Energy Federalism: A Good Idea in the Romney Plan
Power to the States
Yesterday, I wrote about the shortcomings of the Romney energy plan, saying that by looking simply at supply-side, it only goes halfway; a real energy policy addresses both demand and supply sides. There is one part of the plan, however, that I want to highlight because I believe it deserves praise.
The section that stands out as genuinely new and innovative is Romney’s plan to transfer control over energy production on federal lands to states. A Romney Administration would allow states to “establish processes to oversee the development and production of all forms of energy on federal lands within their borders” with the exception of lands “specially designated off-limits” (presumably national parks and the like). Federal agencies would certify state’s regulations as meeting an “adequate” level, but would leave most of the decisions to the states themselves. Romney would then encourage a “State Energy Development Council” that would allow states to share best practices and work together. This idea of Energy Federalism would allow states – the “laboratories of Democracy” in Justice Brandeis’ terminology – to test different regimes for energy production.
For the country that leads the world in capitalism and private ownership, the federal control over lands through the Bureau of Land Management, the U.S. Forest Service, and others is a strange idea. In 11 states, all in the West, the Federal Government claims ownership of more than 50% of the total land. In Nevada and Utah, it holds greater than 70%. Most of that is controlled by the Bureau of Land Management, which owns more than 245 million acres of land, an area about the size of Texas and New Mexico combined. The BLM also manages 700 million acres of sub-surface mineral rights, meaning that in many areas (again, mostly in the West), the owners of land above ground have no rights to the mineral or fossil-fuel rights below ground.
The federal ownership of land is a strange leftover from the early days of the Republic. In treaties with both European powers and Indian tribes, the Federal government bought or was ceded land from the Appalachian Mountains on west. What to do with that land was the subject of continued political battles throughout the 19th Centuries, starting with the land grants of the Northwest Ordinances and going through the Homestead Act and the Mining Act. Today, the Department of the Interior regulates how land can be used and what it can be used for.
It makes sense for the regulation of energy production to be as close to the local level as possible. Production will benefit the local economy, and any pollution that comes from drilling or mining will also be predominantly local. This would allow states to compete with each other for energy jobs – or a clean environment. It is important to note, however, that the emissions from the burning of fossil fuels is a national – even international – issue that should be regulated by the federal government, in cooperation with countries around the world.
We see an interesting case-study here in the East (where federal ownership of land is not much of an issue) between how New York and Pennsylvania are regulating fracking and natural gas production from the Marcellus Shale, stretching across their shared border. While New York prizes the quality of its water – much of which is pumped to New York City – Pennsylvania has taken the lead in developing its energy production – bringing new jobs and new revenues to the state. Is one better than the other? It is hard to say – but it shows differing priorities by each state.
I would even go further than Romney’s plan and devolve all control over the land – not just of minerals rights, but also farming, ranching, and hunting rights – to the states, or even simply privatize it altogether. This would allow a true competition for what is the most efficient use of land.
Won’t Achieve Energy Independence
Ultimately, however, Romney includes this Energy Federalism in his plan as a way to go around what he sees as a slow and reluctant federal bureaucracy. He sees this as a way to expand production of oil and natural gas. However, it is not clear that there is enough oil available on federal lands just waiting to be released for production to meet the plan’s stated goal of achieving “North American Energy Independence.” Other than some areas like the Arctic National Wildlife Refuge on the North Slope of Alaska (which would require an act of Congress, that is not forthcoming, to open), there is not evidence of vast untapped resources on federal land. A recently released CBO report estimates that we would not see a vast windfall from new production if all lands were opened up. While it is a good idea to devolve power back to the states, we should not expect a sudden burst to energy independence.
2015 EIA Energy Conference
June 15-16, 2015 - Washington, D.C.
Platts North American Crude Oil Summit
February 26-27, 2015 - Houston, TX