to more than one existing mine. The announcement 

also notes where interested stakeholders can view lease sale details 

including bidding instructions, terms and conditions of the proposed coal 

lease, and case file documents, typically available for review at the 

relevant BLM state office.

 65Environmental impact statements are more detailed evaluations of the proposed project 

and alternatives compared to environmental assessments, and are required if a project 

would likely significantly affect the environment.

66For environmental assessments a decision record is used; for environmental impact 

statements a record of decision is issued.

BLM Provides Some 

Information through 

Environmental Documents 

and Coal Lease Sale 

Announcements
Page 42 GAO-14-140 Coal Leasing

BLM websites are another way that public information is released on the 

leasing program, but we found that it was difficult to locate this 

information on some of BLM’s websites that we reviewed and the amount 

and type of information shared across the websites that we accessed in 

May 2013 varied (see table 3). For example, BLM headquarters’ website 

contains general information on the federal coal leasing program, but it 

does not include information on past or upcoming federal coal lease sales 

or link to relevant BLM state or field office websites. BLM officials told us 

that they attempted to provide general information on past lease sales on 

the headquarters website in 2010, but they were unable to obtain state 

BLM offices’ verification of the data, which stalled the effort. Five of the 

six state offices do not maintain information on past lease sales on their 

websites, although officials in BLM headquarters and two state offices 

also told us they have provided this information upon request. All six state 

offices that manage lease sales, at a minimum, publish lease sale 

announcements in the Federal Register, which is searchable via the 

Internet, and based on our review of BLM websites and interviews with 

BLM officials, all but one of the state offices issue press releases with 

lease sale results that are highlighted for limited periods. In addition, 

during our review of BLM websites, we found that five of the six state 

offices keep environmental documents related to lease sales on their 

websites during the time of lease sale activity.

BLM State Offices Vary 

in the Amount and Type 

of Coal Lease Information 

on Their Websites
Page 43 GAO-14-140 Coal Leasing

Table 3: Summary of Federal Coal Leasing Information Contained on BLM Websites

BLM office website and 

states covered

Colorado

BLM

(Colorado)

Eastern 

States BLM

(Alabama, 

Kentucky)

Montana/ 

Dakotas BLM

(Montana, 

North Dakota)

New Mexico 

BLM

(New Mexico, 

Oklahoma)

Utah BLM

(Utah)

Wyoming 

BLM

(Wyoming)

Number of coal tracts leased 

since 1990 20 13 16 12 15 31

General information on the 

federal coal leasing programa — √ √ — √ √

Lease sale results announced 

in press release √ √ √ — √ √

Environmental documents linked 

on website (during time of lease 

sale activity)

√ √ √ — √ √

Final environmental documents 

maintained on website — — — — — √

Summary information from 

past lease sales maintained 

on website

— — — — — √

Sources: GAO analysis of BLM websites accessed May 2013 and interviews with BLM officials.

a

Links to general information on primary coal website pages were considered as being contained on 

BLM website pages.

Of the six state office websites we reviewed, the Wyoming state office 

provided the most comprehensive information on the federal coal leasing 

program, including results for all coal lease sales in the Powder River 

Basin since 1990. For each lease sale, this website had information on 

successful bid amounts, associated coal volume and coal quality, and 

links to environmental documents. Wyoming BLM officials told us that 

they had this information on their website because they receive regular 

inquiries from the press and public on coal leasing in the Powder River 

Basin. In contrast, the New Mexico state office had no coal leasing 

information on its website. New Mexico BLM officials told us that there is 

not much public interest in coal lease sales in the states of New Mexico 

and Oklahoma, which they oversee, and requests for this type of 

information are limited to inquiries from mining companies.

Making electronic information available to the public is a position 

supported by the Office of Management and Budget (OMB) and has been 
Page 44 GAO-14-140 Coal Leasing

demonstrated by other agencies. Specifically, OMB guidance directs 

federal agencies to use electronic media to make government information 

more easily accessible and useful to the public.67 In addition, we have 

previously reported on the importance of federal programs allowing users 

to easily access and use information on websites.68 BLM’s federal oil and 

gas onshore leasing program maintains a list of planned lease sale 

auction dates on the headquarters level website, along with summary 

results from recent lease sales by state. Without standard information on 

BLM websites, federal coal leasing activity is difficult to track by the 

public, and access to publicly available documents may be hampered.

BLM’s guidance states that a public version of the appraisal report that 

deletes all proprietary material should be prepared for each lease sale, 

but BLM has not been following this guidance.

69 According to officials 

from BLM state offices, a public version of appraisal reports is not 

prepared as a standard practice in the six BLM offices managing the coal 

lease sale process. According to some BLM officials, they do not prepare 

this public version because they are concerned about the potential 

release of proprietary and sensitive information these reports contain and 

the impact this could have on the bidding process.70

BLM’s guidance also states that the “fair market value appraisals and 

estimates can be released to the public upon request on tracts where the 

high bid has been accepted,” and further states “information and analyses 

documents used to derive these released fair market value estimates are 

to be released to the public upon request” after these documents have 

been “modified to exclude proprietary information.”71

 67OMB Circular No. A-130.

BLM has interpreted 

this guidance to mean that the agency has the discretion to determine 

68GAO, Agricultural Chemicals: USDA Could Enhance Pesticide and Fertilizer Usage 

Data, Improve Outreach and Better Leverage Resources, GAO-11-37(Washington, D.C.: 

Nov. 4, 2010), and GAO, Medicare: Communications to Beneficiaries on the Prescription 

Drug Benefit Could Be Improved, GAO-06-654 (Washington, D.C.: May 3, 2006).

69BLM, H-3070-1 Economic Evaluation of Coal Properties, V-4.

70BLM officials noted that federal officers and employees are prohibited from publishing or 

disclosing proprietary or business confidential information to any extent not authorized by 

law and that unauthorized publication or disclosure could result in criminal penalties. 

71BLM, H-3070-1 Economic Evaluation of Coal Properties, V-5.

BLM Does Not Make 

Reports Related to Its 

Estimation of Fair Market 

Value Publicly Available, 

Which Is Inconsistent with 

Some Parts of Its Guidance
Page 45 GAO-14-140 Coal Leasing

whether to release these reports in a redacted format. For two Freedom 

of Information Act (FOIA) requests received in 2011 for reports used to 

determine fair market value of coal leases,72 BLM initially withheld all fair 

market value documents until Interior’s Office of the Solicitor advised BLM 

to provide redacted documents in response to an appeal filed in one of 

these cases.73

BLM headquarters and state office officials consistently told us that it is 

critical that the sensitive information in lease sale documents not be 

released publicly so that the integrity of the sealed bid process can be 

maintained. For example, if companies were to obtain the specific 

comparable sales used for a past lease sale, this information could lead 

them to reduce their bid for a future lease sale so that it is closer to the 

fair market value estimate, according to BLM officials. But there are 

differing views within the agency on the extent of information that should 

and could be shared. For instance, BLM headquarters officials told us that 

they are open to releasing additional information on federal coal leasing, 

including making redacted appraisal reports available. In contrast, 

Wyoming BLM officials told us they were not comfortable making any 

additional information on the fair market value process available such as 

redacted appraisal reports. They told us that, in their opinion, 

considerable information is already available in documents that must be 

prepared as part of the process, such as environmental impact 

In its response to this FOIA appeal, Interior’s Office of the 

Solicitor agreed that BLM has discretionary authority to disclose this 

information and noted that BLM’s guidance “does not require the BLM to 

release ‘fair market value appraisals and estimates’ to the public and, 

instead, merely notes that it ‘can’ do so.” In the end, BLM provided 

redacted appraisal reports to this FOIA request, which we reviewed.

These documents included a description of the approaches BLM used to 

estimate fair market value, the number of comparable sales that were 

considered, and background information on the mining operation, but the 

fair market value estimate was redacted along with the supporting 

analysis behind this number. As of June 2013, BLM was in the process of 

responding to another request for fair market value documents received 

in 2012.

 72Pub. L. No. 89-487 (1966), codified as amended at 5 U.S.C. § 552. FOIA requires 

federal agencies to provide the public with access to government records and information 

on the basis of the principles of openness and accountability in government. 

73The other requester did not appeal BLM’s decision.
Page 46 GAO-14-140 Coal Leasing

statements, public notices, and detailed statements on how to bid. They 

also told us most people are interested primarily in lease sale results, 

which Wyoming BLM makes available on its website. Wyoming BLM 

officials also said they are concerned that, by making additional 

information available, including redacted appraisal reports, some 

important information might be shared that would result in reduced bids 

on future coal lease sales. The Wyoming BLM officials’ point of view 

stands in conflict with BLM’s guidance that additional information in the 

form of public versions of the appraisal report should be prepared and the 

Office of the Solicitor’s determination that FOIA does not allow BLM to 

withhold entire documents relating to the estimate of fair market value in 

response to FOIA requests when portions of these documents contain 

information that is not protected from disclosure and should be released.

With about 40 percent of the nation’s coal produced from federal coal 

lease tracts in recent years, the federal coal leasing program plays an 

important role in the nation’s energy portfolio. In managing the leasing 

program, BLM is required to obtain fair market value for coal leases.

Because there is typically little competition for federal leases, BLM plays 

a critical role in ensuring that the public receives fair market value for the 

coal that is leased. However, we found differences across BLM state 

offices in the approaches they use to estimate fair market value and the 

rigor of these reports. Moreover, BLM state offices are not documenting 

the rationale for choosing their approaches for the appraisal process.

Adequate oversight of the fair market value process is critical to ensuring 

that its results are sound and properly reviewed. However, BLM’s 

guidance on the valuation of coal properties is out of date, and officials 

are not reviewing and signing appraisal reports in accordance with BLM’s 

guidance. Without a mechanism to ensure consistent reviews by three 

officials, as specified in the guidance, and independent third-party 

reviews, appraisal reports may not be receiving the scrutiny they deserve.

BLM’s guidance allows for additional information and analyses to be 

considered as part of the postsale review process, which could result in a 

lower revised fair market value estimate and acceptance of bids below 

the presale fair market value estimate but above the revised estimate.

The guidance calls for such decisions to be fully justified and that a 

revised fair market value be clearly documented and reviewed. However, 

we found instances where BLM’s justification to accept such bids was not 

adequately documented. Without proper documentation of these 

decisions, adequate oversight cannot take place, and BLM does not have 

Conclusions
Page 47 GAO-14-140 Coal Leasing

assurance that accepted bids were in compliance with the Minerals 

Leasing Act.

Coal exports make up a small but growing proportion of total U.S. coal 

production, yet BLM state offices were generally not tracking the export 

activity for mines on federal leases and were including only generic 

statements about exports in their appraisal reports, and some state 

offices were not routinely including export information in appraisal reports. 

Moreover, BLM officials were largely unaware of the various sources of 

mine-level information about exports, such as the information that EIA 

collects and the information collected by private companies. By not 

tracking and considering all available export information, BLM may not be 

factoring specific export information into appraisals for lease tracts that 

are adjacent to mines currently exporting coal or keeping abreast of 

emerging trends in this area.

BLM state offices are not following agency guidance because they have 

not prepared public versions of appraisal reports, and there is a lack of 

agreement within the agency on the extent and type of information related 

to the estimation of fair market value to be shared in response to public 

requests. Without updated guidance and a consensus, there may 

continue to be a disconnect between BLM’s guidance and its standard 

practice of not releasing this information publicly. Finally, BLM provides 

little summary information on its websites on past lease sales or links to 

sale-related documents. Having additional information online could 

increase the transparency of federal coal leasing program.

We are recommending that the Secretary of the Interior direct the Director 

of the Bureau of Land Management to take the following eight actions:

To ensure that appraisal reports reflect future trends in coal markets, BLM 

should revise its guidance to have state offices use both comparable 

sales and income approaches to estimate fair market value where 

practicable. Where it is not practicable to do so, the rationale should be 

documented in the appraisal report.

To ensure that appraisal reports receive the scrutiny they deserve and 

are reviewed by specified officials, BLM should take the following actions:

• update its guidance so that it reflects the current titles of officials who 

should review appraisal reports;

Recommendations for 

Executive Action
Page 48 GAO-14-140 Coal Leasing

• develop a mechanism to ensure that state offices are reviewing and 

signing appraisal reports consistent with the guidance;

• develop a process for independent review of appraisal reports and 

work with the Office of Valuation Service to determine its role, if any, 

in this process.

To ensure that all accepted bids comply with the Minerals Leasing Act by 

meeting or exceeding BLM’s estimate of fair market value, BLM should 

update its guidance to specify the documentation needed for postsale 

analyses in instances where a decision is made to revise the fair market 

value estimate and accept a bonus bid that was below the presale 

estimate of fair market value but above the revised estimate. Such 

documentation for postsale analyses should include the revised estimate 

of fair market value, the rationale for this revision, and review of this 

decision by appropriate officials.

To ensure that appraisal reports reflect the current state of export activity 

for mines on federal leases, BLM headquarters should develop guidance 

on how to consider exports as part of the appraisal process and identify 

potential sources of information on coal exports that state offices should 

use when conducting appraisals.

To eliminate the disconnect between its guidance and BLM state offices’

practice of not releasing appraisal documents to the public, BLM 

headquarters, state office officials, and Interior’s Office of the Solicitor 

should come to agreement on the extent and type of information related 

to the estimation of fair market value that should be shared in response to 

public requests for this information and make sure that its guidance 

reflects this consensus.

To make electronic information on the coal leasing program more 

accessible to the public, BLM should provide summary information on its 

websites on results of past lease sales (e.g., amount of coal offered, coal 

quality, bonus bids received ) and status of any upcoming coal lease 

sales along with links to sale-related documents.

We provided a draft of this report to the Department of the Interior, the 

Department of Agriculture, and the Department of Energy for review and 

comment. The Department of the Interior concurred with our 

recommendations and also noted it has begun to address some of these 

recommendations. Specifically, BLM has signed a memorandum of 

understanding with the Office of Valuation Services to enhance the review 

Agency Comments
Page 49 GAO-14-140 Coal Leasing

of fair market values. In addition, BLM stated it will soon publish 

additional information on lease sales on its national and state websites. 

The Departments of the Interior, Agriculture, and Energy also provided us 

with technical comments, which we have incorporated as appropriate. 

See appendixes IV and V for agency comment letters from the 

Department of the Interior and the Department of Agriculture. 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies of this report to the 

appropriate congressional committees, the Secretary of the Interior, the 

Secretary of Agriculture, the Secretary of Energy, and other interested 

parties. In addition, the report will be available at no charge on the GAO 

website at http://www.gao.gov.

If you or your staffs have any questions about this report, please contact 

me at (202) 512-3841 or fennella@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made major contributions to this report 

are listed in appendix VI.

Anne-Marie Fennell

Director, Natural Resources and Environment
Appendix I: Objectives, Scope and 

Methodology

Page 50 GAO-14-140 Coal Leasing

Our objectives were to examine (1) federal coal leasing, including the 

number of tracts leased, along with the trends in associated coal 

production and revenues generated since 1990; (2) Bureau of Land 

Management’s (BLM) implementation of the process to develop an 

estimate of fair market value for coal leases; (3) the extent to which BLM 

considers coal exports and domestic coal reserve estimates when 

developing an estimate of fair market value; and (4) the extent to which 

BLM communicates information on federal coal lease sales to the public.

To provide information on trends in federal coal leasing under the first 

objective, we analyzed data from BLM’s LR2000 database—used by BLM 

to track federal land and mineral resources including coal—and 

summarized federal coal lease sale activity and bonus bids accepted from 

January 1, 1990 to December 31, 2012. For each lease sale where a bid 

was accepted and the tract leased, we analyzed data including: lease 

sale date, tract acreage, the amount of offered coal, number of bids 

received, and winning bid amounts. We also analyzed data on coal 

production and revenues generated from federal coal leases from fiscal 

years 1990 to 2012 from the Department of the Interior’s Office of Natural 

Resources and Revenue (ONRR), which is responsible for collecting and 

distributing revenues associated with federal mineral leases including 

federal coal leases. We used ONRR sales year revenue data, which 

includes current fiscal year data and adjusted or corrected transactions 

for sales that took place in previous years. According to ONRR officials, 

adjustments to sales year data are made on an ongoing basis in real 

time, such that the data varies daily. We used sales year data because 

this type of data was identified by ONRR as the best for trending 

purposes. To complete our analysis, we adjusted both BLM bonus bid 

data and ONRR revenue data to 2013 dollars using the gross domestic 

product price index.

We conducted interviews with BLM and ONRR officials regarding these 

data and reviewed documentation on their data systems. We found that 

some of the revenue data initially provided by ONRR prior to 2003, in 

particular the bonus, rent, and other income data, had gaps resulting from 

a data system conversion the agency underwent and was not reliable for 

use in our analysis. ONRR ultimately provided updated bonus data for 

this period, but it did so late in our review process, and we were unable to 

determine its reliability. We determined that all other ONRR data including 

royalty and production data from 1990 to 2012, as well as BLM federal 

coal leasing data, were sufficiently reliable for describing trends in the 

federal coal leasing program.

Appendix I: Objectives, Scope and 

Methodology
Appendix I: Objectives, Scope and 

Methodology

Page 51 GAO-14-140 Coal Leasing

To examine how BLM implements the process to develop an estimate of 

fair market value, we reviewed applicable regulations and BLM’s 

guidance for the coal leasing program, including BLM’s H-3070-1 

handbook, titled Economic Evaluation of Coal Properties. We also 

interviewed BLM officials in headquarters and state offices on how they 

implement these regulations and guidance. Specifically, we interviewed 

officials in the following BLM state offices because they are the only state 

offices involved in federal coal leasing at BLM: Colorado, Eastern States, 

Montana/Dakotas, New Mexico, Utah, and Wyoming.1

We selected and reviewed a nonrandom sample of case files prepared by 

BLM officials as part of 31 recent coal lease sales using a data collection 

instrument we developed. The sample included all reports for lease sales 

that generally took place from January 1, 2007, to July 31, 2012. This 

We also spoke 

with officials in the Casper Field Office who are directly involved in coal 

leasing activity in the Powder River Basin. In addition, we reviewed other 

appraisal standards developed by appraisal organizations in the United 

States and appraisal standards used in other countries. These standards 

included the Uniform Standards of Professional Appraisal Practice

prepared by the Appraisal Standards Board in the United States; the 

Uniform Appraisal Standards for Federal Lands Acquisitions prepared by 

the Interagency Land Acquisition Conference in the United States; 

Standards and Guidelines for Valuation of Mineral Properties prepared by 

the Canadian Institute of Mining, Metallurgy and Petroleum; and the Code 

for Technical Assessment and Valuation of Mineral and Petroleum Assets 

and Securities for Independent Expert Reports prepared by several 

groups, including the Australasian Institute of Mining and Metallurgy. We 

examined these standards to see what they said about certain aspects of 

an appraisal including required documentation and review processes. To 

learn about appraisal practices for mineral properties, we also spoke with 

appraisal officials, including officials from the Appraisal Institute, the 

Appraisal Foundation, the American Institute of Mineral Appraisers, and 

an official involved in the development of the Canadian standards for 

mineral valuation mentioned above. In addition, we spoke with officials 

from Interior’s Office of Valuation Services, which is responsible for 

providing real estate evaluation services to the Department of the 

Interior’s bureaus and offices.

 1

The Eastern States office oversees activities in the eastern half of the United States.

There is currently coal leasing activity in Alabama and Kentucky. The New Mexico state 

office also oversees leasing activity in Oklahoma.
Appendix I: Objectives, Scope and 

Methodology

Page 52 GAO-14-140 Coal Leasing

nonrandom sample cannot be generalized to all coal lease sales held but 

rather has a focus on recently prepared files. However, the results of this 

sample provide illustrative examples of the coal leasing process used and 

the documentation prepared. We requested the following documentation 

from BLM for these lease sales if they had been prepared: appraisal 

report, economic report, engineering report, geologic report, and tract 

modification report. As part of our review, we examined 147 documents 

that were prepared for these 31 lease sales. For those states that did not 

oversee two lease sales from January 1, 2007, to July 31, 2012—

Alabama, Kentucky, New Mexico, North Dakota, and Oklahoma—we 

examined their two most recent lease sales.2 In the end we reviewed 

case files for 11 lease sales in Wyoming, 4 lease sales in Colorado, 3 

lease sales in both Oklahoma and New Mexico, and 2 lease sales each in 

Alabama, Kentucky, North Dakota, Montana, and Utah.3

To determine the extent to which BLM considers coal exports when 

developing an estimate of fair market value, we used our case file review 

to examine what types of information BLM provided on exports, if any. For 

those files that did contain information on exports, we compared the 

wording used to describe exports across the various reports to see what 

kind of information was provided. We also used our interviews with BLM 

officials at headquarters and state offices to learn about the information 

they consult in estimating fair market value and the extent to which they 

consider exports when making this determination. We examined available 

information on coal exports from the Energy Information Administration 

(EIA) and other publicly available documents, such as financial 

statements of mining companies. We also spoke with knowledgeable 

stakeholders about future projections for coal exports, including the 

To ensure that 

our data collection instrument was filled out correctly, two GAO staff 

members reviewed the provided documents: one filled out the data 

collection instrument the first time, and the other verified this work. We 

conducted follow-up interviews with BLM state offices to discuss both 

general questions our review raised about the processes used to estimate 

fair market value in each of the BLM states and details related to specific 

cases we reviewed.

 2

We reviewed three pre-2007 files for both Oklahoma and New Mexico because these 

sales involved multiple lease tracts that were held on the same date.

3

One of the two lease sales we reviewed from Utah did not receive any bids. All of the 

other lease sales received at least one bid.
Appendix I: Objectives, Scope and 

Methodology

Page 53 GAO-14-140 Coal Leasing

National Mining Association, International Energy Agency, and other 

officials from academia and industry.

To determine the extent to which BLM considers reserve estimates, we 

interviewed a variety of BLM officials at the headquarters and state office 

level to determine if reserves were considered. In addition, we examined 

available reserve information from the United States Geological Survey 

(USGS) and spoke with USGS officials involved in making these 

estimates. We also obtained perspectives from stakeholders from 

academia, industry, and environmental organizations.

To examine the extent to which BLM provides information to the public on 

coal lease sales, we analyzed BLM’s policies for making information 

publicly available, including BLM’s H-3070-1 handbook. We also reviewed 

BLM websites related to federal coal leasing, and we reviewed a sample 

of environmental documents that are made publicly available during the 

coal leasing process. We obtained data from BLM on Freedom of 

Information Act (FOIA) requests made for fair market value information 

prepared for federal coal lease sales. We also reviewed copies of request 

letters and BLM’s response to these requests, including redacted 

versions of fair market value documents made available in response to 

the only FOIA request where BLM supplied these documents. We 

interviewed BLM staff, industry representatives, as well as conservation 

and environmental groups to get their perspectives on the information 

made publicly available on federal coal leases.

Finally, we conducted site visits to Colorado and Wyoming. During these 

visits, we met with officials in BLM state offices in Colorado and

Wyoming, and we also met with officials in the Casper Field Office in 

Wyoming. In addition, we met with a coal mining company and toured a 

large surface mine in Wyoming and met with a professor of economics at 

the University of Wyoming’s School of Energy Resources. We selected 

these states because they have different types of mining that take 

place—generally surface mining in Wyoming and underground mining in 

Colorado. In addition, we selected Wyoming because of the large amount 

of federal coal leasing activity in the state.

We conducted this performance audit from June 2012 to December 2013 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 
Appendix I: Objectives, Scope and 

Methodology

Page 54 GAO-14-140 Coal Leasing

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: Federal Coal Lease Sales, January 

1990 through December 2012

Page 55 GAO-14-140 Coal Leasing

This appendix presents data on all federal coal lease sales by state that 

were conducted from January 1, 1990, through December 31, 2012.

Table 4 provides information on the lease tract characteristics (acreage, 

type of mine, and amount of coal) along with the lease sale results 

(number of bids received, bonus bid accepted, and name of successful 

bidder).

Table 4: Federal Coal Lease Sales, January 1990 through December 2012

Sale date

Lease 

serial 

number Acres

Associated 

mine name

Type 

of mine

Estimated 

amount 

of coal 

leased

(1,000 

tons)

Number 

of 

qualified 

bids 

received a

Total 

accepted 

bonus bid 

(nominal 

dollars)

Bonus 

bid per 

ton 

(nominal 

dollars)

Bonus 

bid per 

acre 

(nominal 

dollars)

Successful 

bidder

Alabama

6/12/1990 ALES 

041886

80 River King Surface 160 1 $21,101 $0.13 $264 River King 

Energy

7/12/1991 ALES 

043165

6440 Yellow 

Creek

Underground 24,600 1 $1,300,880 $0.05 $202 Pittsburg & 

Midway 

Mining Coal 

Co.

3/18/1994 ALES 

044853

1610 Shoal 

Creek

Underground 8,065 1 $330,000 $0.04 $205 Drummond 

Co. Inc.

6/28/1996 ALES 

046611

40 Mary Lee 

Number 1

Underground 191 1 $7,795 $0.04 $194 Drummond 

Co. Inc.

8/21/1997 ALES 

047886

40 Oak 

Mountain 

and Boone 

Number 1

Underground 500 1 $4,223 $0.00001 $103 Oak Mtn. 

Energy LLC

9/30/2004 ALES 

051589

2887 North River Underground 10,789 1 $320,568 $0.03 $111 Pittsburg & 

Midway 

Mining Coal 

Co.

Colorado

4/27/1990 COC 

049465

193 King Underground 1,000 2 $101,560 $0.10 $526 National King 

Coal

6/26/1991 COC 

051551

1280 Deserado Underground 8,700 1 $656,640 $0.08 $513 Western 

Fuels

7/30/1992 COC 

053510

1340 Elk Creek Underground 10,300 1 $1,025,998 $0.10 $766 Somerset 

Mining

12/18/1992 COC 

053356

522 Bowie 

Number 2

Underground 2,500 1 $52,178 $0.02 $100 Cyprus 

Orchard 

Valley

10/7/1993 COC 

053560

544 Foidel 

Creek

Underground 3,600 1 $57,225 $0.02 $105 Cyprus 

Western

Appendix II: Federal Coal Lease Sales, 

January 1990 through December 2012
Appendix II: Federal Coal Lease Sales, January 

1990 through December 2012

Page 56 GAO-14-140 Coal Leasing

Sale date

Lease 

serial 

number Acres

Associated 

mine name

Type 

of mine

Estimated 

amount 

of coal 

leased

(1,000 

tons)

Number 

of 

qualified 

bids 

received a

Total 

accepted 

bonus bid 

(nominal 

dollars)

Bonus 

bid per 

ton 

(nominal 

dollars)

Bonus 

bid per 

acre 

(nominal 

dollars)

Successful 

bidder

11/4/1993 COC 

054558

1012 West Elk Underground 14,000 1 $803,520 $0.06 $794 Mountain 

Coal Co. LLC

5/15/1995 COC 

056447

2770 West Elk Underground 37,000 1 $6,408,035 $0.17 $2,314 Mountain 

Coal Co. LLC

1/25/1996 COC 

054608

2600 Foidel 

Creek

Underground 23,870 1 $4,057,900 $0.17 $1,561 Twentymile 

Coal Co.

3/30/1998 COC 

060941

195 King Underground 624 1 $19,752 $0.03 $101 National King 

Coal

5/31/2000 COC 

061357

4444 Elk Creek Underground 20,920 1 $8,723,661 $0.42 $1,963 Oxbow 

Mining Inc.

5/31/2000 COC 

061209

3211 Bowie 

Number 2

Underground 32,600 1 $10,334,186 $0.32 $3,219 Bowie 

Resources 

Ltd.

12/4/2001 COC 

062920

1305 King II Underground 7,049 1 $396,720 $0.06 $304 National King 

Coal

1/6/2004 COC 

066514

1520 McClane 

Canyon

Underground 8,365 2 $2,065,000 $0.25 $1,358 Central 

Appalachia 

Mining, CAM 

Holdings

7/1/2004 COC 

067011

691 West Elk Underground 2,300 1 $191,994 $0.08 $278 Arch Coal, 

Inc., Ark 

Land Co.

10/12/2006 COC 

067514

200 Foidel 

Creek

Underground 2,100 1 $525,000 $0.25 $2,620 Twentymile 

Coal Co.

1/24/2007 COC 

067232

1517 West Elk Underground 14,000 1 $3,025,000 $0.22 $1,994 Ark Land Co.

5/30/2007 COC 

068590

1407 Colowyo Surface 92,000 1 $13,106,600 $0.14 $9,317 Colowyo 

Coal Co. LP

1/14/2009 COC 

072980

500 Foidel 

Creek

Underground 1,400 1 $350,000 $0.25 $700 Twentymile 

Coal Co.

5/15/2012 COC 

070615

726 Elk Creek Underground 3,960 1 $990,264 $0.25 $1,364 Oxbow 

Mining, LLC

8/22/2012 COC 

074219

400 Sage Creek Underground 3,200 1 $800,000 $0.25 $2,000 Sage Creek 

Holdings, 

LLC

Kentucky

12/13/1990 KYES 

041395

180 Bell Co. 

Number 2

Underground 900 3 $196,000 $0.22 $1,089 Apollo Fuel

12/13/1990 KYES 

045303

800 Stone 

Number 2

Underground 3,800 1 $160,000 $0.04 $200 Apollo Fuel
Appendix II: Federal Coal Lease Sales, January 

1990 through December 2012

Page 57 GAO-14-140 Coal Leasing

Sale date

Lease 

serial 

number Acres

Associated 

mine name

Type 

of mine

Estimated 

amount 

of coal 

leased

(1,000 

tons)

Number 

of 

qualified 

bids 

received a

Total 

accepted 

bonus bid 

(nominal 

dollars)

Bonus 

bid per 

ton 

(nominal 

dollars)

Bonus 

bid per 

acre 

(nominal 

dollars)

Successful 

bidder

5/3/1991 KYES 

043034

167 Camp 

Number 2

Underground 900 1 $16,658 $0.02 $100 Peabody

5/3/1991 KYES 

042948

99 Big Fist 

Number 4

Underground 400 1 $9,900 $0.02 $100 Wellmore 

Coal

8/31/1993 KYES 

045088

181 Number 60 Underground 500 1 $19,005 $0.04 $105 Leeco

7/27/2005 KYES 

051002

1210 Beechfork Underground 2,900 1 $501,003 $0.17 $414 Bledsoe Coal 

Leasing 

Company

5/11/2006 KYES 

050213

315 Chas

Number 4

Underground 792 1 $47,250 $0.06 $150 Chas Coal 

LLC

Montana

6/16/1999 MTM 

080697

1401 Rosebud Surface 27,600 1 $4,416,000 $0.16 $3,152 Western 

Energy Co.

11/27/2000 MTM 

088405

150 Spring 

Creek

Surface 15,400 1 $1,740,200 $0.11 $11,601 Spring Creek 

Coal Co.

4/17/2007 MTM 

094378

1118 Spring 

Creek

Surface 108,600 1 $19,902,200 $0.18 $17,806 Spring Creek 

Coal Co.

2/28/2012 MTM 

097988

2680 Bull 

Mountains 

Mine No. 1

Surface 35,500 1 $10,650,000 $0.30 $3,974 Signal Peak 

Energy LLC

New Mexico

7/31/1991 NMNM 

078371

3082 Salt River Surface 19,600 1 $1,571,963 $0.08 $510 Salt River 

Project

7/31/1991 NMNM 

086717

3360 Salt River Surface 10,000 1 $799,680 $0.08 $238 Salt River 

Project

11/1/2000 NMNM 

099144

4484 San Juan Underground 63,000 1 $13,000,000 $0.21 $2,899 San Juan 

Coal Co.

North Dakota

1/23/1991 NDM 

078697

160 Freedom Surface 2,500 1 $16,000 $0.01 $100 Coteau 

Properties 

Co.

8/9/1994 NDM 

081582

793 Freedom Surface 9,140 1 $79,300 $0.01 $100 Coteau 

Properties 

Co.

3/26/1997 NDM 

085516

159 Freedom Surface 1,750 1 $15,900 $0.01 $100 Falkirk 

Mining Co.

3/26/1997 NDM 

085537

80 Coteau Surface 510 1 $8,000 $0.02 $100 Coteau 

Properties 

Co.
Appendix II: Federal Coal Lease Sales, January 

1990 through December 2012

Page 58 GAO-14-140 Coal Leasing

Sale date

Lease 

serial 

number Acres

Associated 

mine name

Type 

of mine

Estimated 

amount 

of coal 

leased

(1,000 

tons)

Number 

of 

qualified 

bids 

received a

Total 

accepted 

bonus bid 

(nominal 

dollars)

Bonus 

bid per 

ton 

(nominal 

dollars)

Bonus 

bid per 

acre 

(nominal 

dollars)

Successful 

bidder

3/26/1997 NDM 

085517

399 Freedom Surface 5,610 1 $39,900 $0.01 $100 Coteau

Properties 

Co.

3/26/1997 NDM 

085515

79 Freedom Surface 2,000 1 $8,000 $0.004 $101 Coteau 

Properties 

Co.

9/30/1998 NDM 

086601

360 Beulah Surface 6,210 1 $36,000 $0.01 $100 Knife River 

Corp.

2/12/2002 NDM 

090783

503 Freedom Surface 7,000 1 $50,280 $0.01 $100 Coteau 

Properties 

Co.

12/10/2002 NDM 

091647

40 Falkirk Surface 300 1 $4,000 $0.01 $100 Falkirk 

Mining Co.

3/2/2006 NDM 

091535

5334 Freedom Surface 89,000 1 $533,400 $0.01 $100 Coteau 

Properties 

Co.

9/12/2006 NDM 

095104

320 Center Surface 8,300 1 $32,000 $0.004 $100 BNI Coal 

LTD

10/15/2009 NDM 

097633

160 Center Surface 3,000 1 $16,000 $0.01 $100 BNI Coal 

LTD

Oklahoma

11/14/1994 OKNM 

091590

400 Shady 

Point, 

Cavanal

Underground 369 1 $165,544 $0.45 $414 FarrellCooper 

Mining Co.

11/14/1994 OKNM 

091569

2725 Heavener Surface 18,290 1 $281,388 $0.02 $103 FarrellCooper 

Mining Co.

11/14/1994 OKNM 

091568

1933 Red Oak 

South

Surface 11,137 1 $204,502 $0.02 $106 FarrellCooper 

Mining Co.

11/14/1994 OKNM 

091190

3429 Pollyanna 

Number 8 

North and 

South

Surface 15,320 1 $346,710 $0.02 $101 P&K 

Company

1/31/1997 OKNM 

094663

90 Pollyanna 

Number 9

Surface 138 1 $10,000 $0.07 $111 Georges 

Colliers Inc.

1/31/1997 OKNM 

091571

2120 Rock Island Surface 4,300 1 $251,816 $0.06 $119 FarrellCooper 

Mining Co.

9/14/2005 OKNM 

108097

2380 McCurtain Underground 10,058 2 $323,204 $0.03 $136 FarrellCooper 

Mining Co.
Appendix II: Federal Coal Lease Sales, January 

1990 through December 2012

Page 59 GAO-14-140 Coal Leasing

Sale date

Lease 

serial 

number Acres

Associated 

mine name

Type 

of mine

Estimated 

amount 

of coal 

leased

(1,000 

tons)

Number 

of 

qualified 

bids 

received a

Total 

accepted 

bonus bid 

(nominal 

dollars)

Bonus 

bid per 

ton 

(nominal 

dollars)

Bonus 

bid per 

acre 

(nominal 

dollars)

Successful 

bidder

9/14/2005 OKNM 

107920

2702 Bull Hill Surface 8,993 2 $409,965 $0.05 $152 FarrellCooper 

Mining Co.

9/14/2005 OKNM 

104763

560 Liberty 

Number 4

Surface 2,057 1 $57,820 $0.03 $103 FarrellCooper 

Mining Co.

Utah

1/11/1990 UTU 

064263

1987 Star Point 

Mine

Underground 7,630 1 $1,526,369 $0.20 $768 Cyprus 

Western

6/28/1990 UTU 

066060

933 Aberdeen Underground 8,800 1 $1,654,776 $0.19 $1,773 AMCA Coal 

Leasing

6/28/1990 UTU 

064375

2631 Trail 

Mountain

Underground 12,200 2 $6,103,479 $0.50 $2,320 Beaver Creek 

Coal

12/29/1993 UTU 

068082

2979 Genwal, 

Crandall 

Canyon 

North

Underground 18,600 1 $3,810,000 $0.20 $1,279 Andalex

Resources, 

Inc.

7/19/1995 UTU 

069635

2177 Dugout 

Canyon

Underground 12,700 1 $2,667,000 $0.21 $1,225 Sage Point 

Coal Co.

5/30/1996 UTU 

067939

3291 Skyline Underground 24,100 1 $5,600,000 $0.23 $1,702 Coastal 

States 

Energy Co.

12/18/1996 UTU 

073975

2299 Willow 

Creek Mine

Underground 22,100 1 $5,127,200 $0.23 $2,230 Cyprus 

Plateau 

Mining Co.

5/14/1998 UTU 

074804

1288 Horizon Underground 6,300 1 $315,000 $0.05 $244 White OakHorizon 

Mining

5/20/1999 UTU 

076195

7172 Sufco Underground 60,000 1 $16,900,000 $0.28 $2,356 Canyon Fuel 

Co.

12/12/2001 UTU 

078562

1646 West Ridge Underground 14,800 1 $11,459,900 $0.77 $6,961 Andalex 

Resources, 

Inc.

6/12/2003 UTU 

078953

880 Genwal, 

Crandell 

Canyon 

South

Underground 7,630 1 $6,561,800 $0.86 $7,457 Andalex

Resources, 

Inc.

6/24/2004 UTU 

079975

703 Aberdeen Underground 3,040 1 $486,400 $0.16 $692 Andalex 

Resources, 

Inc.
Appendix II: Federal Coal Lease Sales, January 

1990 through December 2012

Page 60 GAO-14-140 Coal Leasing

Sale date

Lease 

serial 

number Acres

Associated 

mine name

Type 

of mine

Estimated 

amount 

of coal 

leased

(1,000 

tons)

Number 

of 

qualified 

bids 

received a

Total 

accepted 

bonus bid 

(nominal 

dollars)

Bonus 

bid per 

ton 

(nominal 

dollars)

Bonus 

bid per 

acre 

(nominal 

dollars)

Successful 

bidder

6/8/2006 UTU 

081893

1760 Aberdeen Underground 14,900 1 $2,816,000 $0.19 $1,600 Andalex 

Resources, 

Inc.

8/1/2006 UTU 

084285

214 Deer Creek Underground 325 1 $98,000 $0.30 $459 PACIFICORP

9/3/2009 UTU 

086038

120 Emery 

Deep

Underground 561 1 $201,600 $0.36 $1,680 Consolidation 

Coal

Wyoming

9/20/1990 WYW 

119606

81 Swanson Underground 300 1 $28,611 $0.10 $353 Lion Coal

9/26/1991 WYW

117924

1709 Jacobs 

Ranch

Surface 102,600 1 $20,110,457 $0.20 $11,770 Kerr McGee

8/12/1992 WYW 

118907

3493 Black 

Thunder

Surface 481,000 1 $71,898,842 $0.15 $20,587 Thunder 

Basin

9/28/1992 WYW 

119554

3064 North 

Antelope 

Rochelle

Surface 370,000 1 $86,986,960 $0.24 $28,390 Powder River

1/7/1993 WYW 

122586

463 Rocky 

Butte

Surface 55,000 1 $16,500,001 $0.30 $35,621 Northwestern 

Resources

4/5/1995 WYW 

124783

1059 Eagle Butte Surface 166,400 1 $18,470,400 $0.11 $17,438 AMAX Land 

Co.

12/4/1996 WYW 

128322

617 Antelope Surface 60,364 1 $9,054,600 $0.15 $14,670 Antelope 

Coal Co.

9/25/1997 WYW 

127221

1482 North 

Rochelle

Surface 157,610 1 $30,576,340 $0.19 $20,633 Triton

6/30/1998 WYW 

136142

4224 North 

Antelope 

Rochelle

Surface 532,000 1 $109,596,500 $0.21 $25,945 Powder River 

Coal Co.

10/1/1998 WYW 

136458

3546 Black 

Thunder

Surface 412,000 2 $158,000,009 $0.38 $44,563 Arch Coal

9/29/1999 WYW 

139975

5206 Elk 

Mountain

Surface & 

Underground

65,780 1 $1,957,456 $0.03 $376 Ark Land Co.

9/7/2000 WYW 

141435

2819 Antelope Surface 275,577 1 $91,220,121 $0.33 $32,363 Kennecott 

Energy

1/16/2002 WYW 

146744

4982 Jacobs 

Ranch

Surface 537,542 2 $379,504,652 $0.71 $76,171 Kennecott 

Energy
Appendix II: Federal Coal Lease Sales, January 

1990 through December 2012

Page 61 GAO-14-140 Coal Leasing

Sale date

Lease 

serial 

number Acres

Associated 

mine name

Type 

of mine

Estimated 

amount 

of coal 

leased

(1,000 

tons)

Number 

of 

qualified 

bids 

received a

Total 

accepted 

bonus bid 

(nominal 

dollars)

Bonus 

bid per 

ton 

(nominal 

dollars)

Bonus 

bid per 

acre 

(nominal 

dollars)

Successful 

bidder

6/29/2004 WYW 

154001

2957 North 

Antelope 

Rochelle

Surface 297,469 1 $274,117,684 $0.92 $92,710 PeabodyBTU Western 

Resources, 

Inc.

9/22/2004 WYW 

150318

5084 Black 

Thunder

Surface 718,719 1 $610,999,950 $0.85 $120,193 Ark Land LT 

Incorporated

11/17/2004 WYW 

151634

921 Buckskin Surface 142,698 1 $42,809,400 $0.30 $46,473 Kiewit Mining 

Group

12/15/2004 WYW 

151643

2809 Antelope Surface 194,961 1 $146,311,000 $0.75 $52,084 Antelope 

Coal Co.

12/29/2004 WYW 

150210

2369 North 

Antelope 

Rochelle

Surface 324,627 1 $299,143,785 $0.92 $126,254 BTU Western 

Resources, 

Inc.

1/19/2005 WYW 

154595

2242 Bridger Underground 32,145 1 $6,953,861 $0.22 $3,101 Bridger Coal 

Co.

2/16/2005 WYW 

151134

2813 School 

Creek

Surface 327,186 2 $317,697,610 $0.97 $112,959 BTU Western 

Resources, 

Inc.

6/5/2007 WYW 

160394

1399 Black Butte Surface 11,200 1 $2,426,620 $0.0002 $1,735 Black Butte 

Coal 

Company

2/20/2008 WYW 

155132

1428 Eagle butte Surface 255,000 1 $180,540,000 $0.71 $126,429 Foundation 

Coal West 

Inc.

4/22/2008 WYW 

174407

2900 Cordero 

Rojo

Surface 288,100 1 $250,800,000 $0.87 $86,476 Cordero 

Mining Co.

1/28/2009 WYW 

154432

446 Cordero 

Rojo

Surface 54,657 1 $48,098,424 $0.88 $107,871 Cordero 

Mining Co.

5/11/2011 WYW 

163340

2838 Antelope Surface 350,263 1 $297,723,228 $0.85 $104,920 Antelope 

Coal LLC

6/15/2011 WYW 

177903

1909 Antelope Surface 56,356 1 $49,311,500 $0.88 $25,836 Antelope 

Coal LLC

7/13/2011 WYW 

161248

1671 Caballo Surface 221,735 2 $210,648,060 $0.95 $126,059 BTU Western 

Resources

8/17/2011 WYW 

172657

1024 Belle Ayr Surface 130,196 2 $143,417,404 $1.10 $140,057 Alpha Coal 

West
Appendix II: Federal Coal Lease Sales, January 

1990 through December 2012

Page 62 GAO-14-140 Coal Leasing

Sale date

Lease 

serial 

number Acres

Associated 

mine name

Type 

of mine

Estimated 

amount 

of coal 

leased

(1,000 

tons)

Number 

of 

qualified 

bids 

received a

Total 

accepted 

bonus bid 

(nominal 

dollars)

Bonus 

bid per 

ton 

(nominal 

dollars)

Bonus 

bid per 

acre 

(nominal 

dollars)

Successful 

bidder

12/14/2011 WYW 

174596

1977 Black 

Thunder

Surface 222,676 1 $300,001,012 $1.35 $151,769 Ark Land Co., 

South

5/17/2012 WYW 

176095

3243 North 

Antelope 

Rochelle

Surface 401,831 1 $446,031,864 $1.11 $137,536 BTU Western 

Resources

6/28/2012 WYW 

173408

6364 North 

Antelope 

Rochelle

Surface 721,155 1 $793,270,311 $1.10 $124,644 BTU Western 

Resources

Source: GAO analysis of BLM data.

a

With the exception of WYW 154595 lease tract, we are reporting minable tons of coal for the lease 

tracts in Wyoming. For WYW 154595 lease tract and lease tracts in all other states, we are reporting 

recoverable tons of coal. This estimate of mineable tons of coal is generally a larger number than the 

recoverable estimate, because it includes coal that is generally left in place during actual mining 

operations, such as coal along property boundaries or coal left in place as pillars for structural 

reasons in an underground mine. Wyoming BLM does not typically report recoverable tons publicly 

because officials in this state office consider this sensitive information.
Appendix III: Summary Information from File 

Reviews of Selected Federal Coal Lease Sales

Page 63 GAO-14-140 Coal Leasing

This appendix provides information on the 31 federal coal lease sales we 

reviewed that generally took place from January 1, 2007, to July 31, 

2012. For those BLM state offices that did not conduct 2 lease sales 

during this time, we reviewed their 2 most recent lease sales.1

Reports that are relevant to the determination of fair market value include 

the following:

• geologic reports, which contain an estimate of the amount of coal that 

can be recovered on the lease tract along with the characteristics of 

the coal, including its heating content;

• engineering reports, which generally contain estimates of the costs to 

extract the coal based on the number of employees and capital 

equipment necessary to carry out mining activities;

• economic reports, which establish price and demand levels for the 

lease tract’s coal; and

• appraisal reports, which document the fair market value for the lease 

tract, along with an explanation of the methods used to develop this 

number.

BLM’s guidance does not direct that all of these reports to be prepared as 

part of a lease sale. For example, it is unlikely that an economic report 

would be prepared if the income approach was not used to determine fair 

market value. However, BLM guidance requires that appraisal reports be 

signed by three officials.

For the files we reviewed, table 5 provides information by lease tract on 

the amount of coal involved in the sale, types of reports prepared as part 

of the sale, fair market value approaches used, and compliance with 

appraisal report review requirements.

 1

We reviewed three pre-2007 files for both Oklahoma and New Mexico because these 

sales involved multiple lease tracts that were held on the same date.

Appendix III: Summary Information from File 

Reviews of Selected Federal Coal Lease Sales
Appendix III: Summary Information from File 

Reviews of Selected Federal Coal Lease Sales

Page 64 GAO-14-140 Coal Leasing

Table 5: Summary Information on Coal Lease Sale Files Reviewed

State

Serial 

number

Lease 

tract 

name

Date of 

lease sale

Coal 

offered 

(millions 

of tons)

Geologic 

report 

prepared? a

Engineering 

report 

prepared? 

Economic 

report 

prepared? 

Appraisal 

report 

prepared? 

Fair market 

value 

approaches 

used

Appraisal 

report 

signed by

three 

officials?

AL

b

ALES047886Jesse 

Creek

8/21/1997 0.5 No No No Yes Comparable 

sales

Unknown 

because 

BLM unable 

to provide 

copy of 

appraisal

AL ALES051589Flat Creek 9/30/2004 10.8 Yes Yes No Yes Comparable 

sales

Income

No

CO COC067232Dry Fork 1/24/2007 12.1 Yes Yes No Yes Comparable 

sales

No

CO COC68590Collom 5/30/2007 92.0 Yes Yes Yes Yes Comparable 

sales

Income

No

CO COC072980Foidel 

Creek

1/14/2009 1.4 Yes Yes No Yes Comparable 

sales

No

CO COC070615Elk Creek 

East

5/15/2012 4.0 Yes Yes No Yes Comparable 

sales

No

KY KYES051002Gray Mtn. 7/27/2005 2.9 Yes Yes No Yes Comparable 

sales

Income

No

KY KYES050213Laurel 

Fork

5/11/2006 0.8 Yes Yes No Yes Comparable 

sales

No

MT MTM094378Spring 

Creek

4/17/2007 108.6 Yes Yes Yes Yes Comparable 

sales

Income

Yes

MT MTM097988Bull Mtn. 2/28/2012 35.5 Yes Yes Yes Yes Comparable 

sales

Income

No

NM NMNM078371Fence

Lake 1

7/31/1991 19.6 Yes Yes Yes Yes Comparable 

sales

Income

Yes

NM NMNM086717Fence 

Lake 2

7/31/1991 10.0 Yes Yes Yes Yes Comparable 

sales

Income

Yes

NM NMNM099144San Juan

Deep Ext.

11/1/2000 63.0 Yes Yes Yes Yes Comparable 

sales

Income

No
Appendix III: Summary Information from File 

Reviews of Selected Federal Coal Lease Sales

Page 65 GAO-14-140 Coal Leasing

State

Serial 

number

Lease 

tract 

name

Date of 

lease sale

Coal 

offered 

(millions 

of tons)

Geologic 

report 

prepared? a

Engineering 

report 

prepared? 

Economic 

report 

prepared? 

Appraisal 

report 

prepared? 

Fair market 

value 

approaches 

used

Appraisal 

report 

signed by

three 

officials?

ND

b

NDM095104Center 

Mine

9/12/2006 8.3 Yes Yes No Yes c Comparable 

sales

Yes

ND NDM097633Center 

Mine 2

10/15/2009 3.0 Yes Yes Noc Yes Comparable 

sales

No

OK OKNM107920Bull Hill 9/14/2005 9.0 No No No No No 

approaches 

documented

No

OK OKNM104763Liberty 

West

9/14/2005 2.1 No No No No No 

approaches 

documented

No

OK OKNM108097McCurtain 

Tract No. 

1

9/14/2005 6.5 No No No No No 

approaches 

documented

No

UT UTU086038Miller 

Canyon

9/3/2009 0.6 Yes Yes No Yes Comparable 

sales

No

UT UTU85539Dry

Canyon

11/15/2011 42.2 Yes Yes No Yes Comparable 

sales

No

WY WYW160394Pit 14 6/5/2007 11.2 Yes Yes Yes Yes Comparable 

sales

Income

Adjusted 

discounted 

cash flow 

comparable 

sales

Yes

d

WY WYW155132West 

Eagle 

Butte

2/20/2008 255.0 Yes Yes Yes Yes Comparable 

sales

Income

Adjusted 

discounted 

cash flow 

comparable 

sales

Yes

WY WYW174407South 

Maysdorf

4/22/2008 288.1 Yes Yes Yes Yes Comparable 

sales

Income

Adjusted 

discounted 

cash flow 

comparable 

sales

Yes
Appendix III: Summary Information from File 

Reviews of Selected Federal Coal Lease Sales

Page 66 GAO-14-140 Coal Leasing

State

Serial 

number

Lease 

tract 

name

Date of 

lease sale

Coal 

offered 

(millions 

of tons)

Geologic 

report 

prepared? a

Engineering 

report 

prepared? 

Economic 

report 

prepared? 

Appraisal 

report 

prepared? 

Fair market 

value 

approaches 

used

Appraisal 

report 

signed by

three 

officials?

WY

b

WYW154432North 

Maysdorf

1/29/2009 54.7 Yes Yes Yes Yes Comparable 

sales

Income

Adjusted 

discounted 

cash flow 

comparable 

sales

Yes

WY WYW163340West 

Antelope 2 

North

5/11/2011 350.3 Yes Yes Yes Yes Comparable 

sales

Income

Adjusted 

discounted 

cash flow 

comparable 

sales

Yes

WY WYW161248North 

Belle Ayr

7/13/2011 221.7 Yes Yes Yes Yes Comparable 

sales

Income

Adjusted 

discounted 

cash flow 

comparable 

sales

Yes

WY WYW172657Caballo 

West

8/17/2011 130.2 Yes Yes Yes Yes Comparable 

sales

Income

Adjusted 

discounted 

cash flow 

comparable 

sales

Yes

WY WYW174596South 

Hilight

12/14/2011 222.7 Yes Yes Yes Yes Comparable 

sales

Income

Adjusted 

discounted 

cash flow 

comparable 

sales

Yes
Appendix III: Summary Information from File 

Reviews of Selected Federal Coal Lease Sales

Page 67 GAO-14-140 Coal Leasing

State

Serial 

number

Lease 

tract 

name

Date of 

lease sale

Coal 

offered 

(millions 

of tons)

Geologic 

report 

prepared? a

Engineering 

report 

prepared? 

Economic 

report 

prepared? 

Appraisal 

report 

prepared? 

Fair market 

value 

approaches 

used

Appraisal 

report 

signed by

three 

officials?

WY

b

WYW176095South 

Porcupine

5/17/2012 401.8 Yes Yes Yes Yes Comparable 

sales

Income

Adjusted 

discounted 

cash flow 

comparable 

sales

Yes

WY WYW177903West 

Antelope 2 

South

6/15/2012 56.4 Yes Yes Yes Yes Comparable 

sales

Income

Adjusted 

discounted 

cash flow 

comparable 

sales

Yes

WY WYW173408North 

Porcupine

6/28/2012 721.2 Yes Yes Yes Yes Comparable 

sales

Income

Adjusted 

discounted 

cash flow 

comparable 

sales

Yes

Source: GAO analysis of BLM case files for coal lease sales.

a

In Wyoming, we are reporting mineable tons of coal, while for the other states, we are reporting 

recoverable tons of coal. This estimate of mineable tons of coal is generally a larger number than the 

recoverable estimate because it includes coal that is generally left in place during actual mining 

operations, such as coal along property boundaries or coal left in place as pillars for structural 

reasons in an underground mine. Wyoming BLM does not report recoverable tons publicly because 

officials in this state office consider this sensitive information.

b

According to BLM’s handbook on the economic evaluation of coal properties and BLM officials, the 

three officials that need to sign the appraisal report are: appraiser, reviewer, and deputy state 

director.

c

While a separate economic report was not prepared, economic and market information was 

incorporated into the appraisal report.

d

This approach involves numerically adjusting comparable sales using the results of the income 

approach.
Appendix IV: Comments from 

Department of the Interior

Page 68 GAO-14-140 Coal Leasing

Appendix IV: Comments from 

Department of the Interior 

The report number was 

changed to a FY2014 

number after it was sent to 

the agency for comment.
Appendix V: Comments from 

Department of Agriculture

Page 69 GAO-14-140 Coal Leasing

Appendix V: Comments from 

Department of Agriculture

The report number was 

changed to a FY2014 

number after it was sent to 

the agency for comment.
Appendix VI: GAO Contact and Staff 

Acknowledgments

Page 70 GAO-14-140 Coal Leasing

Anne-Marie Fennell, (202) 512-3841 or fennella@gao.gov

In addition to the individual named above, Elizabeth Erdmann (Assistant 

Director), Antoinette Capaccio, Scott Heacock, Rich Johnson, Mehrzad 

Nadji, Alison O’Neill, Dan Royer, Rebecca Shea, Jeanette M. Soares, Jeff 

Tessin, and Swati Sheladia Thomas made key contributions to this report.

Appendix VI: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(361421)
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