Interior plan to use drilling funds for new projects met with skepticism

A new Interior Department plan to build roads in national parks, fix visitors centers and complete other infrastructure projects using money raised by drilling on public lands is facing skepticism from members of Congress and a former senior department official.

The plan, part of the budget the White House proposed this week, would forgo traditional funding and instead opt to finance up to $18 billion in “backlogged” infrastructure projects solely through the sale of mineral and fossil fuel extraction on public lands and waters.

But the proposal heralded by Interior Secretary Ryan Zinke faces several key hurdles, leaving even Republican members of Congress questioning its feasibility and raising a number of concerns, including whether the drilling money is already spoken for by other agencies.

{mosads}

“Keep in mind that if we are funding this through oil revenues from offshore, what else is it being spent for?” said Sen. Lisa Murkowski (R-Alaska), chair of the Senate appropriations subcommittee on the Interior.

“You have a lot of uses or sources, a lot of calls on that same money. So how many times has it been spent over? We have to find that out,” she added.

The annual budget already takes into consideration the billions of dollars in revenue generated from oil and gas extraction on public lands when it makes its appropriations to each department. Zinke’s plan suggests creating a Public Lands Infrastructure Fund to pool new lease sale revenues for use exclusively by Interior.

The fund concept is novel, said a former Interior senior official, but the idea of trying to make a claim on a source of funding solely for one department is not.

“Previous administrations have wanted to have royalties developed from public lands to help fund projects at the Interior Department. But Congress is very conscious of the purse strings that it has and does not want to share that decisionmaking with administrations that come and go,” said David Hayes, who served as Interior deputy secretary and chief operating officer under former Presidents Clinton and Obama, respectively.

Hayes noted that royalties from oil and gas are “one of the largest revenue producers in the entire federal government.”

Interior announced in November that the U.S. made $7 billion in revenue from energy disbursements under Trump in 2017. Last year, oil and gas sales from extraction on land under Interior’s Bureau of Land Management (BLM) increased by 86 percent, generating nearly $360 million in revenue.

“These results are hard proof that our sound energy policy is working for both public lands and Americans in terms of reliable power and job growth opportunities,” Brian Steed, BLM’s deputy director, said in a statement.

Zinke has proposed increasing revenues even further by doing away with regulatory hurdles and opening up more federally owned property for fossil fuel extraction.

In January, Zinke proposed opening up 90 percent of the U.S. outer continental shelf to offshore drilling leases — areas that would include the Atlantic, Pacific and eastern Gulf of Mexico. However, his announcement was met with intense backlash, including from Republican governors from coastal states such as Florida. 

On Friday, the Interior Department announced plans for the largest sale of oil and gas leases in the country’s history. The March sale would auction off 77.3 million acres of offshore waters to drilling, covering coastal waters in Texas, Louisiana, Mississippi, Alabama and Florida.

Interior also submitted for public comment a list of 35 “critical” minerals the department is proposing for increased mining development. According to the department, the minerals, which include aluminum and uranium, are considered “essential” to the U.S. economy and national security.

In a press call with reporters Monday following the release of the White House budget, Zinke emphasized that “sovereignty should mean something, so we’re focusing on that.”

“Our growth curve continues to be impressive. As this country focuses on energy dominance, we’ll see this budget request increase going into our parks, and schools,” he said.

But critics say the increase in revenues generated in 2017 were not a result of policy changes but instead increasing oil and gas prices.

Today, oil prices are just starting to rebound at $40 to $60 a barrel after falling from about a $100 a barrel around 2014 to a low of $26 per barrel in 2016.

“Zinke is very misleading suggesting that all of a sudden there is a renaissance in oil and gas,” Hayes said. “The main driver for royalties going up and down is the price of gas. There has been virtually no change at all in the amount of oil and gas leasing available [in 2017].”

Additionally, if auctions on already available land leases are any indicator of interest by industry in more drilling on public land, it doesn’t bode well for Zinke’s proposal.

A BLM auction of $10.2 million acres of land in Alaska in December yielded only seven bids on less than 1 percent of the available land, according to federal data. Another auction that same month for land in Nevada wasn’t any more successful. Of 208 parcels of land offered, only 17 were bid on with the highest bid of $2 per acre, the lowest bid allowed by the federal government.

According to a review of offshore oil sales by Reuters, increasing revenue may just be as unlikely in oceans.

Looking at the oil-rich Gulf of Mexico, the amount of money per acre that oil companies spent last year was about a third of what they spent in 2013 when oil prices were higher, Reuters reported.

“It’s funny money,” said Rep. Raúl Grijalva (Ariz.), the top Democrat on the House Natural Resources Committee. 

“[Interior is] betting on the idea that opening up the public lands will generate revenue. Stupidly, mineral extraction doesn’t provide one penny of royalties to anybody,” he said. “Gas and oil royalties pay 8, 9, 10 percent depending, and that is not going to be enough. There are already thousands and thousands of permits that have never been used.”

However, others argue that Zinke’s proposal is still a step in the right direction and signals to industry and Congress that the administration is determined to remove barriers to drilling. 

“Companies definitely avoided federal lands during the Obama administration for all of the obstacles it threw up, and you could get a lease but you had no assuredness that you would be able to actually operate on that lease,” said Kathleen Sgamma president of the Western Energy Alliance.

“With the clear signal from Secretary Zinke that the administration is willing to move forward, [it] signals to companies that, ‘Hey maybe it would be worth while to acquire.’ ”

Rep. Rob Bishop (R-Utah), chairman of the Natural Resources Committee, said he supports the plan regardless of its pitfalls.

“However you work it through, it is a good idea because it’s based on the assumption that we need to be producing more energy,” he said. “There is never enough money for everything … there will never be enough money, but to prioritize that is what should be done.”

— Timothy Cama contributed