[House Report 114-446]
[From the U.S. Government Publishing Office]


114th Congress   }                                      {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session      }                                      {      114-446

======================================================================



 
          EXCHANGE OF COAL PREFERENCE RIGHT LEASE APPLICATIONS

                                _______
                                

 March 10, 2016.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Bishop of Utah, from the Committee on Natural Resources, submitted 
                             the following

                              R E P O R T

                        [To accompany H.R. 1820]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Natural Resources, to whom was referred 
the bill (H.R. 1820) to authorize the Secretary of the Interior 
to retire coal preference right lease applications for which 
the Secretary has made an affirmative commercial quantities 
determination, and for other purposes, having considered the 
same, report favorably thereon without amendment and recommend 
that the bill do pass.

                          PURPOSE OF THE BILL

    The purpose of H.R. 1820 is to authorize the Secretary of 
the Interior to retire coal preference right lease applications 
for which the Secretary has made an affirmative commercial 
quantities determination.

                  BACKGROUND AND NEED FOR LEGISLATION

    H.R. 1820 resolves a decades-old Department of the Interior 
statutory obligation to the Navajo Nation stemming from 
provisions of the Navajo and Hopi Settlement Act of 1974 
(Public Law 93-531). This Act brought resolution to a boundary 
dispute between the Navajo Nation and the Hopi Tribe. In the 
settlement, the Navajo Nation lost acreage from their 
reservation to the Hopi Tribe, and many Navajo citizens were 
relocated. In return, the Navajo Nation was allowed to select 
comparable acreage on federal lands to be taken into trust for 
the Navajo Nation.
    By the early 1980s the Navajo Nation selected the federal 
lands they wanted to be taken into trust; however, some of the 
parcels selected were encumbered by preference rights lease 
applications (PRLAs). Under preference right leasing, 
established in the Minerals Leasing Act (30 U.S.C. 181 et 
seq.), a person could apply for an explorative or prospecting 
permit to determine if mineral resources were present at a 
public lands site. If the explorative activities were 
successful, the permittee could then exercise their 
``preference''--the first right to lease those mineral 
resources for commercial production.
    Until the PRLAs are processed, the selected parcels of 
federal land cannot be taken into trust for the Navajo Nation. 
Further complicating the transfer of the selected parcels with 
PRLAs are subsequent conservation designations that prohibit 
mineral development, such as the Fossil Forest Resource Natural 
Area (Public Law 98-603, Section 103), and the Ah-shi-sle-pah 
Wilderness Study Area.
    H.R. 1820 provides a mechanism for the Secretary of the 
Interior to retire the PRLAs, provide the mineral owner a 
credit to be used in leasing minerals, and make ``state share'' 
payments to the state where the new leases are issued.

                            COMMITTEE ACTION

    H.R. 1820 was introduced on April 15, 2015, by Congressman 
Ben Ray Lujan (D-NM). The bill was referred to the Committee on 
Natural Resources. Within the Natural Resources Committee, the 
bill was referred to the Subcommittee on Energy and Mineral 
Resources. On October 7, 2015, the Natural Resources Committee 
met to consider the bill. The Subcommittee was discharged by 
unanimous consent. No amendments were offered and the bill was 
ordered favorably reported on October 8, 2015, by unanimous 
consent.

            COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

    Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII of the Rules of the House of Representatives, the 
Committee on Natural Resources' oversight findings and 
recommendations are reflected in the body of this report.

                    COMPLIANCE WITH HOUSE RULE XIII

    1. Cost of Legislation. Clause 3(d)(1) of rule XIII of the 
Rules of the House of Representatives requires an estimate and 
a comparison by the Committee of the costs which would be 
incurred in carrying out this bill. However, clause 3(d)(2)(B) 
of that Rule provides that this requirement does not apply when 
the Committee has included in its report a timely submitted 
cost estimate of the bill prepared by the Director of the 
Congressional Budget Office under section 402 of the 
Congressional Budget Act of 1974. Under clause 3(c)(3) of rule 
XIII of the Rules of the House of Representatives and section 
403 of the Congressional Budget Act of 1974, the Committee has 
received the following cost estimate for this bill from the 
Director of the Congressional Budget Office:

H.R. 1820--A bill to authorize the Secretary of the Interior to retire 
        coal preference right lease applications for which the 
        Secretary has made an affirmative commercial quantities 
        determination, and for other purposes

    Summary: H.R. 1820 would authorize the Secretary of the 
Interior to provide Ark Coal Company (Ark) with bidding credits 
to acquire federally-owned mineral rights if Ark agrees to 
relinquish its rights to acquire noncompetitive coal leases on 
certain federal lands. Bidding credits are assigned a dollar 
value and can be used in lieu of cash to make certain payments 
to the federal government. The bill also would authorize the 
Secretary to make payments to any states where the bidding 
credits are used. Those payments would equal 50 percent of the 
total value of the credits expended.
    Based on information provided by the Bureau of Land 
Management (BLM) and coal industry representatives, CBO 
estimates that enacting H.R. 1820 would increase direct 
spending by $34 million over the 2017-2021 period; therefore, 
pay-as-you-go procedures apply. Enacting the bill would not 
affect revenues.
    CBO estimates that enacting the legislation would not 
increase net direct spending or on-budget deficits in any of 
the four consecutive 10-year periods beginning in 2027.
    H.R. 1820 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated cost to the Federal Government: The estimated 
budgetary effect of H.R. 1820 is shown in the following table. 
The costs of this legislation fall within budget function 300 
(natural resources and environment).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By fiscal year, in millions of dollars--
                                           -------------------------------------------------------------------------------------------------------------
                                             2016    2017    2018    2019    2020    2021    2022    2023    2024    2025    2026   2016-2021  2016-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               CHANGES IN DIRECT SPENDING
 
Estimated Budget Authority................       0       7       7       7       7       7       0       0       0       0       0        34         34
Estimated Outlays.........................       0       7       7       7       7       7       0       0       0       0       0        34         34
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Amounts may not sum to totals because or rounding.

    Basis of estimate: For this estimate, CBO assumes that the 
legislation will be enacted by the end of fiscal year 2016.
    CBO estimates that enacting H.R. 1820 would increase direct 
spending by $34 million over the 2017-2021 period. That 
estimate reflects the amount of payments CBO expects the 
Secretary would make to states if Ark used bidding credits 
issued under the bill to make certain payments to the federal 
government. That estimate also accounts for the uncertainty 
associated with the range of possible outcomes under current 
law and under the bill.
    Background: Prior to 1976, the Mineral Leasing Act 
authorized the Secretary to allow firms to prospect for coal on 
federal lands. Under that act, any prospector who discovered 
commercial quantities of coal could apply for a noncompetitive 
lease to mine the affected lands. In 1976, the Congress 
repealed the Secretary's authority to issue leases in that 
manner; however, prospectors who tiled for noncompetitive 
leases prior to that date still have valid claims that require 
adjudication by BLM.
    Ark currently holds all remaining applications for those 
noncompetitive leases. If granted, those leases would encompass 
21,000 acres of federal land in northern New Mexico, including 
lands adjacent to or overlapping with areas designated for 
protection by the Department of the Interior. Because of those 
designations, BLM does not want to allow mining on the lands. 
CBO expects that, under current law, a resolution could be 
reached between BLM and Ark under which Ark's noncompetitive 
lease rights would be terminated and the firm would receive 
compensation, either through litigation or some administrative 
action.
    To that end, BLM and Ark entered into an agreement in 2012 
that would allow the agency to terminate Ark's applications for 
noncompetitive leases in exchange for bidding credits. To 
execute that particular agreement:
           The Congress would need to pass legislation, 
        similar to H.R. 1820, providing BLM with the authority 
        to issue bidding credits,
           Ark and BLM would need to agree on the value 
        of the bidding credits, and
           The legislation would need to include the 
        authority to make payments to the states where those 
        credits would be used.
    Direct spending: Based on information in the 2012 agreement 
CBO estimates that, if the parties reached an agreement, the 
agency would provide Ark with bidding credits valued at $134 
million, which the firm would be required to use within a 5-
year period. The 2012 agreement contains a framework for 
negotiating the value of bidding credits BLM would provide to 
Ark that is based on the amount of the bonus bid necessary to 
acquire leases on the affected lands today. That framework 
stipulates that the affected lands contain 267 million tons of 
commercially mineable coal. The market value of that coal is 
between $20 and $30 per ton, and bonus bids for coal in New 
Mexico typically range from 1 percent to 3 percent of the 
market price of coal. Our estimate of the value of the bidding 
credits is derived by multiplying 267 million by the expected 
bonus bid per ton.
    CBO estimates that any resolution reached under current law 
will cost $134 million. That is the same amount that CBO 
estimates Ark would receive under H.R. 1820, which would 
implement the 2012 agreement. There is some probability that 
BLM and Ark will not be able to agree on the value of the 
bidding credits or other compensation and that Ark will resort 
to litigation to resolve its claims. The cost of settling that 
litigation would be the same under current law as under the 
bill. Because the expected cost of compensating Ark for the 
value of its claims under the bill would be equal to the 
expected cost of compensating Ark for those claims under 
current law, CBO estimates that authorizing BLM to provide 
bidding credits to Ark would have no budgetary effect.
    Under, the bill the Secretary would be required, as part of 
the agreement, to make cash payments to states equal to 50 
percent of the value of any bidding credits used in those 
states. Such payments are not authorized under current law. 
Based on our estimate of the value of the bidding credits, CBO 
estimates that the full value of those payments would total $67 
million. Because BLM and Ark would still have to negotiate 
after the bill is enacted, CBO expects that, under the bill, 
there could be two outcomes, which would be equally likely:
           The parties could reach an agreement under 
        which BLM would terminate Ark's applications for 
        noncompetitive leases, the agency would provide Ark 
        with bidding credits, and the Secretary would make 
        payments to states, or
           The parties could fail to reach an 
        agreement, BLM would deny Ark's applications for 
        noncompetitive leases on the affected lands, the firm 
        would pursue litigation or some other resolution, and 
        the Secretary would not make payments to states.
    After accounting for the uncertainties under the bill and 
under current law, CBO estimates that enacting H.R. 1820 would 
cost $34 million for payments to states (50 percent of the full 
value of payments to states where the credits are used). Those 
costs could be incurred anytime over the 2017-2021 period, so 
CBO distributed the total cost evenly over that period (about 
$7 million a year).
    Pay-as-you-go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays that are subject to those 
pay-as-you-go procedures are shown in the following table.

         CBO Estimate of Pay-As-You-Go Effects for H.R. 1820, as ordered reported by the House Committee on Natural Resources on October 8, 2015
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By fiscal year, in millions of dollars--
                                           -------------------------------------------------------------------------------------------------------------
                                             2016    2017    2018    2019    2020    2021    2022    2023    2024    2025    2026   2016-2021  2016-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET INCREASE IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact............       0       7       7       7       7       7       0       0       0       0       0        34         34
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Increase in long term direct spending and deficits: CBO 
estimates that enacting the legislation would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2027.
    Intergovernmental and private-sector impact: H.R. 1820 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate prepared by: Federal Costs: Jeff LaFave; Impact on 
State, Local, and Tribal Governments: Jon Sperl; Impact on the 
Private Sector: Amy Petz.
    Estimate approved by: H. Samuel Papenfuss, Deputy Assistant 
Director for Budget Analysis.
    2. Section 308(a) of Congressional Budget Act. As required 
by clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives and section 308(a) of the Congressional Budget 
Act of 1974, this bill does not contain any new budget 
authority, credit authority, or an increase or decrease in 
revenues or tax expenditures. According to the Congressional 
Budget Office, implementation of this bill would increase 
direct spending by $34 million over the 2017-2021 period.
    3. General Performance Goals and Objectives. As required by 
clause 3(c)(4) of Rule XIII, the general performance goal or 
objective of this bill is to authorize the Secretary of the 
Interior to retire coal preference right lease applications for 
which the Secretary has made an affirmative commercial 
quantities determination.

                           EARMARK STATEMENT

    This bill does not contain any Congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined 
under clause 9(e), 9(f), and 9(g) of rule XXI of the Rules of 
the House of Representatives.

                    COMPLIANCE WITH PUBLIC LAW 104-4

    This bill contains no unfunded mandates.

                       COMPLIANCE WITH H. RES. 5

    Directed Rule Making. The Chairman believes that this bill 
does not direct an executive branch official to conduct any 
specific rule-making proceedings.
    Duplication of Existing Programs. This bill does not 
establish or reauthorize a program of the federal government 
known to be duplicative of another program. Such program was 
not included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-139 
or identified in the most recent Catalog of Federal Domestic 
Assistance published pursuant to the Federal Program 
Information Act (Public Law 95-220, as amended by Public Law 
98-169) as relating to other programs.

                PREEMPTION OF STATE, LOCAL OR TRIBAL LAW

    This bill is not intended to preempt any State, local or 
tribal law.

                        CHANGES IN EXISTING LAW

    If enacted, this bill would make no changes in existing 
law.

                                  [all]