As Interior pivots to fossil fuel extraction, report shows it costs taxpayers bigly

Taxpayers lose $7 billion a year due to U.S. subsidies for fossil fuels. The Trump administration might increase that.

Interior Secretary Ryan Zinke with Sen. Lisa Murkowski (R-AK) after signing an order lifting a moratorium on new coal leases on federal lands and a related order on coal royalties. CREDIT: AP Photo/Molly Riley
Interior Secretary Ryan Zinke with Sen. Lisa Murkowski (R-AK) after signing an order lifting a moratorium on new coal leases on federal lands and a related order on coal royalties. CREDIT: AP Photo/Molly Riley

In the months since he took office, President Donald Trump has repeatedly taken steps to uphold at least one of his campaign promises — to make oil, gas, and coal extraction easier, cheaper, and less regulated.

His new proposed budget, released this week, is intended to continue that trend by cutting polluter oversight and boosting production of fossil fuels on public lands. The Department of the Interior has been tasked with increasing government revenue from fossil fuel leases, which has fallen in recent years — even while opponents say fossil fuel leasing is more cost than benefit to the public.

But a new report, out Wednesday from Oil Change International, found out that taxpayers are already losing more than $7 billion per year due to U.S. subsidies for fossil fuel production on public lands.

For his part, Interior Secretary Ryan Zinke said the budget was an attempt to bring in more money for the public.

“Revenues is a concern,” he said on a call with reporters earlier this week. “In 2008 the department brought in just over $18 billion a year in offshore revenue. Last year that number was just north of $2 billion.”

“Some of it has been due to oil and gas pricing, but not all of it,” Zinke continued. “A lot of it is uncertainty that we have not been a good partner with industry.”

The above chart shows the dramatic fluctuations in oil prices over the past 20 years. The high point of that chart represents July 2008.

The charts below show the relatively consistent production of both onshore and offshore oil and natural gas on federal land and waters. The charts were prepared by the nonpartisan Congressional Research Service for a 2016 report, in which the group notes, “having more lands accessible may not translate into higher levels of production on federal lands, as industry seeks out the most promising prospects and higher returns which in recent years have come on more accessible non-federal lands.”

CREDIT: Congressional Research Service
CREDIT: Congressional Research Service

Democrats in Congress immediately vowed to oppose increased fossil fuel extraction on public lands.

“Once again, the Trump Administration has turned its back on Teddy Roosevelt-style conservatism and is instead trying to allow special interests to pillage our natural resources so a wealthy few can make themselves even wealthier,” Senate Energy and Natural Resources Committee ranking member Maria Cantwell (D-WA) said in a statement. “We won’t let him.”

The Trump administration has already reversed a moratorium on new coal leases on public lands and has announced plans to try to open the Arctic and the Eastern Seaboard to oil drilling.

Indeed, the administration appears to be taking a multi-pronged approach to becoming a better “partner” with industry. For instance, the Department of the Interior is one of the federal agencies that issues permits for pipeline right of ways through public lands. A $16 million increase to the department’s oil and gas programs in the proposed budget is intended to “make sure that the right of ways are done,” Zinke said.

The budget also relies on opening up the Arctic National Wildlife Refuge to fossil fuel extraction, a particularly sensitive area for environmentalists.

“This budget proposes drilling in one iconic area, the Arctic refuge, to help fund a damaging and useless border wall in another fragile landscape. It’s a bad deal to sell-off and sell-out vital wildlife habitat on public lands. Once these wild places are gone, they are gone for good,” Defenders of Wildlife President and CEO Jamie Rappaport Clark said in a statement.

And the administration will need Congress’ help — not just to pass the budget, but also to open up protected areas.

Zinke said the administration is “focused on boosting revenue through legislative proposals” and expects to bring in about $5.8 billion through increased offshore and onshore development. The Arctic National Wildlife Refuge, for instance, would need an act of Congress to be opened for drilling.

But according to the budget document, “onshore energy mineral leasing” will bring in $330 million more in 2018 than 2017. Offshore mineral leasing will bring in $450 million more.

It was also not immediately clear how the administration would accomplish its goals. In response to a question about when those revenues — which are dependent on lease sales and then production royalties — would begin, Zinke acknowledged that testing and surveys need to be done. The administration expects the leases by “2022 or 2023,” he said. Still, “we thought it appropriate to put it in the budget as a placeholder if legislation action is done.”

The increased revenues was another example of “crazy math in the budget,” said David Turnbull, a spokesperson for Oil Change International. “Those sorts of increases in the royalties received are definitely not attributed to raising the royalty rate, but rather… a totally unrealistic expectation of opening up new oil and gas drilling that will wreck the climate.”

But even while leasing estimates are difficult to pinpoint, line items to streamline permitting process are more clear. The Bureau of Ocean Energy Management (BOEM), which oversees offshore oil and gas leasing, is going to see an increase in funding; BOEM will get nearly half a million dollars more in 2018 than it did this year if the president’s proposed budget goes through. BOEM’s conventional oil and renewable energy line items will see decreases, with the bulk of the increase going to a program that will assist the agency in redoing the five-year plan that guides offshore leasing programs.

Trump announced earlier this year that the plan would be redone with an eye to opening up both the Eastern Seaboard and the Arctic Ocean to oil drilling.

But subsidies for fossil fuel extraction on publicly owned land and waters is already costing U.S. taxpayers billions of dollars a year, according to the report by Oil Change International, an advocacy group.

The report looks only at direct costs to taxpayers, “not including externalities such as climate and health impacts” — and still comes up with a missing $7 billion. Including climate and health impacts would greatly increase the tallied cost to the public.

“At the end of the day, we need to see fossil fuel production on public land phase out”

“At the end of the day, we need to see fossil fuel production on public land phase out,” Turnbull said. “While that phase-out is happening in a careful way, we should be getting the true costs of the fossil fuels — borne by the public — paid by the industry.”

There are several different ways fossil fuel companies are ripping off taxpayers, according to the report, including by undervaluing leases and by waiving royalty payments. “For example,” the report says, “the BLM set rates for ‘renting’ federal lands for oil and gas leases in 1987 to $1.50 per acre, or a fraction thereof, for the first five years of the lease term and $2 per acre, or fraction thereof, for any subsequent year. This rate has not been raised in 30 years — not even to reflect inflation.”

The country’s coal leasing program has repeatedly come under fire for a loophole that allows companies to sell coal at below-market rates (to sister companies), thereby lowering the rate paid to the public. In addition, in 2011, some 20 percent of offshore leases for oil and gas development completely avoided royalty payments, the report found.

“I think it goes without saying that if they are going to be touting all of the revenues that they are getting from fossil fuels on public lands, it’s sort of a no-brainer that these royalty rates should be increased,” Turnbull said. “They should be closing loopholes and ending subsidies.”

“They should be closing loopholes and ending subsidies.”

All this government support comes at a huge cost in terms of mitigating climate change as well. Oil Change International found that government subsidies are so critical to supporting the coal industry that “cutting off subsidies to Big Coal in Wyoming would save the same carbon emissions over 20 years as shutting down 32 coal-fired power plants.”

Moreover, the oil industry, in particular, represents a huge liability for the United States. Oil spills in the Gulf of Mexico are common — more than common, in fact: they are incessant. According to the Louisiana Bucket Brigade, there were 173 petrochemical spills in that state in April alone.

This is all to say that the Department of the Interior does in fact have some room to improve revenue — even without leasing more lands or waters. The Office of Natural Resources Revenue’s Mineral Revenue Payments to States programs got a nearly 20 percent increase. On the other hand, a similar program for revenue sharing with Gulf of Mexico states was zeroed out. The budget to audit oil and gas operations decreased slightly.

“The president’s budget prioritizes America’s energy independence through all of the above. That’s oil, coal, gas, and renewable energy, and development in a responsible way and being accountable on our nation’s lands and waters. I do have an MBA in finance and when I took the job I looked at both sides of the balance sheet,” Zinke said.

Ironically, Zinke said that “it’s unclear whether we’re getting any value” from renewable energy development on public lands. “Our position is that if you’re going to have a commercial enterprise on public lands, the stakeholder is the American public and we want to make sure that we get value on that, that that value is transparent, that it’s not arbitrary, and finally, to make sure that we have a trust to verify,” he said. “Self-reporting, over time, has shown not to be a particularly useful tool.”

He could just as well have been talking about the country’s oil and gas programs. The U.S Government Accountability Office, a federal agency, has repeatedly put the Interior’s oil and gas program on its “High Risk Report” of programs that lack sufficient fiscal oversight.

“This report makes it clear as day that the Trump agenda is the fossil fuel billionaire agenda,” said Jason Kowalski, policy director at 350.org. “The industry finances corrupt politicians who in turn help them keep fossil fuels economically viable at a time when the science suggests most oil gas and coal needs to be kept in the ground. They set out to rig the system and they succeeded. History will judge them harshly.”