Dakota Gasification : Basin Electric spared immediate impact of federal coal leasing moratorium

'At the end of the day, the taxpayer is the ultimate loser because the U.S. treasury will receive nothing for the resource they own, which will stay in the ground,' said Joe Leingang, Basin Electric director of fuel and transportation.

Dakota Gasification Company - January 22, 2016

Basin Electric may have been spared immediate effects of the U.S. Department of the Interior 's temporary moratorium on new leases for coal mined from federal lands, though many unknowns remain.

'This is a complicated issue because we won't know the effect on the calculation of federal royalties for some time,' said Joe Leingang, Basin Electric director of fuel and transportation. 'However, on its face, this is just more of this administration's continuing war on coal.'

North Dakota

Federal coal makes up about 20 percent of coal mined annually in North Dakota, according to Leingang.

Basin Electric subsidiary Dakota Coal Company controls rights to lignite reserves in North Dakota and provides financing for the Freedom Mine north of Beulah, ND. The Freedom Mine is owned and operated by The Coteau Properties Company, a subsidiary of the North American Coal Corporation, Dallas, TX.

Dakota Coal's customers include Basin Electric's Antelope Valley Station, Leland Olds Station andDakota Gasification Company's Great Plains Synfuels Plant.

According to Leingang, most of Freedom Mine coal is in non-federal coal leases.

'While this moratorium complicates mine planning at Freedom Mine we're in generally good shape,' Leingang said. 'Our bigger concern here is in the formulation of the royalty rates and outstanding or planned future requests for royalty reductions.'

Wyoming

Western Fuels Association manages the Dry Fork Mine, which is owned by Western Fuels-Wyoming. Dry Fork Mine produces approximately 6 million tons of coal annually. Customers include Basin Electric's Laramie River Station, Dry Fork Station and Leland Olds Station.

According to Leingang, nearly 300 million tons of coal reserves are already tied up in five federal coal leases at the Dry Fork Mine.

'In general, Powder River Basin (PRB) coal producers have enough federal coal leased to continue mining at current levels for about another 20 years,' Leingang said. 'We're in pretty good shape.'

This moratorium, however, puts 10 PRB applications on hold for mine extensions from mines which Basin Electric purchases coal for Laramie River Station, Leingang said. He added that many pending coal lease applications have recently been 'pulled' because the U.S. Bureau of Land Management (BLM), who administers the program for the Department of the Interior, has priced them exorbitantly.

'At the end of the day, the taxpayer is the ultimate loser because the U.S. treasury will receive nothing for the resource they own which will stay in the ground,' Leingang said. 'Also, the BLM will very likely use this rulemaking proceeding to reformulate the calculus under which royalties are calculated in an effort to make this coal uneconomical.'