Questions Concerning Proposed Utah Power and Light Company Coal Lease Exchange

In reviewing the proposed Utah Power and Light Company coal lease exchange, which involves the relinquishment of preference right lease applications, GAO expressed concern as to: (1) the validity of the lease applications themselves; (2) the lack of data, particularly on coal reserves, for making the required equal value determination; and (3) the effect that giving over highly desirable coal lands in central Utah would have on opportunities for competitive leasing in the area.

GAO believes that there is an unanswered question as to whether the Utah Power and Light Company has a valid right to be issued a preference right lease or even whether an exchange is appropriate. Congress has expressed its intent that, before accepting the lease agreements, the Secretary of the Interior would first satisfy himself that the application and permit upon which it was based met all the requirements of the applicable legislation. The lack of data on the estimated coal reserves plus the absence of a valid basis for making transportation and marketing assumptions complicate any economic evaluation and fail to assure reasonable protection of the national interest. Consummation of the proposed exchange would result in the noncompetitive leasing of the prospectively highly competitive tract, North Horn Mountain. This tract comprises one of the larger areas of unmined coal and would be the largest tract in Utah to be leased in a competitive sale planned for 1981. Offering the tract in a competitive sale would provide the power company an opportunity to obtain it without denying other interested parties the same opportunity. Assuming that the power company has a valid right to be issued preference right leases, GAO believes that viable alternatives exist for resolving the exchange issue.