Climate activists heard a bit of welcome news during Tuesday’s State of the Union address: a hint from President Obama that he’ll soon reform the way public lands are leased to fossil-fuel companies for mining and drilling.
“Rather than subsidize the past, we should invest in the future—especially in communities that rely on fossil fuels,” Obama told the audience at the Capitol. “That’s why I’m going to push to change the way we manage our oil and coal resources, so that they better reflect the costs they impose on taxpayers and our planet.”
For years environmentalists have asked the Interior Department to reevaluate federal leasing programs, arguing that the government effectively subsidizes coal and oil companies by charging below-market rates for access to publicly owned resources. In Wyoming’s Powder River Basin, for instance, the government sells coal at about one-fifth the price of Appalachian coal, and undervaluation has cost taxpayers tens of billions in lost revenue.
It’s also undermined Obama’s climate agenda. Fossil-fuel production on public lands surged to an unprecedented level under his leadership. According to the Center for American Progress, the losses and damages related to carbon pollution from Powder River Basin coal alone amount to $19 billion a year. Overall, all of the coal, oil, and gas extracted from public lands each year has the potential to release as much carbon pollution as the annual emissions from 280 million cars—or as much as 21 percent of all greenhouse-gas emissions in the United States.
In the wake of their victory over the Keystone XL pipeline, green groups are looking toward public lands as the next locus of the campaign to keep fossil fuels in the ground. Ultimately, climate organizations would like to see all fossi-fuel production on public lands come to an end. Obama’s reforms aren’t likely to go that far—the White House says it will release details in the coming weeks—but even a move towards factoring the social cost of carbon into the price of those public assets would be a significant change to a program that has been repeatedly exposed as corrupt and mismanaged.
‘‘We welcome President Obama’s full throated endorsement of clean energy and his pledge to take a close look at how we can get off fossil fuels. The President’s top priority during his last year in office needs to be keeping that coal, oil and gas in the ground,” 350.org Executive Director May Boeve said in a statement. “The issue of fossil fuel extraction on public lands is going to be a key fight over the coming months.”
No doubt any reforms will be described as just another move in the “war on coal.” But already, even with the government artificially propping up the industry with its below-market leases, production is at a 30-year low, in large part because of competition from increasingly affordable renewable energy and cheap natural gas. Earlier this week the nation’s second-largest coal corporation, Arch Coal, filed for bankruptcy, following a handful of others. The consulting firm McKinsey and Company said in December that, with nearly $110 billion in liabilities, the coal industry was headed for a “slow-motion train wreck” unless it downsizes significantly. Despite so little demand, coal companies have balked at closing mines and slowing production.
“They’re managing ideology instead of managing coal operations,” says Tom Sanzillo, director of finances for the Institute for Energy Economics and Financial Analysis. “The ideology is that coal is the only way to go, that it is critical for the country, and that if they ignore market competitors, they can just make believe they don’t exist. Well, they do exist.” He continued, “The coal industry leadership does not want to discuss how to assist communities and workers because to do so they have to acknowledge the shrinking nature of the markets.”
Obama’s intention to reform the management of public oil and coal resources—which Interior Secretary Sally Jewel indicated last spring—is a real shift from his previous promotion of an “all of the above” energy strategy. While his administration has largely concentrated on demand-side climate policies—such as energy-efficiency standards that discourage the consumption of fossil fuels—the way he framed the rejection of the Keystone pipeline, and the acknowledgement that prices for federally owned fossil fuels should “reflect the costs they impose on taxpayers and our planet,” suggest a new appetite for trying to restrict the production of fossil fuels, as well. The only pity, from the perspective of the planet, is that he waited until the final year of his administration to do so.