Inaccurate Estimates of Western Coal Reserves Should Be Corrected

A significant portion of coal resources are under federal lands which are leased by the Department of the Interior to private entrepreneurs for mining purposes. In a previous report, GAO concluded that estimates of resources on existing leases did not provide a sound basis for forecasting production potential.

This conclusion has not changed. Interior's recoverable reserve estimates were based on general recovery factors and not on detailed economic analyses. Wide variations existed between Interior and leaseholder estimates, with leaseholder estimates generally better supported. However, both the U.S. Geological Survey (USGS) and leaseholders omitted some underground coal in computing recoverable reserves. USGS does not have requirements for nonproducing leaseholders to provide cost and pricing information; producing leaseholders submit selling price information with production royalty reports. No coal production occurred before 1977 on 87 percent of the 219 leases reviewed. The Mineral Leasing Act of 1920, as amended, requires leaseholders to satisfy conditions of diligent development and continued operation, and coal production requirements were further defined in 1976 regulations issued by Interior. Application of these requirements depends on accurate reserve estimates.

Recommendations

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