PRB Coal Leasing Scandal Redux

By Kennedy Maize

Washington, D.C., June 26, 2012 – Pardon my déjà vu, but an article in Monday’s Washington Post, citing a study of how the Interior Department’s coal leasing program in the Powder River Basin is mismanaged, takes me back 30 years. The study by the Institute for Energy Economics and Financial Analysis claims that Interior’s Bureau of Land Management over the years has shorted taxpayers some $30 billion in lease payments by faulty, industry-leaning leasing policies and procedures.

Three decades ago, the figure was $100 million. But that was for only one lease sale, the first big sale of coal from federal land after several years of leasing moratoria. As a reporter for the Energy Daily, I covered the story of that sale from 1982 start to 1984 finish. It was a tale of bureaucratic fumbling, political posturing, potentially criminal behavior, and more than a bit of opera bouffe. Without making any judgment about the current claims, which may or may not have substance, it’s worth recalling some of the events of the first PRB coal leasing scandal. It was a doozy.

Interior Secretary James G. Watt

The key figure was James Gaius Watt, Ronald Reagan’s first secretary of interior. Watt was, in his day, unique in Washington. A Wyoming native with a bald pate and Coke-bottle lensed eyeglasses, he was an outspoken evangelical Christian, hard-hard-right, and dedicated to the cause of taking the government out of government. Watt was a very strange figure in the early 1980s, but would seem familiar today. Watt presided over the nation’s mineral estate, including the astonishingly vast deposits of steam coal located near the surface of northeastern Wyoming and southeastern Montana.

Former President Jimmy Carter (remember the “more equivalent of war”?) had cleared the way to opening much of that resource to strip mining. Reagan turned it over to Watt, and he turned it over to a crew of partisan zealots and time-serving civil servants. It soon became clear to some of us who were following the lease sale from the outside that something was rotten at the Bureau of Land Management. Mark Crawford, a young reporter at McGraw-Hill, and I had both picked up rumors that BLM’s allegedly “secret” minimum bid data had leaked to industry. The coal industry and BLM, of course, denied this.

When the bids came in, the smell of rotten fish was strong in the air. The bids all came in exactly at the secret minimum bid levels or a penny or so above. The Wattites, naturally, proclaimed a great victory, following Sen. George Aiken’s prescription for ending the war in Vietnam: “Declare victory and bring the troops home.” But the smell was so great that even Congress couldn’t ignore it, so the solons in the summer of 1983 ordered Watt to assemble a “blue ribbon” commission to investigate what, if anything, went wrong.

This became Watt’s undoing. He named a commission chaired by veteran Washington fixer and serial special commission infielder David Linowes, which naturally became the “Linowes coal leasing commission.” In addition to Linowes, the members were Washington investment advisor and socialite Julia Walsh, former Fed member Andrew Brimmer, former IRS commissioner Donald Alexander, and Penn State mineral economist Richard Gordon. At a Chamber of Commerce luncheon that September, a reporter quizzed the pugnacious Watt about the copmposition of the panel, which appeared to be some as biased in favor of business interests.

Watt took umbrage, and took the question to be a reference to what we called “affirmative action” in those days and now refer to as “diversity.” He replied that his panel was quite well-balanced. “I have a black, a woman, two Jews, and a cripple,” Watt replied to stunned silence. (Walsh was the woman, Brimmer the black, Linowes and Gordon the Jews, and Gordon, who had a withered arm from birth, the cripple.) The remarks were on audio tape. Watt soon joined the ranks for former Reagan administration officials.

When the Linowes commission issued its final report in February 1984, it was highly critical of BLM and the coal leasing program, “badly mismanaged” in the characterization in the New York Times. The report found that taxpayers had been stiffed of at least $100 million because of the lack of competition in the coal sales and the coal was sold at “bargain-basement prices.”

The Linowes report also singled out two Reagan-Watt acolytes, David Russell and W. Perry Pendley, for improper industry contacts. During my coverage, I came across an internal Interior report that said Russell and Pendley had accepted improper gifts – expensive meals at fancy restaurants – from coal industry lobbyists. The implication was that they had leaked bid information; the Linowes report suggested that the Justice Department might want to take a look at how Interior handled the sale. Both Russell and Pendley were quickly fired by Watt’s successor, William P. Clark.

If the current report is accurate, little has changed in the ensuing 30 years, which should come as little surprise to anyone who follows Washington carefully. Administrations come and go, as do repeated “blue ribbon” commissions formed to paper over problems, but the bureaucracy most often grinds on to its own internal rhythms.

A footnote: The self-righteous Watt went on from Interior to become a D.C. lobbyist, where he attempted to influence the Department of Housing and Urban Development. In 1995, a federal grand jury indicted him on 25 felony counts, including lying to a federal grand jury, regarding his activities as a lobbyist between 1984 and 1986. In a 1996 plea bargain, he entered a guilty plea to one misdemeanor count and paid a $5,000 fine. He was sentenced to five years of probation, 500 hours of community service, and was forbidden to own a firearm.

 

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