Use of federally owned land has been on the media’s mind lately – how apt for the Obama administration to announce a comprehensive review of the Federal Coal Program. Although, timing of the announcement may have had more to do with President Obama’s State of the Union address than with the events at the Malheur National Wildlife Refuge in Oregon. The review includes a moratorium on most future coal leases until the review has been completed. Such moratoria were also in place during previous such reviews – there just hasn’t been one in 30 years. So it’s in the eye of the beholder whether this is just consistent policy making following precedent or another nail in the coal industry’s coffin.

The objective of the review are clear: analyze (1) the appropriateness of income to the taxpayers from the program, (2) environmental impacts covering both, health of stakeholder populations and global emissions, and (3) the role of the program in light of the country’s energy security.

The moratorium on future leases has some exceptions that should lessen the impact to the steel industry, small leaseholders and lease applications already far along in the process. These exceptions appear pragmatic to avoid immediate downstream impacts affecting middle class jobs and small business, which could overshadow the quest to devise a longer-term economically fair strategy for the bulk of the coal resources.

As a strategic global resource, coal is on its way out, according to Goldman Sachs’ global market analysis. And if the increasing number of coal companies in bankruptcy is any indication, the industry is occupied with short-term business viability issues. Existing leases remain in place, which is good for the short-term, and aside from some general poor policy commentary, the industry isn’t really in a position to convey further concerns to the market.

In our view this is a good policy initiative as either side has reasons to complain that the initiative falls short but includes appealing elements; it’s incremental; it’s a review to inform next policy steps and not an untested knee-jerk reaction. Timing and reading of the tea leaves on subsequent steps seems to favor the ESG-minded crowd – with the risk of directional change if the next president is more pro-coal than pro market-appropriate returns for taxpayer assets.