How Interior Should Handle Congressionally Authorized Federal Coal Lease Exchanges

GAO examined the experience of the Department of the Interior in handling a proposed exchange of federal coal lands involving the Utah Power and Light Company, an exchange authorized by Congress in October 1978.

GAO questioned whether the company had a valid right to be issued leases and whether an exchange was even appropriate. The prior administration entered into an exchange agreement with the company and began its evaluation on the basis that this question did not need to be addressed because Congress authorized the exchange. However, Congress clearly expressed its intent that, before granting a noncompetitive lease, the requirements of the Mineral Leasing Act of 1920 be met. Secondly, there was a lack of data to make a realistic estimate of the coal reserves on the preference right lands, thus making it impossible to make a valid equal value determination, as required by legislation authorizing the exchange. Finally, consummation of the proposed exchange would have resulted in leasing noncompetitively a prospective highly competitive tract. In addition, serious management weaknesses were noted which include: (1) Interior tended to overlook technical problems and disregard normal operating procedures; (2) Interior officials did not involve Geological Survey (USGS) technical people in planning the technical requirements for making an equal value determination; (3) because coal data were inadequate and transportation and marketing assumptions were of questionable validity, the method used was inappropriate; (4) USGS present coal reserve evaluation standards were not adequate for evaluating complex coal deposits; and (5) USGS unnecessarily spent $800,000 and may spend about $640,000 more this year for drilling exchange lands.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Michael Gryszkowiec Team: General Accounting Office: Energy and Minerals Division Phone: (202) 275-5514