Energy & Environment

Interior Dept. needs to review onshore oil and gas leasing program

As evidence mounted that the current system of leasing federal lands for coal mining was deeply flawed, the Department of the Interior took a bold step in January. The agency placed a moratorium on new federal coal leases and launched a programmatic environmental review of its coal leasing program.

The federal leasing program for onshore oil and gas is plagued by similar environmental and economic questions. The time is ripe for a review of this program as well.

{mosads}Two key purposes of the coal program review are to evaluate the overall return to taxpayers, and to assess the climate change impacts of coal production on federal lands. Significant economic and environmental benefits are expected to result from Interior’s decision to review and modernize the coal program, as market conditions, scientific understanding and national priorities have changed considerably since the program was last reviewed in the 1980s. Interior is statutorily required to receive a fair return for taxpayers when it allows leaseholders to extract valuable natural resources from public lands. The programmatic environmental review of the coal program gives Interior the opportunity to determine how to best account for the environmental and social costs associated with producing and burning fossil fuels, including climate change impacts, using modern economic tools like the social cost of carbon. The alternatives analysis that Interior will conduct as part of this review will provide critical information on how different royalty rates and coal production scenarios would affect greenhouse gas emissions, revenue, jobs and energy markets.

Interior should undertake a comprehensive review of the federal onshore oil and gas program, as well, in order to maximize social welfare and help meet domestic greenhouse gas emission reduction goals. As the United States seeks to meet its climate commitments made in Paris, reducing emissions from federal fossil fuel production is one promising avenue for securing greater emission reductions, with concomitant benefits for the public. A review can also help determine the socially optimal level of federal fossil fuel production and fiscal terms for these leases.

Other environmental groups have called for a review of the onshore oil and gas leasing program and a corresponding pause on new oil and gas leases during this programmatic review. In January, the environmental law clinic at the University of California, Irvine School of Law filed a petition on behalf of WildEarth Guardians requesting that the Bureau of Land Management (BLM) prepare a “Programmatic Environmental Impact Statement” assessing the climate change and other health and environmental impacts of the onshore oil and gas program. These efforts are related to the growing “Keep It in the Ground” movement, which seeks to halt new fossil fuel leasing on public lands.

A comprehensive environmental review, when done correctly, would provide information on aggregate greenhouse gas emissions, the net social benefits or costs of federal oil and gas production, and the effect of potential modifications to the program, such as revised royalty rates. Such a review would also allow Interior to respond to mounting concerns, including those raised by the Government Accountability Office, that Interior is not receiving an appropriate share of revenue from federal onshore oil and gas leases.

The BLM issued a proposed rule in February to address methane emissions from flaring, venting, and leaks from oil and gas wells on federal lands. The proposal also set the stage for updating the BLM’s decades-old royalty rates — which have been set at 12.5 percent for new, competitive leases since 1987 — by adopting a more flexible approach to royalty rates for future leases. The royalty rate for offshore leases in the Gulf of Mexico was increased twice under the George W. Bush administration and is now 18.75 percent. Similarly, Western states commonly charge royalty rates between 16.67 and 25 percent — up to twice the rate BLM charges. According to research by the Center for Western Priorities, BLM could be losing out on up to $730 million per year for federal taxpayers and Western states, which receive half of all royalties collected from federal leases within state borders.

The time has come for Interior to conduct a programmatic environmental review of the federal onshore oil and gas program. By undertaking this analysis, Interior can help ensure that environmental and public health costs are properly accounted for, that taxpayers receive a fair return for the lease of their fossil fuel resources, and that the United States is on track to meet its climate change goals.

Hein is the policy director at the Institute for Policy Integrity at New York University School of Law. Wilkins is a third-year law student at New York University School of Law.

Tags BLM Bureau of Land Management Department of the Interior Drilling federal land gas Interior leasing oil royalty rate

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