Last week, the 10th Circuit Court of Appeals reversed and remanded a District Court decision approving a decision by the Bureau of Land Management to approve new leases on mines that account for 20% of U.S. coal production. The decision is just the latest in a series of cases making clear that courts will not approve new – or renewed – energy production that does not appropriately address the impacts of a project on climate change.
Here, the Court held that BLM tripped up on a fairly basic issue – supply and demand. In the EIS, BLM acknowledged that coal from Powder River Basin – the location of the mines at issue – was cheaper than other coal. BLM nonetheless assumed that perfect substitutes for Powder River Basin coal exist somewhere that would be used without affecting the price of coal.
The BLM did not point to any information (other than its own unsupported statements) indicating that the national coal deficit of 230 million tons per year incurred under the no action alternative could be easily filled from elsewhere, or at a comparable price.
In fact, BLM acknowledged that coal demand may decline in response to an increase in price – duh! It argued instead that overall demand for coal would still increase. However, that argument misses the point. The question is not whether demand is increasing, overall. The question is what would be the difference in price if the leases were renewed as compared to if they were not. It’s indisputable that a decision not to renew the leases, taking 20% of U.S. coal out of production, would increase prices, thus driving down demand, reducing use of coal, and thus reducing GHG emissions.
The Court’s bottom line?
Therefore, we hold that it was an abuse of discretion to rely on an economic assumption, which contradicted basic economic principles, as the basis for distinguishing between the no action alternative and the preferred alternative.
Score one for economics.