Interior report punts on climate costs

While a new report by the Interior Department recommends several changes to the federal oil and gas leasing program, it punts on one big question: how to account for climate change.

The Biden administration has already indicated that it may seek to make drillers pay for the climate damage caused by fossil fuel extraction and is expected to increase the costs to drill based on climate harms, but the current report leaves questions about how and when such a policy would be announced. Rather, it says the department will keep examining the issue.

That's not sitting well with many climate activists.

"That's not a true comprehensive analysis. It's a massive missed opportunity," said Sara Cawley, a legislative representative with Earthjustice, referring to the report's lack of climate change mentions.

The review, which comes as the Senate is hammering out details on Democrats' sweeping climate and social spending bill, has very little on climate change, with the word "climate" appearing just a few times in the document and not in any of its concrete policy recommendations.

The long-awaited report did determine oil and gas leasing "fails to provide a fair return to taxpayers, even before factoring in the resulting climate-related costs that must be borne by taxpayers."

It recommended that the Bureau of Land Management (BLM) increase costs of drilling on public lands by raising minimum royalties paid for onshore oil and gas leases, minimum bids that companies can make on tracts of land and rental rates that companies pay before they begin producing oil and gas on the leased lands.

And it hinted at also considering climate costs in the future - but didn't lay out explicit mechanisms.

It said that the BLM, Bureau of Ocean Energy Management and Bureau of Safety and Environmental Enforcement "will be continuing to study the most appropriate method for revising royalty rates and other fiscal terms to monetarily account for the costs of carbon dioxide, methane, and nitrous oxide."

Carbon dioxide, methane and nitrous oxide are three planet-warming gases that make up most of the country's emissions. Fossil fuels are contributors to each type of emissions.

The language surrounding this study is less firm than the recommendations issued in the report, which explicitly said that the BLM should "initiate a rulemaking" for the higher onshore royalties and increased rental rates.

Randi Spivak, director of the Center for Biological Diversity's public lands program, said she believes factoring in climate costs could work to discourage oil and gas production - something she argued is lacking from the current recommendations.

"If the cost is truly reflective of the cost to society, then the effect would be to discourage production and that is where we could see some positive benefits: discouraging, actually, leases and production, because that's what the climate demands," she said.

In an email to The Hill, Interior Department spokesperson Tyler Cherry said that "analyses of the effects of greenhouse gas emissions are ongoing and will be incorporated in the Department's planning and reviews as it moves forward with leasing."

Cherry's response came after The Hill asked why the review didn't include findings on how to account for greenhouse gases. The spokesperson didn't answer The Hill's question about when that would be released.

The report highlights a finding from the Government Accountability Office that the department's recommendation for raising royalty rates on shore could decrease production "by a small amount or not at all."

The report comes out amid a tense political backdrop as the Biden administration seeks to get its climate and social spending bill passed through Congress.

In particular, Democrats need to keep Sen. Joe Manchin (D-W.Va.), who has been more supportive of fossil fuels, on board, as they can't afford to lose a single vote on the legislation.

"They're probably trying to thread a fine political needle here," Spivak told The Hill, adding that she thinks the administration is trying to appease "fossil fuel cheerleaders such as Sen. Manchin."

Mark Squillace, a professor at the University of Colorado Law School, noted that they also probably don't want to run afoul of the legislative changes prescribed in that bill in general.

"They're kind of being boxed in a little bit by the fact that there is this legislation pending," Squillace said.

The version that passed the House includes raises to both onshore and offshore royalty rates, minimum bids and rental rates. It also requires royalties to be paid for methane from gas that is vented, flared or leaked.

Meanwhile, the White House is also working on its own assessment of the negative effects of these gases, calculating what's known as their "social cost."

Currently, it's operating under Obama-era findings but is expected to release updated costs by January, which could give even greater weight to the negative effects of greenhouse gas emissions.

Tamma Carleton, an assistant professor of environmental economics and climate change at the University of California, Santa Barbara, told The Hill that given important recent advances in climate science and economic modeling, the department should use the incoming figure for any work in this area.

"We should all be looking towards January and where that number will change to, given the amount of scientific change," Carleton said.