In a first, coal company agrees to use social cost of carbon

By Benjamin Storrow | 03/13/2023 06:49 AM EDT

Environmentalists said a deal involving the Canyon Fuel Co. of Utah marks the first time a coal company has voluntarily agreed to calculate the climate damages of its mining on federal land.

Large coal piles sits in front of a coal fired power plant in Castle Dale, Utah.

Large coal piles sits in front of a coal-fired power plant in Castle Dale, Utah. George Frey/Getty Images

Utah’s largest coal company will relinquish two mining leases and apply the social cost of carbon in the environmental analysis of a third lease as part of a settlement agreement reached last week with environmental groups and the federal government.

The deal, which also includes the state of Utah, would see environmentalists drop their lawsuit challenging the expansion of a coal mine on federal land.

Environmentalists said an agreement involving Canyon Fuel Co. LLC, the Interior Department, the state of Utah and two green groups marks the first time a coal company has voluntarily agreed to calculate the climate damages of its mining operations on federal land.


The agreement comes as the Biden administration weighs a hike in the social cost of carbon — a metric for calculating the monetary damages caused by greenhouse gas pollution — and amid continued debate over fossil fuel production on federal land. Environmentalists and energy companies long have been at loggerheads over the feasibility of using the social cost of carbon to evaluate the costs of fossil fuel production on federal land.

“For a coal company to do the math itself makes clear that it’s not an impossible exercise, and I hope, helps to move us past arguing over the credibility and usefulness of the method,” said Aaron Paul, an attorney at the Grand Canyon Trust, one of two groups that challenged the expansion of a central Utah mine.

The settlement stems from a 2015 lawsuit brought by WildEarth Guardians and the Grand Canyon Trust, which argued the government violated the National Environmental Policy Act when issuing a lease to expand the Skyline Mine in the Manti-La Sal National Forest. The suit argued Interior relied on a previous 2002 environmental analysis that failed to account for climate damages of the mine’s expansion.

Under the terms of the agreement, Canyon Fuel will relinquish leases with 9 million tons of coal at its Sufco and Dugout Canyon mines, though environmental groups estimated that figure could rise as high as 40 million tons if Canyon Fuel cannot access other remaining coal deposits via its lease areas.

Canyon Fuel, a subsidiary of Wolverine Fuels Inc., also agreed to calculate the social cost as part of a federal environmental review analyzing new and modified leases with a combined 11 million tons of coal at the Skyline Mine.

The deal commits the company to using the federal government’s social cost of carbon, which is now $51 per ton of CO2. The Biden administration has proposed raising that to $190 per ton.

An Interior spokesperson declined comment. A lawyer representing Canyon Fuel did not respond to a request for comment.

Legal analysts said the settlement could provide a template for future negotiations and agreements between the government and fossil fuel producers.

“When the Social Cost of Carbon is plugged into the environmental review, it provides a way for the analysis (though not necessarily the economics of the project itself) to internalize the externalities of greenhouse gas emissions, and to allow decision-makers to more fully assess the impacts of proposals,” Michael Gerrard, director of the Sabin Center for Climate Change Law at Columbia Law School, wrote in an email.

Mark Squillace, a law professor at the University of Colorado, said the government’s willingness to apply the calculation in the settlement “could be incredibly significant.”

“It suggests a willingness on the part of the government to use the SC-GHGs in not just coal reviews but all agency decisions with climate implications,” Squillace said, referring to the social cost of greenhouse gases. He added, “It could be a bigger deal for oil and gas development than for coal.”

The Skyline settlement is not the first time greenhouse gases damages will be calculated as part of the review of a federal coal lease. In 2014, a federal judge ordered the Bureau of Land Management to apply the social cost of carbon to the expansion of a Colorado coal mine on federal land (Greenwire, Sept. 12, 2014). BLM conducted another environmental assessment and ultimately approved the lease (Greenwire, March 3, 2020).

The decision hints at one of environmentalists’ larger worries: that the Biden administration could ultimately raise the social cost of carbon and elect to approve new federal fossil fuel leases anyway (Climatewire, March 9).

Paul said the settlement’s impact on emissions will depend “on whether our civil servants will look at how much harm is likely to come from issuing the leases and have the backbone to say no to a coal company.”