If you have an ACS member number, please enter it here so we can link this account to your membership. (optional)

ACS values your privacy. By submitting your information, you are gaining access to C&EN and subscribing to our weekly newsletter. We use the information you provide to make your reading experience better, and we will never sell your data to third party members.



Carbon Charge Considered For Fuels Extracted From Public Lands

Climate Change: Battle between White House and Congress over climate policy intensifies

by Steven K. Gibb
May 18, 2015 | A version of this story appeared in Volume 93, Issue 20

Coal mined on federal lands accounts for 40 percent of carbon dioxide emissions.
Credit: Bureau of Land Management
Environmentalists say fossil fuels extracted from public lands accounted for 25% of U.S. CO2 emissions over the past decade.

The White House’s latest salvo in its ongoing battle with Congress over climate change involves public lands. The Department of the Interior is weighing whether to boost the fees that companies pay to extract fossil fuels from federal land. The goal is to incorporate the environmental and climate change costs of burning coal, oil, and natural gas into the fuels’ prices. Such a move could help reduce U.S. greenhouse gas emissions.

Not surprisingly, the energy industry is panning the effort. And congressional Republicans are vowing to fight this and other executive branch climate actions such as the Environmental Protection Agency’s upcoming rule to curb power plants’ carbon dioxide emissions. But that has not slowed President Barack Obama’s determination to make fighting climate change a legacy of his Administration.

As part of Obama’s effort, Interior’s Bureau of Land Management (BLM) last month requested public feedback on a plan to raise royalty and lease rates that companies pay to extract fossil fuels from public lands. BLM did not suggest an amount for this increase. But ensuring that taxpayers receive fair returns and that federal leases are “managed in a way that is consistent with our climate objectives” is paramount, says Interior Secretary Sally Jewell.

Tacking so-called carbon charges onto federal land leases for coal, oil, and natural gas extraction could put a dent in emissions of CO2 by making energy conservation and non-fossil-fuel sources such as solar and wind more competitive. Environmental activists estimate that the burning of fossil fuels extracted from public lands accounted for a quarter of U.S. CO emissions in the past 10 years.

Any BLM royalty increase would likely have a significant impact on the price of coal because 40% of the nation’s production of this fuel comes from public lands. Currently, companies pay about $1.00 per ton of coal in federal lease payments, Jewell says.

Any new royalties are “yet another regulatory assault from the Obama Administration on energy development on federal lands. Hiking the royalty rates will further curtail production and decrease revenue flowing to the federal Treasury,” House of Representatives Natural Resources Committee spokeswoman Julia Bell says. Right now, Capitol Hill lawmakers also are busy attacking EPA’s controversial plan to regulate CO2 emissions from power plants under the Clean Air Act.

Recent moves by legislators threaten the viability of the power plant rule. For one, the House Energy & Commerce Committee in late April approved legislation that would allow states to skirt EPA’s power plant rule by citing high costs or electricity reliability concerns. That bill now moves to the full House. Sen. Shelley Moore Capito (R-W.Va.) plans to introduce similar legislation in the Senate.

In addition, Senate Majority Leader Mitch McConnell (R-Ky.) is spearheading a litigation campaign against the regulation, which EPA expects to release in July. During the past three months, McConnell has distributed legal blueprints to states that detail how they could ignore the power plant rule through court filings.

EPA chief Gina McCarthy says she expects the rule to survive legal challenges.

McConnell, however, is doubling down against EPA. “I can assure you that as long as I’m majority leader of the Senate, this body’s not going to be signing off on any backdoor energy tax,” McConnell says of the power plant rule. His definition of “backdoor energy tax” may well include BLM’s plans for higher fees.

But the action BLM is considering may not meet the legal definition of a tax, analysts say. Policy experts examined this issue in a recent white paper issued by Resources for the Future, a nonpartisan environmental and energy think tank. It finds that boosting federal land-lease premiums is well within BLM’s legal authority and is legally distinct from a tax.

Alan J. Krupnick, a senior economist at the think tank, and Nathan D. Richardson, a University of South Carolina law professor, say a small carbon charge as part of BLM royalty premiums on leases would be an effective, if controversial, way to incorporate the cost of climate change from rising CO2 levels into the price of fossil fuels.

Energy industry groups are opposing any BLM royalty increases. Brendan E. Williams, a vice president at the American Fuel & Petrochemical Manufacturers, says “pro-growth policies are better ways to generate revenues than increasing taxes.”

At the same time, the Center for Western Priorities, a conservation advocacy group, is urging BLM to boost the minimum bid price for the leases, which was set at $2.00 per acre in 1987 and has never been changed.

Meanwhile, an increase in BLM’s lease charges for extraction of fossil fuels may also give the Obama Administration critical added leverage in ongoing international climate treaty talks set to conclude in December. If the Administration relies solely on EPA’s rule to back commitments to reduce CO2 releases, other countries are likely to be skeptical, given that the rule will probably be tied up in court for years.



This article has been sent to the following recipient:

Chemistry matters. Join us to get the news you need.