Energy Remains Big Issue for Public Lands Management

TipSheet: Energy Remains Big Issue for Public Lands Management

This special TipSheet is one in a series of reports from SEJournal’s Joseph A. Davis that looks ahead to key issues in the next year. Stay tuned for more in coming weeks and for the full “2018 Journalists’ Guide to Energy & Environment” special report in late January.

The battle over whether to conserve or exploit U.S. public lands has been going on for decades or longer, and under President Donald Trump, it remains news.

Why? Energy development — especially development of the fossil fuels that worsen climate change — was a key selling point in Trump’s campaign and continues to be a key policy of his administration.

And public lands are one important place where this plays out.

So controversy — and news — over the Interior Department’s management of U.S. federal lands is a sure bet to continue in 2018, even if the arena for the issue is likely to shift to the courts.

For example, Trump administration efforts to shrink national monuments will keep on getting attention, but many of the more procedural moves ahead will be just as important or more so. In many cases, the agenda will be driven by the hunger of for-profit energy companies for low-priced taxpayer-owned coal, oil, gas and minerals.

The largest expanse of public lands (247 million acres) is managed by Interior’s Bureau of Land Management. But significant amounts are managed by other agencies, especially the Agriculture Department’s Forest Service (193 million acres) and the Fish & Wildlife Service (306 million acres, with about half of that wildlife refuges and half in national monuments).

Each category is managed under different laws for different purposes. For instance, in federal jargon, offshore tracts of the Outer Continental Shelf within U.S. territorial waters are considered “lands” — and often leased for oil drilling.

Here are some public lands-related stories to watch in 2018:

National monument cuts prompt legal action

The Trump administration’s drastic cut in national monument acreage was a big news story in 2017.

On Dec. 4, President Trump went to Utah and announced that he was cutting the Bears Ears National Monument from about 1.3 million acres to about 228,000 acres, and the Grand Staircase-Escalante National Monument from about 1.9 million acres to about 1 million. The next day the administration announced further cuts and reorganization of monuments.

 

The politics of the national monument

wrangle are complex, but

energy is a big factor. 

 

What is certain is that 2018 will see a host of lawsuits challenging the Trump administration moves — in fact, a coalition of five Native American tribes filed suit within hours of Trump’s announcement. One of their main contentions is that the Antiquities Act of 1906, which gives the President power to set lands aside as monuments, is silent on whether he has authority to un-designate monuments. That issue will be key in most of the other lawsuits.

As of late December, between tribes and environmental groups, at least five suits had been filed. This was no surprise. The suits may well extend through 2018 before resolution, but will be news as they proceed.

The politics of the national monument wrangle are complex, but energy is a big factor. Some of the monuments contain energy resources. Some opponents of designation have strong interests in energy development on the lands in question.

After Trump announced his decision to shrink Bears Ears National Monument by 85 percent, the Washington Post revealed that a uranium mining company had lobbied hard for the change. Grand Staircase-Escalante holds significant coal deposits.

Onshore oil, gas and minerals policies shifting?

Very significant reserves of coal, oil, gas and minerals underlie many federal lands, and historically the government has “leased” these lands to private companies who extract the resources and pay (usually) the government various fees and royalties.

Critics have long complained that the Treasury does not get enough money for the resources, but many of the lease sales are arguably “competitive.”

Efforts to update and reform hard rock mining law have been perennial in recent decades, with only a few minor successes. Shown above, a miner at work at a quarry on public land in Idaho in 2004. Photo: Bureau of Land Management Idaho, Flickr Creative Commons

The rules and paybacks vary according to land categories and resource types.

For instance, the so-called “hard rock” minerals — like gold, silver, platinum, tungsten, copper, lead and uranium — are mined under one family of laws.

Those legal traditions go back to the days before the California Gold Rush. The General Mining Act of 1872 allowed prospectors to discover minerals on federal land, stake claim to them, mine minerals from them without royalties and convert the claims to land ownership by “patenting” them. There have been many subsequent amendments to mining law, and claims are no longer patented and some minimal royalties are now paid.

Efforts to update and reform the 1872 hard rock mining law have been perennial in recent decades, with only a few minor successes. Liability for post-mining cleanup remains a big issue. GOP-dominated Western states have resisted reforms to the 1872 law.

In 2017, new reform legislation was proposed from both sides of the aisle — but has yet to go far. The year 2018, with a GOP-run government, may be unlikely to see further reform. If a bill starts really moving, that would be news.

The law for oil and gas leasing on federal lands diverged from the 1872 law with the Mineral Leasing Act of 1920, which has been amended many times and overlain with some major environmental laws (some important ones are described here).

Trump’s “drill-baby-drill” stance has already manifested itself in drilling policies for onshore federal lands. Interior Secretary Ryan Zinke signed an order in July 2017 to “streamline” processing of onshore drilling permits and reduce backlogs. Check back to see if backlogs go down.

Limits on offshore oil and gas drilling reversed

Offshore drilling has successfully generated hydrocarbons and revenue for U.S. oil companies for many decades. Until it didn’t — and then the 2010 Deepwater Horizon oil spill in the Gulf of Mexico reminded us that it could also generate disaster. Politics, economics, environment and geology all come into the equation.

Gulf coast states like Texas and Louisiana are friendlier toward offshore drilling, which brings them jobs and revenue. A major share of the U.S. refining and energy transport business is located there, in places like Houston and Baton Rouge.

But in California, where they remember the 1969 Santa Barbara spill, new offshore drilling remains unwelcome. And along the Atlantic coast and in Florida, where clean beaches bring dollars, opposition is strong.

In a parting shot in December 2016, former President Barack Obama issued a five-year drilling plan that withdrew the Arctic and big chunks of the Atlantic from drilling. Trump pointedly issued an executive order in April 2017 telling agencies to undo that.

Following up, Interior in October announced (subscription required) that it would offer an unprecedentedly huge bunch of Gulf tracts for auction in March 2018. In fact, they plan to offer virtually all unleased tracts in the Gulf.

Will that guarantee federal leases earn bottom dollar in a depressed oil market? Not necessarily. An earlier Gulf sale under the new Trump program drew some serious bidding from oil and gas companies. But the March mega-sale will be news either way. Wait and see.

Trump’s April 2017 order also put on the table drilling off the shores of California and the Eastern seaboard (subscription required), where strong, bipartisan political opposition in Congress over many years has prevented drilling. Whether political opposition will stymie this threat, and whether companies have the appetite (subscription required) for the oil, remains to be seen.

In any case, writing the leasing plans could take years (subscription required). If the administration offers no serious lease sales along these coasts in 2018, that will be telling.

Alaska’s ANWR opened to drilling

Alaska will surely be making news in the energy and public lands arena during 2018. The 2017 GOP tax bill also opened up the Arctic National Wildlife Refuge, or ANWR, to oil drilling after decades of struggle in Congress between oil companies and conservationists. What the tax bill left undetermined was the exact rules and procedures for developing ANWR.

So ANWR will be a 2018 story, but it won’t happen overnight. In fact, 2018 will only be the beginning. ANWR leasing will be contested and journalists will write about it.

 

The ANWR sale could be a payday

for Alaskans. Uncertain, though, is

what that revenue will be. 

 

The tax bill also requires the Interior Secretary to conduct at least two 400,000-acre lease sales within its 10-year budget window — the first within four years and the second within seven years. Court challenges to Interior’s offerings are likely.

The ANWR sale could be a payday for Alaskans. The bill sets a royalty rate of 16.67% and a 50-50 revenue split between Alaska and the federal Treasury. Much of Alaska’s share ends up going to the state’s residents. Uncertain, though, is what that revenue will be. The tax bill’s estimate of $1 billion in federal revenues is a wild guess.

The price of oil and market demand are key unknowns. Some analysts think the tax bill’s revenue estimate will prove highly optimistic, because oil and gas companies won’t want to buy that many leases.

Some relevant evidence is the result of a Dec. 6 auction of leases in the National Petroleum Reserve in Alaska, which inspired crowing from Trump officials and oil companies about America’s energy future. But demand was so weak that oil companies bid on only seven of the 900 tracts offered at auction. Other recent Alaska sales have drawn more interest.

Alaskan offshore drilling also on the table

While Shell spent billions in hopes of Arctic offshore drilling during the Obama years, it experienced setbacks (weather being one factor), and in the end abandoned all Arctic offshore plans in 2015, as did virtually all other companies (after the price of oil had started a steep drop in 2014).

In November 2016, shortly after Trump won the election, Obama unloaded a five-year drilling program that banned offshore drilling in the Arctic’s Beaufort and Chukchi Seas through 2022. These were tracts no oil companies wanted.

But in April 2017, surrounded by Alaskan Congress members, Trump signed an executive order telling Interior to reconsider Obama’s ban. Then on Nov. 28, Interior granted Italian energy company Eni a permit to drill exploration wells (possibly a speculative move) in the Arctic waters of the Beaufort Sea.

Offshore Arctic drilling is expensive. Weather and ice conditions in Arctic waters, even shallow ones, could make spills more likely and cleanup of a spill ineffective or impossible. The result could be long-term damage to fragile ecosystems and native cultures.

Although it is rarely mentioned, one reason Alaska and the oil companies push for Arctic drilling is the imperative they feel to keep the Trans-Alaska Pipeline full enough to operate.

Deeper questions on energy, public lands

And back to climate change. It’s one of the most important issues when it comes to energy and public lands — though not one much mentioned by the oil and gas lobby or Trump administration.

Climate is the reason why U.S. policy might want to move away from the fossil fuels so plentiful on public lands. Burning fossil fuels emits carbon dioxide, a greenhouse gas. Extracting them releases methane, another greenhouse gas.

Trump and GOPers evince a strong preference for fossil fuels over renewables. But renewables — wind, solar, hydro and geothermal — can be leased and located on federal lands also.

And how about politics? Sometimes news media, legislators and even executive agency officials talk about land and energy policy as if politics did not exist. But it is important to remind our audiences that politics are a determiner. The coal, oil and gas industries play a huge role in guiding Trump and GOP policies. That influence will keep determining news in 2018.

And markets? Keep on watching them in 2018. For at least another year, the prices of oil, gas and coal seem unlikely to rise dramatically (though speculative news stories may continue).

If these prices rise much, it will be game-changing news. But fundamentals say they won’t. This is all-important for the “drill-baby-drill” program. With over-supply and finite demand for these commodities, prices will stay low and the industries will feel pain that drilling can’t cure.

Efforts by Trump and Congress to boost production with pedal-to-the-metal energy policies will, in the end, paradoxically, tend to keep prices low. Even the oil and gas industry is beginning to understand this.

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* From the weekly news magazine SEJournal Online, Vol. 3, No. 1. Content from each new issue of SEJournal Online is available to the public via the SEJournal Online main page. Subscribe to the e-newsletter here. And see past issues of the SEJournal archived here.