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Federal Lands and Fossil Fuels: Maximizing Social Welfare in Federal Energy Leasing
Published in the Harvard Environmental Law Review.
The Department of the Interior is tasked with managing the nation’s mineral resources and must earn a “fair market value” for the use of federal lands and resources. But in recent years, Interior’s coal, oil, and natural gas leasing programs have been criticized for failing to keep pace with developments in modern technology, shortchanging taxpayers, and failing to adequately account for climate change and other environmental effects. This article, published in the Harvard Environmental Law Review, suggests a rational path forward for federal fossil fuel leasing. Just as a private company would seek to maximize net revenue in its operations, Interior should seek to manage its program to provide maximum net benefits to the public, to whom public resources belong. This includes accounting for all of the costs and benefits of leasing—including environmental and social costs—and adjusting the fiscal terms of its fossil fuel leases to recoup unmitigated externality costs.
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Monumental Decisions: One-Way Levers towards Preservation in the Antiquities Act and Outer Continental Shelf Lands Act
Published in Environmental Law Review
In new legal scholarship published in Environmental Law Review, Jayni Hein argues that the powers granted to the President in the Antiquities Act and Outer Continental Shelf Lands Act (OCSLA) operate in one direction only: towards preservation. Presidents do not have the authority to rescind or diminish national monument designations, nor to re-open previously withdrawn areas to offshore leasing. Congress, alone, retains this authority over public lands.
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Comments on Interior’s Offshore Oil and Gas Leasing 2019-2024 Draft Proposed Program
The Department of the Interior’s offshore leasing program must analyze and account for the potential for environmental damage, the potential for the discovery of oil and gas, and the potential for adverse impact on the coastal zone. In addition, offshore oil and gas leases must provide fair market value for private use and development of these publicly-owned oil and gas resources. Our comments to the Interior’s Bureau of Ocean Energy Management (BOEM) explain why its Draft Proposed Program for 2019-2024, which would replace BOEM’s existing Program for 2017-2022, fails to meet its statutory mandates under the Outer Continental Shelf Lands Act (OCSLA).
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Mineral Royalties: Historical Uses and Justifications
Published in the Duke Environmental Law & Policy Forum
Governments and private landowners have collected royalties on mineral resources for centuries. When comprehensive measures to account for the environmental externalities of mineral extraction are politically or practically unavailable, federal and state governments may consider adjusting royalty rates as an expedient way to account for these externalities and benefit society. One key policy question that has not received attention, however, is whether a royalty rate can and should be manipulated in this way, assuming statutory discretion to do so.
This article, published in the Duke Environmental Law & Policy Forum, fills that gap by evaluating the argument for increasing federal or state fossil fuel royalty rates through historical, theoretical, and practical lenses. To that end, this article in turn considers the meaning of royalties, the economic justifications for royalties, the legislative history of the implementation of federal royalties, and the considerations that private landowners have relied upon in setting royalties. This article concludes that it would be appropriate for governments to adjust mineral royalty rates to account for negative externalities not otherwise addressed by regulation or to otherwise promote public welfare. Such use of royalties is consistent with the historical record. Royalties have been used as pragmatic policy tools from almost their inception, and federal and state governments have often exercised their existing statutory discretion to adjust mineral royalty rates to promote public welfare.
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Royalty Rate Changes for Offshore Drilling
At a meeting in Houston on February 28, the Interior Department’s Royalty Policy Committee recommended lowering the royalty rate that companies pay to the public when they drill for oil and gas in U.S. coastal waters. Such a change would go against the Interior Department’s statutory mandate to earn fair market value for the development of publicly owned natural resources. Our policy director, Jayni Hein, submitted public comments to the Royalty Policy Committee and spoke at the meeting.
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Comments to Interior on Offshore Drilling Safety Requirements
The Bureau of Safety and Environmental Enforcement (BSEE) within the Department of the Interior is tasked with setting safety and environmental standards for offshore oil and gas production and exploration in federal waters. While BSEE updated its safety requirements in 2016, it now proposes to weaken and repeal some of these safety requirements in order to encourage more oil and gas production. In our comments on the proposed rule, we argue that the agency has failed to provide a reasoned explanation for repealing these requirements, which were part of a comprehensive update to safety regulations that had not been revised since 1988.
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Comments to the U.S. Fish and Wildlife Service on Market-Based Mitigation Programs
We recently submitted comments to the U.S. Fish and Wildlife Service on its market-based mitigation programs. Our comments were based in part on the recommendations Policy Integrity’s Legal Director, Jason Schwartz, made to the Administrative Conference of the United States on marketable permits, which were adopted in late December.
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Comments on Arctic Drilling to the Bureau of Ocean Energy Management
We submitted comments on the Bureau of Ocean Energy Management’s environmental impact statement for potential offshore oil drilling and an undersea oil pipeline off Alaska’s northern coast. While expanded drilling in the Arctic presents many climate and public health concerns, BOEM did use the Social Cost of Carbon in assessing environmental impacts of the Liberty Development and Production Plan. Our comments encourage BOEM to continue using the best available methods for the Social Cost of Carbon in future environmental impacts statements, and we also recommended that BOEM use the Interagency Working Group’s Social Cost of Methane to quantify methane damages.
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Comments on EPA Methane Rule Stay
The Environmental Protection Agency (EPA) recently paused certain requirements to reduce methane leaks and emissions from new oil and gas facilities. In its “notice of data availability” for the proposed stay, EPA claims that the compliance costs of reducing these emissions exceed the benefits to the public and to industry. Our comments argue that EPA manipulated economics to make this claim. EPA undervalued the social cost of methane emissions and claimed that the forgone benefits of the rule are only $5.4 to 23 million per year, when EPA’s original estimates said the rule would create public benefits of $140-180 million per year.
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Comments on the Clean Water Rule’s “Applicability Date”
The Environmental Protection Agency and Army Corp of Engineers’ newest attempt to delay implementation of the Clean Water Rule adds an “applicability date” to the original rule. Our comments to EPA argue that this “applicability date” is effectively an administrative stay of the Rule, which the Agency has no authority to issue. Moreover, delaying implementation of the Clean Water Rule will have substantial negative economic consequences, as detailed in our report on the rule. And the agencies have not provided an adequate justification for imposing these costs on society.
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