Cooperative Leasing Offers Increased Competition, Revenues, and Production From Federal Coal Leases in Western Checkerboard Lands

GAO evaluated the Department of the Interior's ongoing experiment with cooperative leasing agreements as a possible alternative approach for developing Federal coal in Western checkerboard lands. The basic GAO objective was to determine whether Interior's efforts to plan and conduct a cooperative coal lease sale would result in a fair and reasonable first test for the concept.

Prior to the actual lease sale, the cooperative coal leasing concept combines the surface and coal rights to checkerboard lands into a single logical mining unit. Interior chose the Red Rim, Wyoming, tract as the test site for the first cooperative lease sale. However, obtaining consent from the private surface owner and unresolved legal issues surrounding participation by the mining affiliates of land grant railroads have complicated the sale. Moreover, the possibility of protracted litigation of either issue may persuade Interior to withdraw the tract for consideration for sale under the cooperative agreement concept. GAO believes that it would be imprudent to decide on the merits of the cooperative leasing concept based solely on the outcome of the Red Rim experiment. Cooperative coal leasing could substantially increase competition, revenues, and production from checkerboard area coal leases. In addition, the concept could lead to the mining of Federal coal that might not otherwise be recovered. However, before meaningful comparisons can be made against other leasing alternatives, more experience with the concept is needed.

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: John W. Sprague Team: General Accounting Office: Energy and Minerals Division Phone: (202) 512-7783