Fossil Fuels and Public Lands: How the US Interior Department Can Act on Climate Right Now

April 6, 2021 | 12:32 pm
Joel Clement
Former Contributor

Those of us who work on climate action, whether it be reducing greenhouse gas emissions to slow warming or addressing the impacts of the warming that’s already baked into the system, we tend toward the somber. We’re optimists, or we wouldn’t be doing it at all, but circumstances can sometimes dampen our outward enthusiasm, to say the least. So to hear the president’s cabinet talk about climate change daily, to see the White House hiring some of the best and brightest climate minds in the country, to hear federal agency staff describing how climate change interacts with every aspect of their public service mission has been, dare I say, thrilling.

Not to say that all of a sudden we have a grasp on this thing, but after four years of dangerous denial and a shameful disregard for public service, just making the effort to understand the breadth of the problem and establish interim goals feels like the Great Enlightenment.

Making actual gains is another matter, however, and nowhere is this better illustrated than at my old agency, the Department of the Interior. And that’s because the agency responsible for our legendary national parks, for the protection of our nation’s fish, wildlife, and plants, for generating world-class science, and for supporting the well-being of our nation’s first inhabitants is also the agency responsible for leasing and permitting onshore and offshore fossil fuel extraction. In a time of rapid, human-caused climate change, the enormous agency that manages one fifth of our national land area is a house divided, and therefore a house diminished…for now.

Given the enormity of the multiple crises we now face, from the climate crisis to the biodiversity, social justice, and public health crises, we can’t afford to muddle through with a conflicted Interior Department. It is of national interest to unify the agency around a common purpose to both protect the land—our national life-support system—and the American people whose health and well-being are at risk.

In this post I describe some immediate opportunities—and emphasize specific recommendations—to establish the Interior Department as a purposeful catalyst for a fair and just transition to clean energy, healthy ecosystems, and thriving communities.

Interior faces a conundrum

Journalists often ask me what Secretary Deb Haaland’s Interior Department must do to address climate change right now, and I always have the laundry list handy: Restore the science enterprise, protect our nation’s life-support system of public lands and wildlife, invest in the resilience of Native American and Alaska Native communities, and, above all, find legal and just ways to slow the extraction of fossil fuels on public lands. Far easier said than done, particularly that last thing, which is the focus of this post. As we’ve already seen from President Biden’s day-one executive orders, the fossil fuel establishment and its political patrons will scream bloody murder every step of the way, ignoring the impacts all around them in order to perpetuate yesterday’s economy at the expense of tomorrow’s.

Politics aside, the overwhelming scientific consensus tells us that in order to keep warming below 2°C and limit some of the most catastrophic impacts of climate change, we must stop extracting and burning fossil fuels as quickly as possible. The IPCC, a renowned but generally conservative international body of scientists, tells us that to have a fighting chance of meeting global climate goals, we have to cut global emissions approximately in half within this decade, and then continue to drive them down to net zero by mid-century.

To do so, one of the first places to turn in the United States should be our shared federal lands, which are responsible for nearly 25% of our national CO2 emissions thanks to the fossil fuel extraction permitted by the Interior Department. Immediately shutting down oil and gas operations on federal lands, however, could create severe hardships in some of the states that are dependent upon fossil fuel revenues, including Wyoming, Alaska, and New Mexico, the home state of Secretary Deb Haaland.

This is the conundrum that Secretary Haaland inherited. Public lands offer an opportunity to slow emissions in the near term, but if not done thoughtfully, people will suffer. If not done at all, many more people, and the natural systems we all depend upon, will suffer. Somehow, Interior must strike a balance and work with the private and public sectors to help foster a just transition to clean energy. The guideposts for doing so are already baked into the agency’s mission: Serving the public interest, helping communities thrive, and patriotically honoring the land as the national life-support system that it is.

Blueprint for action

There are multiple bureaucratic stages to fossil fuel extraction on public lands, far more layers and steps than I can cover here. To simplify, there is a leasing stage, a permitting stage, and a production stage. There are climate and equity levers to pull at each stage, and these levers affect people and the land differently than how they affect the fossil fuel industry.

The strongest moral footing, and a fertile organizing principle for Interior going forward, is to consider how policy decisions will affect the health, safety, jobs, and economic well-being of people. In other words, in making decisions about these levers, it is important to focus on how decisions impact people and the environment while shaking off the agency’s cultural and historic desire to please industry.

In some cases it is difficult to tease those interests apart—jobs or economic well-being may be intertwined with that industry in some places. In those instances when necessary climate actions may impact people and jobs in a negative way, the focus must be on making people whole into the future rather than propping up dirty energy sources.

While Interior can’t do this on its own—making people whole during the transition will require Congress and other federal agencies—below I describe some of the climate and equity levers that Interior alone can pull at each stage of development, with the caveat that while these are some of the immediate levers, the ultimate goal must be for a full economy-wide transition to carbon-free sources of energy if we hope to avert a national—and global—catastrophe that we cannot afford.

Leasing: When you’re in over your head, stop digging

Thus far the Biden Administration has put a temporary hold on new oil and gas leasing while they review the leasing program. This has the industry up in arms, but will have no negative effect on Americans because industry has already stockpiled enough onshore and offshore acreage to provide for decades of jobs and royalty income (should we have the ill fortune to require that). I know this because when I was the director of Interior’s Office of Policy Analysis, we generated a report each year on unused leases and permits. The most recent agency numbers show that 53% of the 26 million acres already leased onshore remain unused, while 77% of the 12 million acres leased offshore are unused.

It is in the national interest to make the existing moratorium on new oil and gas leasing permanent due to the enormity of the climate crisis and the minimal economic impacts this would cause.

Of course industry doesn’t like this because it will limit opportunities to pad their speculative holdings—paper leases that, while unlikely to ever be developed, help inflate the company’s value. However, the profit margins of multi-billion dollar businesses should not prevail over American well-being. Industry argues against any constraints on industry access to federal lands by claiming that if the oil doesn’t come from our public lands it will instead come from some poorly regulated foreign country instead. Economic models have shown that his fear-mongering theory, known as “perfect substitution,” is an oversimplified myth.

In those limited instances where a fair and just transition requires ongoing leasing, say for example on Tribal lands with Tribal support, there are still climate levers that can bring benefits. Bargain basement rents (the fees paid on leases until they begin producing) and minimum bids (think eBay bidding starting at $1) encourage industry speculation and rob Tribes of revenue. Fee structure changes are within the authority of the DOI bureau responsible for managing the leasing process—the Bureau of Land Management (BLM). Should fossil fuel leasing continue in some limited way, at very least the first Americans deserve a fair return for allowing development on Tribal lands.

In the case of any ongoing leasing, BLM should increase rental fees as well as minimum bids in order to raise revenue and reduce industry speculation on Tribal or federal lands.

Another area for leasing reform regards assignments and suspensions. Assignments allow lease owners to transfer leases to another entity. When the market collapses, companies can transfer leases to smaller companies. Unfortunately those companies are often at risk of bankruptcy, leaving taxpayers holding the bag for any cleanup or restoration. Suspensions, when granted by the bureau, allow a company to prolong their ownership of the lease beyond the limit of 10 years.

To reduce speculation and to limit industry gambling with the federal estate, Interior should prohibit most assignments and suspensions. In the rare instance of granting an assignment or suspension, the agency should add stipulations to protect taxpayers from industry abuses.

Permitting: Bring back transparency and public review

The Biden administration has been less bullish about restricting permitting for drilling operations because of the potential to impact jobs. There are also legal considerations associated with lease contracts that give the owner the right to drill. That doesn’t mean that the permitting process isn’t ripe for immediate reform.

Those reports we produced at Interior’s Office of Policy Analysis covered permitting trends as well as leasing, and showed that a substantial percentage of permits, like leases, were not being used. Conversations with industry partners confirmed that many permits, like many leases, were paper assets only and never intended for development. Currently, there are approximately 7,770 approved, unused permits.

One first step that Interior can take to reform the permitting process is to get speculative permits off the books so public servants can focus on decisions more closely tethered to reality. Reducing such speculative assets would have no impact on jobs or American well-being.

One way to do this may be to determine a maximum number of permits per company (including subsidiaries) at several scales of operation, derived from historical data on permit usage. Another approach would be to borrow from the coal leasing program and implement acreage restrictions.

Another means for reducing the “noise” in the permitting program is to eliminate the bad actors who flaunt federal requirements but still obtain permits by forming a new company or entity. Interior could follow the lead of Montana, which established a “bad actor” law against individuals in the hard rock mining sector, preventing them from obtaining permits no matter what company flag they operated under.

Interior should utilize these three innovative means to reduce the workload and bureaucratic distractions of needless permit processing so staff can focus on aligning the program with the public interest.

The second step would be to evaluate drilling permits with a much tighter focus on the public interest. While the National Environmental Policy Act (NEPA) calls for a review of the environmental impacts of a development, and recent court cases have determined they should also include climate impacts, these assessments are generally conducted at the leasing stage and not at the permitting stage. In other words if an approved lease includes many potential wellheads across a vast acreage, the impacts of individual well permits are not assessed. Not only does this forsake an accurate environmental review, it eliminates the opportunity for communities to weigh in on a specific project—one of the most valuable means for disenfranchised communities to be heard. The Trump administration became particularly famous for eliminating transparency and public input on projects in order to speed up oil and gas development.

In addition to shielding environmental and climate impacts from public scrutiny, this eliminates any means to identify those projects that support communities. This information is needed to flag projects that communities depend upon, and where it will be necessary to provide some other form of support when drilling is no longer viable due to the severity of the climate crisis.

The permitting process should be reformed to ensure a full, transparent review of environmental and climate impacts and provide an opportunity for community input. In order to ensure such a process, Interior should conduct a review of NEPA adequacy in the permitting program—both program-wide and, in the interim, on a case-by-case basis, and follow up with meaningful, transparent reforms.

Another climate change problem that Interior can address at the permitting stage is the condition of the land after fossil industries pull out. Unlike the “leave no trace” ethic of campers and hikers, wealthy corporations often leave behind a contaminated landscape dotted with abandoned wells and mines, in some cases emitting uncontrolled methane and in other cases throttling the land’s ability to support biodiversity or sequester carbon well into the future. Inadequate bonding requirements—financial commitments to restore the land—and loopholes associated with bankruptcy have allowed fossil fuel companies to get away with this, and it comes at a tremendous cost to taxpayers. The Biden administration recently announced an investment of $16 billion, as part of its infrastructure proposal, to clean up the abandoned mines and orphaned wells left behind by these companies.

Correcting this is an environmental justice lever that has little or no negative impact on the economy yet could save taxpayers billions of dollars and return dividends for communities in the form of jobs and cleaner air and water.

Permits to drill or dig should include near full-cost bonding requirements or other reliable financial assurances that the land can be restored when the industry leaves.

Production: Ensuring good corporate behavior and a fair return to taxpayers

This is where the rubber hits the road, according to all the scientific evidence. While there are levers to slow or stop new fossil fuel development, we ultimately have to transition away from existing production in order to avoid the worst climate impacts to come. Unfortunately for future generations, this is not going to happen overnight no matter how hard we climate advocates push.

What Interior can do, however, is set the stage for a rapid, fair, and just transition away from hydrocarbons. This means insisting that fossil fuel companies provide a fair return to taxpayers and that they act in good faith to improve the health and safety of the communities in which they operate. It means moving transition finance into place so that communities that currently depend on fossil fuel operations are made whole. And it means the Interior Department must pivot its leasing and permitting work force to clean energy projects such as offshore wind and onshore wind and solar developments.

The first step is to ensure a fair return to taxpayers. Right now industry pays pennies on the dollar to extract fossil fuels from federal lands and waters. The royalties they pay to the federal treasury are a small fraction of what they pay to for extraction on state lands such as in Texas or New Mexico. Oil corporations say they should pay low royalties because the federal bureaucracy is a burden for them to deal with. In other words, industry leaders assert that we taxpayers should pay wealthy companies for putting up with the laws to protect our shared public lands. This is as reasonable as paying every motorist for stopping at a red light.

It’s been over 100 years since royalty rates were increased, costing taxpayers hundreds of millions of dollars per year. A study from the Government Accountability Office showed that raising royalty rates may cut production on federal lands, but would nonetheless increase federal revenue, making it a win-win for the land and for the taxpayer. A similar opportunity exists for increasing offshore royalty rates.

The Biden administration should immediately raise onshore and offshore royalty rates to ensure taxpayers are compensated fairly.

The “bad-neighbor” problem, described in the permitting section, in which companies fail to fix the damage they do to federal lands and threaten the health and safety of neighboring communities, can also be addressed at the production stage. In fact, bonding requirements for permits will probably not be adequate to solve the problem alone.

Another means to accrue the funds necessary for restoration and reclamation—and potentially to assist communities in other ways—would be a production fee. For example, New Mexico implemented a fee on oil and gas production to generate the funds to reclaim abandoned wells. The bottom line is that taxpayers should no longer have to pay for the damage to our federal lands inflicted by the oil and gas industry.

Interior should implement a per-barrel fee on oil and gas production on federal lands to create a fund for abandoned and orphaned well clean-up and restoration. These funds may also be made available to communities to smooth the transition to carbon-free energy sources.

Methane leakage from oil and gas operations also requires immediate attention. The release of methane and other volatile organic compounds is endemic to oil and gas operations, threatening health and safety and accelerating warming. Measures to prevent, monitor, and repair such leaks are essential for protecting public health and the environment. In a win-win, they are also good for business, ultimately capturing product that industry can sell.

The Biden administration should immediately restore and strengthen limits on methane emissions, establish requirements for leak identification and repair, and establish a transparent means for evaluating compliance.

Finally, in the context of making people whole, it’s important to acknowledge and optimize the expertise and experience of the Interior Department’s leasing, permitting, and production monitoring workforce. Some argue that the revolving door between industry and these federal positions has led to “regulatory capture”—an undesirable situation in which industry controls the regulatory process. While there is truth to this, and regulatory capture must be addressed in broader Interior Department reforms, this expertise will be extremely useful as the energy economy transforms.

In fact, this is one of the several areas in which the clean energy transition can assure abundant and equivalent job opportunities. The Bureau of Ocean Energy Management (BOEM), the agency that traditionally manages offshore leasing for oil and gas, has also been permitting offshore wind for over 10 years. That expertise will come in handy for the “whole of government” approach, just announced by the Biden administration, to spur investment in the US offshore wind sector. We should expect a commensurate spike in onshore wind and solar development during the clean energy transition. All of these efforts require the leasing, permitting, and monitoring expertise that Interior is loaded with.

Secretary Haaland can support the energy transition by establishing in-house climate and clean energy training programs to enable a smooth workforce transition. In this way BOEM and the BLM will play essential roles in building America’s energy future around the rapidly growing clean energy sector.

Rowing in the same direction

Secretary Haaland can take action to address the climate crisis and unify the agency behind a common purpose. Some actions will come with more political headaches than others. Some actions will require support from Congress. But the important matter is to ensure the agency is acting in the public interest during what is likely to be a painful transition away from yesterday’s energy sources.

The question will be, how will fossil fuel industries and their political allies respond to this crisis? Will they continue to slow climate action, fund disinformation, and reject the coming transition? Will they rush to lease and drill federal lands before the rules stop them, as they did during the Trump administration? Or will they embrace the opportunity to pivot their business model toward the future, provide jobs, and help frontline communities at risk? I respect the role of those businesses in building the American economy, but I hope they recognize that their social license to operate is in the hands of the people who are struggling each day to make ends meet during a crisis they created.

The Interior Department is an immense agency with abundant human resources to bring to bear on today’s challenges, but it will not be easy to get everybody rowing in the same direction. Secretary Haaland, the first Native American cabinet secretary, brings an abundance of experience, history, and perspective to Interior. She also has the moral standing, land ethic, empathy, and grace to make transformational changes at the agency she leads. With Interior focused once again on its core mission to patriotically protect the lands that sustain us all, we climate action advocates do indeed have reason for optimism.