59–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 114–446 

EXCHANGE OF COAL PREFERENCE RIGHT LEASE 

APPLICATIONS 

MARCH 10, 2016.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. BISHOP of Utah, from the Committee on Natural Resources, 

submitted the following 

R E P O R T 

[To accompany H.R. 1820] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Natural Resources, to whom was referred the 

bill (H.R. 1820) to authorize the Secretary of the Interior to retire 

coal preference right lease applications for which the Secretary has 

made an affirmative commercial quantities determination, and for 

other purposes, having considered the same, report favorably thereon without amendment and recommend that the bill do pass. 

PURPOSE OF THE BILL

The purpose of H.R. 1820 is to authorize the Secretary of the Interior to retire coal preference right lease applications for which 

the Secretary has made an affirmative commercial quantities determination. 

BACKGROUND AND NEED FOR LEGISLATION

H.R. 1820 resolves a decades-old Department of the Interior statutory obligation to the Navajo Nation stemming from provisions of 

the Navajo and Hopi Settlement Act of 1974 (Public Law 93–531). 

This Act brought resolution to a boundary dispute between the 

Navajo Nation and the Hopi Tribe. In the settlement, the Navajo 

Nation lost acreage from their reservation to the Hopi Tribe, and 

many Navajo citizens were relocated. In return, the Navajo Nation 

was allowed to select comparable acreage on federal lands to be 

taken into trust for the Navajo Nation. 

By the early 1980s the Navajo Nation selected the federal lands 

they wanted to be taken into trust; however, some of the parcels 


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selected were encumbered by preference rights lease applications 

(PRLAs). Under preference right leasing, established in the Minerals Leasing Act (30 U.S.C. 181 et seq.), a person could apply for 

an explorative or prospecting permit to determine if mineral resources were present at a public lands site. If the explorative activities were successful, the permittee could then exercise their 

‘‘preference’’—the first right to lease those mineral resources for 

commercial production. 

Until the PRLAs are processed, the selected parcels of federal 

land cannot be taken into trust for the Navajo Nation. Further 

complicating the transfer of the selected parcels with PRLAs are 

subsequent conservation designations that prohibit mineral development, such as the Fossil Forest Resource Natural Area (Public 

Law 98–603, Section 103), and the Ah-shi-sle-pah Wilderness 

Study Area. 

H.R. 1820 provides a mechanism for the Secretary of the Interior 

to retire the PRLAs, provide the mineral owner a credit to be used 

in leasing minerals, and make ‘‘state share’’ payments to the state 

where the new leases are issued. 

COMMITTEE ACTION

H.R. 1820 was introduced on April 15, 2015, by Congressman 

Ben Ray Luja ́n (D–NM). The bill was referred to the Committee on 

Natural Resources. Within the Natural Resources Committee, the 

bill was referred to the Subcommittee on Energy and Mineral Resources. On October 7, 2015, the Natural Resources Committee met 

to consider the bill. The Subcommittee was discharged by unanimous consent. No amendments were offered and the bill was ordered favorably reported on October 8, 2015, by unanimous consent. 

COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of rule XIII 

of the Rules of the House of Representatives, the Committee on 

Natural Resources’ oversight findings and recommendations are reflected in the body of this report. 

COMPLIANCE WITH HOUSE RULE XIII

1. Cost of Legislation. Clause 3(d)(1) of rule XIII of the Rules of 

the House of Representatives requires an estimate and a comparison by the Committee of the costs which would be incurred in carrying out this bill. However, clause 3(d)(2)(B) of that Rule provides 

that this requirement does not apply when the Committee has included in its report a timely submitted cost estimate of the bill prepared by the Director of the Congressional Budget Office under section 402 of the Congressional Budget Act of 1974. Under clause 

3(c)(3) of rule XIII of the Rules of the House of Representatives and 

section 403 of the Congressional Budget Act of 1974, the Committee has received the following cost estimate for this bill from the 

Director of the Congressional Budget Office: 


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H.R. 1820—A bill to authorize the Secretary of the Interior to retire 

coal preference right lease applications for which the Secretary 

has made an affirmative commercial quantities determination, 

and for other purposes 

Summary: H.R. 1820 would authorize the Secretary of the Interior to provide Ark Coal Company (Ark) with bidding credits to acquire federally-owned mineral rights if Ark agrees to relinquish its 

rights to acquire noncompetitive coal leases on certain federal 

lands. Bidding credits are assigned a dollar value and can be used 

in lieu of cash to make certain payments to the federal government. The bill also would authorize the Secretary to make payments to any states where the bidding credits are used. Those payments would equal 50 percent of the total value of the credits expended. 

Based on information provided by the Bureau of Land Management (BLM) and coal industry representatives, CBO estimates that 

enacting H.R. 1820 would increase direct spending by $34 million 

over the 2017–2021 period; therefore, pay-as-you-go procedures 

apply. Enacting the bill would not affect revenues. 

CBO estimates that enacting the legislation would not increase 

net direct spending or on-budget deficits in any of the four consecutive 10-year periods beginning in 2027. 

H.R. 1820 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA) 

and would impose no costs on state, local, or tribal governments. 

Estimated cost to the Federal Government: The estimated budgetary effect of H.R. 1820 is shown in the following table. The costs 

of this legislation fall within budget function 300 (natural resources 

and environment). 

By fiscal year, in millions of dollars— 

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2016– 

2021 

2016– 

2026 

CHANGES IN DIRECT SPENDING 

Estimated Budget 

Authority ............... 0 7 7 7 7 7 0 0 0 0 0 34 34 

Estimated Outlays .... 0 7 7 7 7 7 0 0 0 0 0 34 34 

Note: Amounts may not sum to totals because or rounding. 

Basis of estimate: For this estimate, CBO assumes that the legislation will be enacted by the end of fiscal year 2016. 

CBO estimates that enacting H.R. 1820 would increase direct 

spending by $34 million over the 2017–2021 period. That estimate 

reflects the amount of payments CBO expects the Secretary would 

make to states if Ark used bidding credits issued under the bill to 

make certain payments to the federal government. That estimate 

also accounts for the uncertainty associated with the range of possible outcomes under current law and under the bill. 

Background: Prior to 1976, the Mineral Leasing Act authorized 

the Secretary to allow firms to prospect for coal on federal lands. 

Under that act, any prospector who discovered commercial quantities of coal could apply for a noncompetitive lease to mine the affected lands. In 1976, the Congress repealed the Secretary’s authority to issue leases in that manner; however, prospectors who tiled 

for noncompetitive leases prior to that date still have valid claims 

that require adjudication by BLM. 


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Ark currently holds all remaining applications for those noncompetitive leases. If granted, those leases would encompass 21,000 

acres of federal land in northern New Mexico, including lands adjacent to or overlapping with areas designated for protection by the 

Department of the Interior. Because of those designations, BLM 

does not want to allow mining on the lands. CBO expects that, 

under current law, a resolution could be reached between BLM and 

Ark under which Ark’s noncompetitive lease rights would be terminated and the firm would receive compensation, either through litigation or some administrative action. 

To that end, BLM and Ark entered into an agreement in 2012 

that would allow the agency to terminate Ark’s applications for 

noncompetitive leases in exchange for bidding credits. To execute 

that particular agreement: • The Congress would need to pass legislation, similar to 

H.R. 1820, providing BLM with the authority to issue bidding 

credits, • Ark and BLM would need to agree on the value of the bidding credits, and • The legislation would need to include the authority to 

make payments to the states where those credits would be 

used. 

Direct spending: Based on information in the 2012 agreement 

CBO estimates that, if the parties reached an agreement, the agency would provide Ark with bidding credits valued at $134 million, 

which the firm would be required to use within a 5-year period. 

The 2012 agreement contains a framework for negotiating the 

value of bidding credits BLM would provide to Ark that is based 

on the amount of the bonus bid necessary to acquire leases on the 

affected lands today. That framework stipulates that the affected 

lands contain 267 million tons of commercially mineable coal. The 

market value of that coal is between $20 and $30 per ton, and 

bonus bids for coal in New Mexico typically range from 1 percent 

to 3 percent of the market price of coal. Our estimate of the value 

of the bidding credits is derived by multiplying 267 million by the 

expected bonus bid per ton. 

CBO estimates that any resolution reached under current law 

will cost $134 million. That is the same amount that CBO estimates Ark would receive under H.R. 1820, which would implement 

the 2012 agreement. There is some probability that BLM and Ark 

will not be able to agree on the value of the bidding credits or other 

compensation and that Ark will resort to litigation to resolve its 

claims. The cost of settling that litigation would be the same under 

current law as under the bill. Because the expected cost of compensating Ark for the value of its claims under the bill would be equal 

to the expected cost of compensating Ark for those claims under 

current law, CBO estimates that authorizing BLM to provide bidding credits to Ark would have no budgetary effect. 

Under, the bill the Secretary would be required, as part of the 

agreement, to make cash payments to states equal to 50 percent 

of the value of any bidding credits used in those states. Such payments are not authorized under current law. Based on our estimate 

of the value of the bidding credits, CBO estimates that the full 

value of those payments would total $67 million. Because BLM and 

Ark would still have to negotiate after the bill is enacted, CBO exVerDate Sep 11 2014 05:36 Mar 11, 2016 Jkt 059006 PO 00000 Frm 00004 Fmt 6659 Sfmt 6602 E:\HR\OC\HR446.XXX HR446

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pects that, under the bill, there could be two outcomes, which 

would be equally likely: • The parties could reach an agreement under which BLM 

would terminate Ark’s applications for noncompetitive leases, 

the agency would provide Ark with bidding credits, and the 

Secretary would make payments to states, or • The parties could fail to reach an agreement, BLM would 

deny Ark’s applications for noncompetitive leases on the affected lands, the firm would pursue litigation or some other 

resolution, and the Secretary would not make payments to 

states. 

After accounting for the uncertainties under the bill and under 

current law, CBO estimates that enacting H.R. 1820 would cost 

$34 million for payments to states (50 percent of the full value of 

payments to states where the credits are used). Those costs could 

be incurred anytime over the 2017–2021 period, so CBO distributed 

the total cost evenly over that period (about $7 million a year). 

Pay-as-you-go considerations: The Statutory Pay-As-You-Go Act 

of 2010 establishes budget-reporting and enforcement procedures 

for legislation affecting direct spending or revenues. The net 

changes in outlays that are subject to those pay-as-you-go procedures are shown in the following table. 

CBO Estimate of Pay-As-You-Go Effects for H.R. 1820, as ordered reported by the House 

Committee on Natural Resources on October 8, 2015 

By fiscal year, in millions of dollars— 

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2016– 

2021 

2016– 

2026 

NET INCREASE IN THE DEFICIT 

Statutory Pay-As-YouGo Impact ............. 0 7 7 7 7 7 0 0 0 0 0 34 34 

Increase in long term direct spending and deficits: CBO estimates that enacting the legislation would not increase net direct 

spending or on-budget deficits in any of the four consecutive 10- 

year periods beginning in 2027. 

Intergovernmental and private-sector impact: H.R. 1820 contains 

no intergovernmental or private-sector mandates as defined in 

UMRA and would impose no costs on state, local, or tribal governments. 

Estimate prepared by: Federal Costs: Jeff LaFave; Impact on 

State, Local, and Tribal Governments: Jon Sperl; Impact on the 

Private Sector: Amy Petz. 

Estimate approved by: H. Samuel Papenfuss, Deputy Assistant 

Director for Budget Analysis. 

2. Section 308(a) of Congressional Budget Act. As required by 

clause 3(c)(2) of rule XIII of the Rules of the House of Representatives and section 308(a) of the Congressional Budget Act of 1974, 

this bill does not contain any new budget authority, credit authority, or an increase or decrease in revenues or tax expenditures. According to the Congressional Budget Office, implementation of this 

bill would increase direct spending by $34 million over the 2017– 

2021 period. 

3. General Performance Goals and Objectives. As required by 

clause 3(c)(4) of Rule XIII, the general performance goal or objecVerDate Sep 11 2014 05:36 Mar 11, 2016 Jkt 059006 PO 00000 Frm 00005 Fmt 6659 Sfmt 6602 E:\HR\OC\HR446.XXX HR446

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tive of this bill is to authorize the Secretary of the Interior to retire 

coal preference right lease applications for which the Secretary has 

made an affirmative commercial quantities determination. 

EARMARK STATEMENT

This bill does not contain any Congressional earmarks, limited 

tax benefits, or limited tariff benefits as defined under clause 9(e), 

9(f), and 9(g) of rule XXI of the Rules of the House of Representatives. 

COMPLIANCE WITH PUBLIC LAW 104–4

This bill contains no unfunded mandates. 

COMPLIANCE WITH H. RES. 5

Directed Rule Making. The Chairman believes that this bill does 

not direct an executive branch official to conduct any specific rulemaking proceedings. 

Duplication of Existing Programs. This bill does not establish or 

reauthorize a program of the federal government known to be duplicative of another program. Such program was not included in 

any report from the Government Accountability Office to Congress 

pursuant to section 21 of Public Law 111–139 or identified in the 

most recent Catalog of Federal Domestic Assistance published pursuant to the Federal Program Information Act (Public Law 95–220, 

as amended by Public Law 98–169) as relating to other programs. 

PREEMPTION OF STATE, LOCAL OR TRIBAL LAW

This bill is not intended to preempt any State, local or tribal law. 

CHANGES IN EXISTING LAW

If enacted, this bill would make no changes in existing law. 

Æ 


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