One of the GOP’s candidates for Iowa’s Senate seat has an unusual idea for lowering government debt: sell off publicly-owned mineral rights.
Mark Jacobs is the former CEO of Reliant Energy in Texas. In 2012, he moved back to his native Iowa, and has since joined the scramble to be the Republican nominee to replace Sen. Tom Harkin (D-IA), who’s retiring after five terms. On Tuesday, Jacobs told Tea Party Express radio that the federal government should sell off some of its “non-core assets” to help pay down the national debt.
“There are tremendous oil and gas reserves that are sitting on federal lands and waterways — some estimates have that as a high as $100 trillion of asset value,” Jacobs said. “What we should be doing is selling the mineral rights to those oil and gas reserves today, and taking those one-time revenue items and applying that to making a significant downpayment on our federal debt.”
“Selling off U.S. mineral assets means selling drilling and mining rights in national parks, national forests, public lands, and waters off every coast,” said Matt Lee-Ashley, a senior fellow at the Center American Progress who deals with energy, environment, and public land issues. “His proposal would allow for mining in Yosemite, drilling in Teddy Roosevelt National Park, and drill rigs off Miami’s beaches.”
Such a move would fall afoul of public sentiment: a poll conducted at the Center for American Progress’ behest in mid-2013 found that 65 percent of Americans said permanently protecting and conserving public lands for future generations should be a “very important priority for public lands managed by the federal government.” Only 30 percent supported making oil and gas reserves on public lands available for development.
It’s not clear where Jacobs got the $100 trillion figure. But it’s an astonishingly high estimate, and it’s not clear where the demand to justify that valuation would come from. As of 2012, oil companies weren’t developing 72 percent of the leases on public lands they already own. Over the last few years, the Bureau of Land Management has also had plenty of auctions for new oil and gas drilling leases on public lands, and a noticeable portion of the acres on sale regularly go unclaimed.
“Oil and gas companies already have the opportunity to lease the rights to virtually the entire Gulf of Mexico, the vast majority of federal lands in the West, and Arctic lands and waters,” Lee-Ashley elaborated. “Yet at each lease sale they buy far less than what they are offered.”
There are obviously a lot of possible explanations for that. But when those trends sit alongside the fact that America is currently seeing its highest levels of domestic oil and gas production in decades it suggests the supply of public land already available to fossil fuel companies outstrips the natural market demand as it is.
It’s also worth noting that by retaining ownership of lands and mineral rights, the government can create an ongoing stream of money into public coffers instead of a one-time windfall. In 2012, royalties and other payments for federal oil and gas leases generated $9.7 billion — the federal government’s largest revenue source outside of taxes. And it could be getting far more: a report by the U.S. Government Accountability Office found the federal government charges only 12.5 percent in royalties for onshore drilling, while many western states charge 16.67 to 18.75 percent. Texas charges 25 percent.
“If [Jacobs] were serious about fiscal responsibility,” Lee-Ashley said, “he would start by helping taxpayers get a fairer return from the oil, gas and coal resources that are coming off federal lands at bargain basement rates.”
It’s also worth noting that Jacob’s idea, even if it did work financially, would be be incredibly destructive from a climate standpoint. If we’re going to avoid catastrophic levels of global warming, the vast majority of known oil and gas reserves are going to have to stay in the ground.