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Federal Lands and Fossil Fuels

Maximizing Social Welfare in Federal Energy Leasing

By Jayni Hein
March 23, 2018

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Filed under Natural Resources, Academic Articles/Working Papers

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. The Article describes how maximizing social welfare is consistent Interior’s statutory mandates, legislative history, judicial precedent, and principles of executive review that instruct agencies to maximize the net benefits of their policy choices. The reforms suggested here can significantly increase revenue for states and the federal government while reducing greenhouse gas emissions, illustrating the utility of using fiscal reform as a policy lever in the absence of comprehensive climate change legislation.