Progressives and environmentalists are upping the pressure on the Obama administration to increase the fees that energy companies pay to extract oil, natural gas and coal from the federal government’s land.
The advocates and their Democratic allies in Congress say they’re out to ensure taxpayers get a fair return for the minerals the government owns, while better protecting the environment and being fair to other industries.
{mosads}The coalition pushing for higher rates can now count Democratic presidential frontrunner Hillary Clinton as one of its allies after she highlighted the issue earlier this month as she formally launched her campaign.
Clinton said at her New York City speech that she would push for “additional fees and royalties from fossil fuel extraction to protect the environment,” with the money going to clean and renewable energy expenses. Campaign spokesman Ian Sams declined to comment further on the policies.
The Interior Department is beginning to work on several fronts to change fees and lease terms.
“A lot of it is driven by the need to create a level playing field among extractive industries on taxpayer-owned lands,” said Matt Lee-Ashley, director for public lands at the Center for American Progress.
Energy companies pushed back against the proposals, saying they would add unnecessary costs and burdens, causing drillers and miners to take their business to private or state lands.
But to the progressives, the Bureau of Land Management (BLM), which oversees most of the federal land hosting fossil fuel extraction, is selling itself short.
“The BLM is the outlier with remarkably low royalty rates, which just means hundreds of millions of dollars left on the table,” Lee-Ashley said.
Some taxpayer groups, such as Taxpayers for Common Sense and the Project for Government Oversight, support the cause as well.
The BLM charges 12.5 percent royalty rates for onshore oil, natural gas and underground coal and 8 percent for surface coal.
Some states, such as Texas, charge as much as 25 percent royalties for extraction on their public lands, and even the federal government charges 18.75 percent for offshore oil and gas.
“You can make the argument to the American taxpayer that … the companies that are benefitting the most from these rather low-cost and permissive processes, that they need to pay,” said Rep. Raúl Grijalva (D-Ariz.), the top Democrat on the House Natural Resources Committee, which oversees the BLM.
“It’s kind of ironic that some of the more conservative states … are the ones that are at least 6, 7, 8 points above what the federal government charges,” he continued.
The Wilderness Society’s main concern is that artificially low rates disadvantage other uses for public land, such as recreation.
“The value of these lands has shifted since these rates were put into place in 1920,” said Joshua Mantell, public lands policy director at the Wilderness Society. “The recreation economy has grown by leaps and bounds in ways that were not apparent way back then.”
Energy extraction can also greatly reduce the value of lands for recreational purposes, Mantell said.
But climate change is another major issue for the progressive groups, who argue that there is a contradiction in the Obama administration trying to cut greenhouse gases at the same time as it is giving away carbon-intensive fossil fuels at a bargain.
For example, Wyoming’s Powder River Basin, the vast majority of which is BLM-owned, accounts for about 40 percent of the United States’ mined coal, and about one-tenth of its carbon emissions.
“It’s largely overlooked in federal energy policy,” said Lee-Ashley. “The coal policy is lagging behind national energy and environmental goals.”
Grijalva said the administration’s policies need to pay closer attention to the climate impact of fossil fuels.
The BLM gathered comments recently for potential changes to oil and gas fee and lease rules and said it will undertake a similar process for coal. Elsewhere in the Interior Department, officials are trying to prevent coal companies from selling minerals to their own subsidiaries to bring down the costs of the product and avoid higher royalty payments.
Interior Secretary Sally Jewell named the reforms as a priority in a wide-ranging March speech on energy development, saying changes to rules “should ensure American taxpayers are getting maximum benefit from their resources.”
But energy companies think the Obama administration’s efforts are misguided.
“It boils down to a straight business decision,” said Jason Hutt, who represents energy companies as a partner at Bracewell and Giuliani. “Oil and gas developers have a business decision to make, whether they want to allocate their development resources to extracting minerals on federal land or doing it on private lands.”
He said that with higher fees, drillers would stop bidding for leases or pay lower bids, reducing the amount of money in the federal coffers.
“It’s a pretty simple adjustment for them to make, because there’s no difference in the resource they’re trying to extract,” Hutt said, adding that other federal rules, like new hydraulic fracturing standards, make drilling more expensive.
“These changes could further disincentivize leasing of federal lands,” the American Petroleum Institute wrote in its July 19 comment.
Among supporters of increased fees, there’s hope that Clinton will carry on the cause even if Obama runs out of time for the biggest reforms.
“Our hope is that the Obama administration moves forward with a lot of this, and that whoever the next administration is that comes in would take a lot of these reforms and modernization, and continue to move the ball forward,” said Mantell.
Grijalva, who has endorsed Clinton, said he was “very glad” to hear her mention the issue in her campaign speech. He added that he would hope the Clinton advisers who are most passionate about the issue would get top jobs at the Interior Department if she is ultimately elected.