June 01, 2015

True Costs: DOI Must Account for Carbon Pollution

Jim Murphy

Over the last few years, we have seen unprecedented steps toward meaningful carbon reduction: the introduction of the first-ever proposed rules to address carbon pollution from the power sector, standards to increase vehicle miles and reduce transportation sector emissions, and strides toward improving efficiency and promoting clean energy like offshore wind. President Obama, in addition to his 2013 Climate Action Plan to reduce the nation’s emissions by 17 percent by 2020, has recently made more aggressive international agreements for carbon pollution reductions. Last fall, he agreed with China to lower U.S. emissions of carbon 26 percent by 2025 and reiterated that commitment in a March agreement with Mexico, seeking an aspiration goal of carbon emissions reductions of 28 percent by 2025.

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Carbon reductions cannot come fast enough given the challenges we face. And the reality of carbon reductions must be acknowledged; averting climate calamity means keeping vast reserves of fossil fuels in the ground. This is not something we have done before. Yet, the numbers are telling. A recent letter in the esteemed journal Nature reported that in order to have a coin toss chance of averting 2 degrees Celsius of warming—the threshold policymakers agreed is too dangerous to cross—we need to leave at least two-thirds of the world’s fossil fuel reserves in the ground. Christophe McGlade and Paul Ekins, The Geographical Distribution of Fossil Fuels Unused when Limiting Global Warming to 2°C, Nature Vol. 517, p. 182 (Jan. 2015).

What this means practically is that in order to avoid runaway climate change 33 percent of known oil reserves, 50 percent of gas reserves, and 80 percent of coal reserves must stay in the ground between 2010 and 2050. The actual distribution of what is unburnable shows the type of dramatic changes in extraction practices that are needed. Even with carbon capture and storage (CCS)—the nascent technology to separate out and pump carbon emissions into the ground where it would not be emitted—92 percent of known U.S. coal reserves would need to be kept in place, and 74 percent of oil reserves in Canada would need to be kept in place. Without CCS, the numbers are 95 percent and 75 percent respectively. Id. at p.189, tbl.1.

Yet, in the United States, one of the leading sources of carbon emissions is fossil fuels, which we are permitting to be extracted from our public lands with little consideration of the climate impacts. Currently, oil, gas, and coal from federal lands and waters comprise more than 20 percent of all U.S. carbon pollution emissions, and America’s public lands account for 30 percent of the nation’s energy production. A recent report by the Center for American Progress (CAP) and The Wilderness Society had some sobering statistics. Claire Moser et al., Cutting Greenhouse Gas from Fossil-Fuel Extraction on Federal Lands and Waters (Mar. 19, 2015). In 2012, federal lands and waters accounted for 24 percent of all U.S. energy-related greenhouse gas emissions—mostly from fossil fuels that are extracted and then burned. Coal is the biggest culprit of emissions, with coal combustion from federal lands accounting for more than 57 percent of all fossil fuel emissions from federal lands. Methane—a powerful greenhouse gas up to eighty-six times more potent than carbon dioxide on a near term basis—from venting and flaring from onshore federal leases rose more than 51 percent between 2008 and 2013.

To put that into perspective, carbon emissions from resulting fossil fuel development on public lands in 2012 amounted to the emissions equivalent of a whopping 280 million cars. According to CAP, this means that public lands are generating 4.5 times more carbon pollution than they are sequestering or absorbing. Id.

In order to achieve climate policy goals, our approach to fossil fuel development on our public lands is going to have to change. Some positive changes are occurring, but ultimately greater changes are needed.

Key among these steps is a proposed guidance that would give agencies instructions on how to evaluate the climate change impacts of federally approved actions, including those on public lands, pursuant to the National Environmental Policy Act (NEPA).

In December 2014, the Council on Environmental Quality issued a Draft Guidance on Consideration of Greenhouse Gas Emissions and Climate Impacts under the National Environmental Policy Act, which revised a 2010 draft guidance. The 2014 revision is an improvement over the 2010 guidance. In particular, it explicitly applies to public land management agencies, whereas the 2010 guidance exempted these agencies from the guidance. Given the emissions resulting from fossil fuel projects on public lands, NEPA evaluation of projects by public land agencies like the Bureau of Land Management (BLM) is necessary to account for the immense pollution associated with leasing and resulting development. Having federal agencies look at the climate impacts of major decisions, like coal leasing on public lands, should both inform and change a practice that is now occurring with virtually no consideration of carbon emissions.

But the guidance has room for improvement. Among which is a current threshold for evaluating emissions set at 25,000 metric tons carbon dioxide equivalent. While the revised draft guidance states that climate impacts from projects below this threshold should still be given consideration, based on historic practice, the strong likelihood is that agencies like BLM will probably not give much consideration to the carbon pollution impacts of projects which are below this threshold.

The NEPA guidance should further instruct agencies to use the social cost of carbon, or SCC, (the economic damages that result from the carbon pollution emitted by a project or action) in evaluating impacts generally in a way that accounts for the fact that SCC as currently used may underestimate impacts. Right now the guidance implies that the SCC is a tool for evaluating only costs and benefits. Clarity is needed and would be consistent with evolving case law. In High Country Conservation Advocates v. United States Forest Service, 2014 WL 2922751 (D. Colo. June 27, 2014), the court found fault with an EIS prepared by the Forest Service and BLM in connection with authorization for proposed coal mining leases on federal lands in part because the agencies failed to use the SCC to evaluate the impacts of carbon emissions. The court noted that the SCC is well-suited for NEPA analyses since it concerns the potential impacts of “actions that have small, or ‘marginal,’ impacts on cumulative global emissions.”

As importantly, the guidance should give clear direction that agencies should evaluate how various leasing decisions will impact the market. Given the enormous amount of fossil fuel production that comes from federal lands, decisions that authorize or deny the extraction of coal, oil, or natural gas from public lands can have a significant effect on the market for those commodities. For instance, such decisions can effect changes in pricing and use as well as provide signals to investors.

Agencies should not be able to get away with conclusions that dismiss carbon pollution impacts with analyses that amount to a conclusion that the impacts will simply pop up elsewhere. High Country Conservation Advocates has already rejected such a scapegoat approach. The court invalidated the Forest Service’s NEPA review of a proposed rulemaking that facilitated access to up to 347 million tons of coal on federal lands that would otherwise have gone unmined. The Forest Service argued that overall coal mining, coal combustion, and GHG emission levels would remain the same regardless of its decision, but the court dismissed the notion that coal markets would be unaffected. It instead found that the Forest Service’s rulemaking made it more likely that “coal that otherwise would have been left in the ground will be burned” and higher emissions would result.

Perhaps the best way to reduce carbon pollution from our public lands is to reform the leasing process itself. Currently, leases are given away at basement prices: just over a $1 per ton when market prices are about eleven to sixty times that amount. Ben Adler, Obama’s Coal-Leasing Program Is Costing Taxpayers More Than $50 Billion, Grist (July 29, 2014). Additionally, according to a Greenpeace report, the SCC from a ton of coal burnt is $22 to $237. Greenpeace, Leasing Coal, Fueling Climate Change. What this means is that private companies are effectively being subsidized to mine coal. They are paying prices to lease coal that are well below the market price and do not account for the social costs of the resulting pollution that the public must bear.

It is a losing proposition for the taxpayer and the public.

Adjusting leasing decisions and royalty rates to ensure that fossil fuel companies, and not the public, pay the costs associated with extraction and carbon pollution would likely have an immense impact on overall carbon emissions. The price of fossil fuels from public lands would more accurately reflect the costs, and the energy market would likely shift in favor of renewables that lack these high, but now largely unaccounted for, costs.

The Department of Interior’s Office of Natural Resource Revenue is taking a step in the right direction that will close a loophole that now allows coal companies to sell coal to subsidiaries in nonarms-length transactions to escape royalty payments for coal mined on federal lands. The agency received comments on this proposed rule in May. Additionally, Interior Secretary Jewell signaled in a St. Patrick’s Day speech that she is exploring ways for her agency to “achieve a low-carbon future.” One effort she cited is a rulemaking by the BLM to ensure that methane from oil and gas production is not wastefully vented or flared. This win-win solution would not only cut emissions of this potent greenhouse gas, but also recapture a fuel that can then be used. It is a very sensible, cost-effective step to clean up carbon pollution on our public lands. But other steps are needed. Reform of leasing of fossil fuel resources on federal lands to ensure carbon pollution costs are borne by extractors—not the public-at-large—is long overdue.

Jim Murphy

Mr. Murphy is Senior Counsel for National Wildlife Federation and is a member of the editorial board of Natural Resources & Environment.