The dismal legacy of Trump’s ‘Energy Dominance’ agenda
After four years of giveaways to the oil industry, opportunity emerges to modernize system for drilling on public lands
Over the last four years, the Trump administration moved rapidly to dramatically expand drilling on public lands and slash public health and environmental safeguards to benefit the oil and gas industry. Led by former oil lobbyist Interior Secretary David Bernhardt, the administration took full advantage of an outdated legal system that allows oil and gas companies to identify where they want to drill, easily obtain drilling permits, and pay minuscule royalties to taxpayers for extracting publicly-owned oil and gas.
The administration made no attempt to hide its drill-everywhere agenda, branding and promoting it as “energy dominance.” The geographic scope of this push was immense, with drilling leases offered from the Gulf of Mexico to the Arctic National Wildlife Refuge, in imperiled sage-grouse habitat and on the doorstep of national parks. Further, the elimination of regulations designed to reduce natural gas flaring and venting, as well as rules aimed at increasing the safety and transparency of fracking, will impact communities for years to come.
The Biden administration, as well as Congress, have an opportunity and a responsibility to fix this broken and rigged system. Currently, oil, gas, and coal extracted from public lands account for nearly 25 percent of all U.S. greenhouse gas emissions. By modernizing our government’s approach to energy development on public lands, the administration can prioritize the development of renewable energy, conserve our natural heritage for future generations, and ensure taxpayers get a fair return for publicly-owned oil and gas, allowing public lands to become part of the climate solution.
Origins of ‘energy dominance’
On March 28, 2017, President Trump issued an executive order that directed federal agencies to “suspend, revise, or rescind [programs and policies] that unduly burden the development of domestic energy resources….” The following day Interior Secretary Ryan Zinke directed his department to operationalitze Trump’s order, specifically requesting a report identifying energy policies to be revised or eliminated. This effort culminated with the October 2017 “Energy Burdens Report,” which recommended sweeping regulatory roll-backs taken straight from the oil and gas industry’s wish list.
In the wake of the report, administration officials embarked on a regulatory slash-and-burn campaign, jettisoning or weakening dozens of rules and policies that protected public health and safety, wildlife, and taxpayers from drilling. To date, the Interior Department has taken action on at least 43 of the burden report’s 49 recommendations, and has transformed BLM from a multiple-use agency to one that is focused almost entirely on facilitating oil and gas development.
Legacy of ‘energy dominance’
From despoiled landscapes to increased pollution, Western communities will grapple with the impacts of energy dominance for years. But its enduring legacy may be in exposing how deeply flawed the system governing oil and gas development on public lands has become. For decades, this system, overseen by the Bureau of Land Management (BLM) has:
- Needlessly wasted increasingly scarce agency resources;
- Prioritized corporate profits over a fair return for taxpayers;
- Shifted billions in orphaned well liabilities from industry to taxpayers and private landowners;
- Put sensitive public lands, wildlife, and waters at risk, including on the doorstep of national parks and monuments; and
- Marginalized the voices of the public, Native American tribes, and other stakeholders.
The Trump administration did not invent this system — it has been in place for well over thirty years — but its profound flaws opened the door for abuse at the behest of the oil and gas industry.
A wasteful program becomes even more wasteful
Waste has long been a defining feature of the BLM’s oil and gas leasing program. Beginning at the broadest land use planning stage, the agency has always opened a sizable amount of public lands to leasing (nearly 200 million acres, as of 2016), many of which have little to no drilling potential. This sets the stage for widespread conflict and inefficiency down the road.
Because so much land is open to leasing, the oil and gas industry floods the BLM with thousands of lease nominations each year — requests to auction drilling rights to a specific location that can be made anonymously and at no cost — many of which are speculative in nature. Between 2010 and 2019, industry nominated nearly 110 million acres of public lands for leasing, an area larger than the state of California.
Every three months, the BLM holds oil and gas lease sales, even when oil prices are low. And while some sales generate fair returns for taxpayers, many do not. Between 2009 and 2019, BLM offered 54.9 million acres for lease, but just 23 percent (12.7 million acres) sold.
The millions of acres of oil and gas leases that do not sell at auction then become available for noncompetitive leasing — a poster-child for government waste. Through this mechanism, anyone can purchase a noncompetitive lease for just $1.50/acre, without paying a bonus bid that is required at auction. According to a new Government Accountability Office (GAO) study, 99 percent of noncompetitive leases issued between 2003 and 2009 never produced a drop of oil. This is not surprising; within a year or two, industry stops paying rent on most noncompetitive leases, which are then terminated by the BLM. To no avail, the Government Accountability Office, the National Academy of Sciences, and even the Interior Department have all implored the BLM to address this chronic waste by developing a more rational, targeted leasing system.
How the Trump administration magnified this problem:
- Unsurprisingly, in new land use plans, the Trump administration opened as much public land as possible to leasing — roughly 50 million acres. In doing so, the administration ignored widespread calls for greater balance from Western governors, Native American tribes, hunters and anglers, rancher and farmers, and many others.
- Administration officials also pressured the BLM to advance as many nominated leases to sale as possible. In response, BLM staff reported that they were “struggling” to properly evaluate environmental impacts and engage the public, as required by federal law.
- What ensued was a case study in government waste: of the 26.1 million acres offered for lease since January 2017, just 6.1 million acres sold. Federal courts also cancelled many of the leases that did sell (now well over a million acres) because of profound legal flaws with the Trump administration’s leasing practices.
- Noncompetitive leasing also soared to record highs, as speculators snatched-up many of the Trump administration’s unsold leases for just $1.50/acre.
Oil companies — not taxpayers — are the real winners
The oil and gas industry has long benefited from sweetheart rates for public lands drilling. The BLM’s current royalty rate, the money owed to taxpayers for extracting publicly-owned resources, has not changed in over 100 years and is several percentage points lower than the royalty rates of Colorado, Montana, New Mexico, North Dakota, Oklahoma, Texas, Utah, and Wyoming. Additional fees, particularly rental rates and minimum lease bids, are also outdated and far below what is needed to ensure a fair return for taxpayers.
Because of these industry-friendly fiscal policies, state and federal taxpayers have lost out on billions in revenue. A modest increase in the royalty rate — from 12.5 percent to 18.75 percent — would have earned taxpayers an additional $12.4 billion between 2010 and 2019.
The industry has also benefited from the BLM’s ongoing refusal to consider oil and gas prices and other market factors during the leasing process. This fosters widespread speculation in cheap federal leases and lets companies boost their attractiveness to investors by padding their reserves. For these and other reasons, the Government Accountability Office placed BLM’s leasing program on its list of “high risk” federal programs in 2011 (where it remains to this day). Programs are placed on this list “due to their vulnerabilities to fraud, waste, abuse, and mismanagement, or that need transformation.”
How the Trump Administration magnified this problem:
- Oil and gas companies and speculators — not taxpayers — were the real winners of energy dominance. As oil prices trended downward, even sinking below zero in April 2020, the administration plowed ahead with its leasing agenda.
- The results were not surprising. Over 20 percent of the leases auctioned-off by the Trump Administration sold for the minimum allowable bid of $2.00/acre and noncompetitive leasing surged to record levels.
- By the end of the administration, a cosmetics entrepreneur and poet from Myanmar with no apparent drilling experience was almost single-handedly propping up the leasing program, purchasing well over a hundred of the leases offered by the BLM in the waning months of the administration.
- The administration frequently touted the revenues that its sales generated for federal and state taxpayers. But just one, historically profitable sale in New Mexico accounts for over 54 percent of the bonus bids earned since January 2017. Over half of the Trump administration’s lease sales earned less than $1 million and over 25 percent garnered less than $100,000.
- And then, during the COVID-19 pandemic, the administration bailed out oil and gas companies, many of whom were in financial distress well-before the onset of the pandemic, by curtailing or eliminating their obligation to pay royalties to taxpayers.
Orphaned well liabilities are skyrocketing for taxpayers and private landowners
Oil and gas companies are supposed to plug their wells and restore the land once they’re finished. Before drilling begins, they must post bonds, which are meant to cover clean-up costs in the event they are unable or unwilling to undertake reclamation. Yet, the federal government’s bond amounts are woefully inadequate, dating back to the 1950s and 60s. It can cost $300,000 or more to plug modern oil and gas wells, but the BLM frequently requires companies to post a bond of just $10,000 per well (or less if companies use national or statewide bonds, which can cover hundreds or thousands of wells).
As a result, the BLM has collected just $204 million in bonds, even though there are over 96,000 producible oil and gas wells on public lands and the cost to reclaim these wells could exceed $6 billion. According to the GAO, total current bonds collected works out to just $2,122 in bond coverage per well.
Beyond the profound risk to taxpayers, orphaned wells are environmental hazards, spewing methane and toxic gases, polluting groundwater, and endangering wildlife. There are now about 57,000 orphaned wells throughout the country, and as many as 746,000 other wells that may be orphaned. These numbers are expected to increase significantly in coming years, as more and more oil companies file for bankruptcy.
How the Trump administration magnified this problem:
- The Trump administration turned a blind eye to the mounting fiscal and environmental costs of orphaned wells and instead fast-tracked thousands of drilling permits with the same antiquated bonding rates that have been in place for decades. In doing so, it rejected calls from ranchers, state regulators, and many others to increase bond amounts.
- Between January 20, 2017 and January 20, 2021, the Trump administration approved 14,386 drilling permits. If each permit leads to one well, then the Trump administration’s reclamation price tag could exceed $4.3 billion and lead to a funding shortfall in the neighborhood of $4 billion.
- Moreover, in defiance of legal restrictions, the administration continued to grant leases to companies with questionable compliance records. For example, the administration issued at least eleven leases to Hilcorp Energy Co., whose “disregard for regulatory compliance” the Alaska Oil & Gas Conservation Commission has described as “endemic” and “inexcusable.” Hilcorp currently operates over 11,000 wells in New Mexico, including dozens that have been inactive for several years.
Impacting sensitive lands
Over the years, as the oil and gas industry has expanded its footprint in the American West, conflict between leasing and other public lands values has become increasingly common. This conflict has frequently been resolved in favor of industry, with some BLM employees “believing they were required by law to give greater deference to mineral leasing proposals than to the protection of other land uses on specific leases.”
As a consequence, the West is burdened by a sprawling network of improvidently issued leases and poorly managed development, including within sensitive habitat for Greater sage-grouse, mule deer, and other wildlife species and surrounding numerous national parks and monuments. In places like the Wyoming Range and along Montana’s Rocky Mountain Front, which have some of the finest fish and game habitat in the West, it has cost millions of dollars to buy back leases that should never have been issued in the first place.
Meanwhile, Native American tribes are still fighting to undo (or at least minimize the impacts of) decades-old leases on ancestral tribal lands, including in Montana’s Badger-Two Medicine, New Mexico’s Chaco Canyon area, and Colorado’s Canyons of the Ancients.
How the Trump administration magnified this problem:
- The Trump administration played a dangerous game of chicken with some of the most iconic landscapes in the West, advancing leasing proposals for lands on the doorstep of at least fourteen national parks and monuments, including Chimney Rock and Great Sand Dunes in Colorado, Great Basin in Nevada, Carlsbad Caverns and Chaco Culture in New Mexico, Theodore Roosevelt in North Dakota, Arches, Bears Ears, Canyonlands, Capitol Reef, Dinosaur, Hovenweep, and Zion in Utah, and Fort Laramie in Wyoming.
- In its final months, the administration rushed to offer oil and gas leases in the Arctic National Wildlife Refuge, one of America’s wildest landscapes, despite opposition the Gwich’in tribe and virtually no industry demand.
- The administration also targeted ancestral tribal lands, such as Chaco Canyon, Chimney Rock, and lands just outside of Bears Ears National Monument that are dense with cultural resources.
- Nor did the administration spare wildlife, in spite of its rhetoric about championing the hunting community’s cause. One in four leases offered for sale by the administration through April 2019 overlapped with big game priority habitat areas, while leasing and drilling in priority Greater sage-grouse habitat soared.
- Finally, more than 60 percent of the leases issued by the administration are located in water-stressed areas, which could hamper the conservation efforts of western communities that are facing extreme water shortages.
Marginalizing the public
For many years, the public had little to no say in the oil and gas leasing process. The BLM treated leasing as a paper transaction that did not cause environmental harm and rarely, if ever, conducted an environmental analysis or sought public input over lease sales. This changed once federal courts ruled that environmental impacts can flow from the decision to lease (because leases convey drilling rights), and ordered BLM to comply with the National Environmental Policy Act (NEPA) prior to holding sales. In 2010, BLM adopted a nationwide policy that required NEPA analyses, meaningful public participation, and coordination with tribal governments, state fish and game agencies, and other stakeholders for every lease sale.
How the Trump administration magnified this problem:
- The Trump administration deemed the public, tribes, and other stakeholders a “burden” on the oil and gas industry and quickly moved to cut them out of the decision-making process. In 2018, it slashed the minimum number of days for public participation in the leasing process from 60 to just ten.
- A few months later the administration directed the BLM to involve the public only in “borderline” or “unusual” drilling proposals and to avoid preparing NEPA documents “to the greatest extent possible.”
- Even during the COVID pandemic, as oil prices sank below zero and congressional leaders, ranchers, and others pleaded for a time-out, the administration plowed ahead. From March 13th, when President Trump declared a national emergency through January 20th, 2021 the BLM approved close to 4,200 new drilling permits — nearly 30 percent of the total number approved during the entire administration — and offered over 1.8 million acres for leasing.
- Over the past three years, federal courts have consistently sided with the public, finding that the administration had targeted “public involvement in the oil and gas leasing process because such public involvement hindered the oil and gas production industry” and ruling that public input “cannot be set aside in the name of expediting oil and gas lease sales.”
Fixing the System
For four years, the Trump administration took advantage of a broken and rigged oil and gas leasing system to fast-track leasing and drilling and roll back key protections for communities, public lands, waters, and wildlife. The Biden administration has the opportunity and obligation to restore these protections and undertake long-overdue, comprehensive reform of the BLM’s oil and gas program. Steps the administration should take include the following:
- Pause leasing and conduct a programmatic review of the leasing program: The Biden administration should promptly pause and initiate a programmatic review of BLM’s oil and gas leasing program. There is precedent for doing so, as BLM has paused leasing several times in the past, including “to conduct an orderly examination of the fairest and most responsible method of leasing [public] lands.”
- Establish a new mandate for the BLM’s oil and gas leasing program: BLM has a duty to manage leasing in a manner that comports with its multiple-use mission, which includes accounting for “the long-term needs of future generations” and avoiding “permanent impairment” of public lands and waters. Accordingly, the Biden administration should develop a new mandate for the leasing program that reinforces the discretionary nature of leasing and establishes far-reaching conservation, climate change, and taxpayer fairness goals for the program.
- Prevent bad actors from getting new leases and drilling permits: The Biden administration should take steps to identify and prevent bad actors from getting new oil and gas leases and drilling permits. This includes companies that are clearly engaging in speculation, repeatedly fail to make rental payments, and/or flout federal and state air and water quality standards.
- Eliminate the oil and gas industry’s sweetheart deals and protect taxpayers from orphaned well liabilities: The Biden administration should eliminate the sweetheart deals that industry enjoys on public lands and increase the program’s royalty and rental rates and minimum lease bids. Further, the administration should prevent industry from shifting clean-up costs onto taxpayers by strengthening oil and gas bonding requirements. Recent legislation from Senators Grassley and Udall and Senator Bennet provide a helpful framework for addressing these shortcomings.
- Restore the important role of the public, Native American tribes, and other stakeholders: Leasing decisions should not be based on the profit-driven motives of oil and gas executives. Accordingly, the Biden administration should restore and embrace the important role of the public, Native American tribes, and other stakeholders in the leasing decision-making process.
- Ensure public lands are a net-zero source of greenhouse gas emissions by 2040: Currently, nearly one-quarter of all U.S. greenhouse gas emissions come from the combustion of fossil fuels extracted from public lands. The Biden administration should set a national goal of making our public lands a net-zero source of greenhouse gas emissions and promptly move to increase renewable energy generation, conserve key landscapes, and modernize the BLM oil and gas program.
The Interior Department is responsible for managing our public lands for all Americans and conserving our natural heritage for future generations, not merely for rubber stamping oil and gas leases and drilling permits. It is long past time to fix a broken system that allows oil and gas corporations to drill across vast swaths of the West, impacting communities and ecosystems, all the while taking advantage of sweetheart royalty rates. And as we face the existential crisis of climate change, it is time to ensure that our public lands are no longer part of the climate problem, but instrumental in the solution.
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