Federal Lands and Fossil Fuels: Maximizing Social Welfare in Federal Energy Leasing

• Date: 01 August 2019

8-2019 NEWS & ANALYSIS 49 ELR 10729

ARTICLE

Federal Lands and Fossil Fuels:

Maximizing Social Welfare in

Federal Energy Leasing

by Jayni Foley Hein

Jayni Foley Hein is the Natural Resources Director at the Institute for Policy Integrity, New York University

School of Law, and is an Adjunct Professor of Law, New York University School of Law.

I. Introduction

e externality costs of fossil fuel production—includ-

ing pollution costs—are not accounted for under the U.S.

Department of the Interior’s (Interior) coal, oil, and natura l

gas leasing programs. is results in fossil fuel production

on public lands imposing signicant social costs. Interior’s

leasing programs have never been tai lored to meet any

past or present climate change goals, despite their signi-

cant contribution to domestic greenhouse gas emissions.

Moreover, several government studies show that federal

fossil f uel leasing programs are riddled with loopholes and

stagnant sca l terms that shortchange federal taxpayers, to

whom the nation’s minerals belong.1

is Article presents a path for ward for Interior’s fossil

fuel leasing programs that would instill more rationality

into the process, with the goal of maximizing social wel-

fare. is Article argues that Interior should account for

all the costs and benets of leasing—including environ-

mental and social costs —and adjust the scal terms of its

fossil fuel leases to recoup unm itigated externa lity costs. In

doing so, Interior can arrive at a social-welfare ma ximizing

leasing program. e tools and reforms sugge sted in this

Article would likely have the eect of reducing production

on marginal trac ts where the cost of production would out-

weigh the benets. Additionally, these tools and reforms

could earn states, the federa l government, and taxpayers

more revenue from the resources they own while reducing

1. See generally U.S. G’ A O, GAO-14-140, C

L: BLM C E A P, M E

C C E,  P M P I

(2013), https://perma.cc/8MME-ZDPU.

greenhouse gas emissions, illust rating the utility of using

scal reform as a policy lever in t he absence of comprehen-

sive climate change legislation.

II. The Fossil Fuel Boom and Legal Lag

Overall, Interior oversees more than 260 million surface

acres and 700 million subsurface a cres of mineral resources

onshore, and more than 1.7 billion acres oshore in the

waters of the Outer Continental Shelf.2 Despite these

extensive public land and m ineral holdings, Interior ha s

consistently been criticized for failing to earn more from

its mineral resources and for fa iling to protect environmen-

tal values. is pa rt provides a brief overview of modern

energy market trends and hig hlights recent critiques of fed-

eral leasing programs.

A. The Fossil Fuel Boom

Domestic oil and natural ga s production has risen steadily

for the past 10 years.3 Federal energy production generates

one of the largest non-tax sources of revenue for the United

States, accounting for approximately $6.23 billion in sca l

year 2 016.4 While federal oil and gas production has been

decreasing as a share of tota l U.S. production,5 coal mining

on federal lands, by contrast, has grown as a proportion

of the domestic total.6 In 1960, federal coal accounted for

2. U.S. G’ A O, N. GAO-14-50, O  G

R: A N  I  B E  F

R 2 (2013), https://perma.cc/CV96-ELRT [hereinafter GAO, A-

 N].

3. Id.

4. Press Release, U.S. Oce of Nat. Res. Revenue, Interior Department

Disburses $6.23 Billion in FY 2016 Energy Revenues: Federal Revenues

Support State, Tribal, National Needs (Nov. 25, 2016), https://perma.cc/

N9WX-EV6Y.

5. See, e.g., C. R S., R42432, U.S. C O  N

G P  F  N-F A (2016).

6. U.S. E I. A., S  F F P F

F  I L, FY 2003 rough FY 2014 (2015), https://

perma.cc/HFZ3-LYH4 [hereinafter EIA, S  F F]; U.S.

E I. A., D 2015 M E R 97

(2015), https:// perma.cc/TS5K-U4KP.

is Article is adapted from Jayni Foley Hein, Federal Lands

and Fossil Fuels: Maximizing Social Welfare in Federal Energy

Leasing, 42 H. E. L. R. 1 (2018), and is reprinted with

permission. Copyright in the Environmental Law Review is held by

the President and Fellows of Harvard College, and copyright in the

article is held by the author.

Copyright © 2019 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.