Interior Should Properly Consider Climate Damages in Oil and Gas Leasing

In regulatory policy, as in life, calculating a potential action’s costs is an important step in determining whether to take that action. Once known, such costs can be considered in any number of ways, most helpfully by being weighed against the benefits of the action. Identifying these costs without giving them a place in the decisionmaking, however, would be irrational, and undermines the purpose of calculating the costs in the first place. And yet this is precisely the approach the Department of the Interior (Interior) has taken in analyzing recent proposals to lease public lands and waters for fossil fuel development.

For years, Policy Integrity has urged the Interior subagencies responsible for onshore and offshore oil and gas leasing — the Bureau of Land Management (BLM) and the Bureau of Ocean Energy Management (BOEM), respectively — to better incorporate climate impacts into their decisionmaking. Specifically, we have advised them to estimate the greenhouse gas emissions from extraction projects, including those from potential end-use combustion, and then monetize the resulting climate damages using the social cost of greenhouse gases. Such analysis would help these agencies fulfill their obligations under the National Environmental Policy Act (NEPA) and reveal to decisionmakers and the public that the economic benefits of leasing are often not worth the costs.

Last November, BLM released environmental assessments for a series of oil and gas lease sales to take place in the first quarter of 2022. Around that same time, BOEM released an environmental impact statement for its proposal to lease more than one million acres of submerged land off the coast of Alaska for oil and gas development. These environmental review documents are an essential part of the decisionmaking process (and required under NEPA for major actions) as they are designed to ensure that public land- and water-use determinations balance the most important considerations.

Within these analyses, the agencies take the important step of monetizing climate damages. Unfortunately, both BLM and BOEM propose to proceed with lease sales despite estimating that doing so will collectively lead to between $5 billion and $7 billion in climate damages.

The agencies’ consideration of these climate damages is significantly lacking. In theory, monetizing climate change impacts enhances an agency’s ability to weigh an action’s pros and cons, even in the NEPA context where a formal cost-benefit analysis is not required. But while BLM’s and BOEM’s recent analyses begin to fill out one side of the ledger for these lease sales by using the social cost of greenhouse gases, the agencies fail to demonstrate how they balance these large sums against potential beneficial effects of leasing. Nor do they provide any justification for moving forward with the decision to lease in the face of theses enormous climate costs.

Our recommendations for improving the agencies’ decisionmaking address these deficiencies. In our comments to both agencies, we recommend that they more fully monetize the beneficial and adverse effects of the prospective leasing and make a determination about the lease sales based on a careful weighing of costs against benefits. This echoes a recommendation in our comments to the Council on Environmental Quality to amend the NEPA implementation regulations. If such monetization is not possible, we tell BLM it should use the social cost of greenhouse gases as a point of comparison between the action alternatives it considers and provide a justification if it chooses a more harmful option. We also urge BLM to consider the aggregate effects of the concurrent onshore lease sales, which often happen in clusters on a quarterly basis, to better highlight the true climate impacts of the larger federal oil and gas leasing program.

Oil and gas leasing on public lands has enormous climate costs and, if left unaltered, the program could pose a serious obstacle to the Biden administration’s commitment to significantly reduce greenhouse gas emissions. In fact, some groups have called for a complete halt to fossil fuel development on public lands. However, even the administration’s attempt to pause the program for further review was met with legal challenges. Right now, one thing Interior definitely can and should do is reflect and properly contextualize the significant climate costs of its leasing decisions using the recommendations we have outlined above.

By Lance Bowman and Iliana Paul.

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