Chamber of Commerce Paints Grim Picture if Fossil Fuels were 'Kept in the Ground'

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The final stage of the U.S. presidential contest traditionally kicks off on Labor Day. With two months until Election Day, it is said, voters are now ready to begin thinking about their presidential choices. Games of "what if" are being played by both candidates' camps, and their voters, on a wide range of issues.

The U.S. Chamber of Commerce is asking a very pointed "what if" question: What if all forms of energy production were banned on federal lands and waters?

It's not as far-fetched as it might seem. In a report released August 26, the Chamber's Institute for 21st Century Energy noted the rising influence of the "Keep it in the Ground" movement, including a bill with that title introduced by Senate Democrats last November. That bill, according to the Chamber's report, What If Energy Production was Banned on Federal Lands and Waters?, would prohibit the U.S. Department of the Interior from entering into any new public lands lease, or renew, reinstate or extend any existing lease for the purpose of developing onshore fossil fuels.

That bill, S. 2238, was cosponsored by seven U.S. senators, and it has a number of supporters in the House of Representatives. It appears to have little chance of passage in the current Republican-controlled Senate and House, but a change in one or both houses, coupled with the election of Hillary Clinton as president, could create a very different policy landscape in 2017.

The Democratic Party Platform, adopted at the party's convention in July, reads, in part: "We oppose drilling in the Arctic and off the Atlantic coast, and believe we need to reform fossil fuel leasing on public lands. We will phase down extraction of fossil fuels from our public lands, starting with the most polluting sources, while making our public lands and waters engines of the clean energy economy and creating jobs across the country. Democrats will work to expand the amount of renewable energy production on federal lands and waters, from wind in Wyoming to solar in Nevada."

Earlier this year, before the party's convention, Hillary Clinton said she favored "no future extraction" of fossil fuels from public lands. So the candidate and the party are in agreement about public lands leasing.

A public-lands policy that keeps fossil fuels in the ground would carry "significant and wide-ranging negative economic consequences" for the U.S. and its residents, the What If? report said. Federal lands and waters account for about 24% of U.S. coal, gas and crude oil production in 2015, down significantly over the last decade.

Click on the image at right to see a pie chart showing where fossil fuels are extracted and a bar chart showing the declining percentage of fossil fuels extracted from federal lands.

The report claims losing the ability to extract fossil fuels from federal lands would drive up the price of energy while:

• Leading to the loss of more than $11.3 billion of annual royalties and lease payments to federal and state governments
• Threatening more than $70 billion in annual gross domestic product (GDP)
• Wiping out more than 100,000 direct jobs and as many as 280,000 indirect jobs

Several regions of the country would be disproportionately affected by a "Keep it in the Ground" policy, including:

• The Gulf Coast region, which could lose up to 110,000 jobs (39,000 direct jobs and 71,000 indirect and induced jobs) and $28 million in annual royalty payments to state governments
• Colorado could lose up to 15,300 direct jobs, 34,700 indirect/induced jobs and $125 million in annual royalty payments to state government
• Wyoming stood to lose $900 million in annual royalty payments as well as 13,300 direct jobs and 19,300 indirect/induced jobs
• New Mexico could lose $496 million in annual royalty collections, 10,000 direct jobs and 14,300 indirect/induced jobs

"Instituting a ban on future federal-lands leasing and stopping the current production of these resources would increase energy prices for consumers by removing low-cost resources from the available supply stream," the report said. "The impact would be immediate and severe to the U.S. economy, leading to the loss of hundreds of thousands of American jobs and robbing the federal government and primarily Western states of potentially billions of dollars of revenues in the form of lost royalties." In its section on natural gas, the Chamber noted gas production has grown "by an enormous amount" over the past decade, rising 51% from 19 trillion cubic feet (Tcf) in 2006 to 28.7 Tcf in 2015. Production of gas on federal lands, however, has fallen 26% during the last decade, from 6.2 Tcf to 4.6 Tcf. Offshore production, mainly in the Gulf of Mexico, has dropped 52% during the last decade, the report noted, adding that areas where gas production from shale formations has soared are states with minimal federal land ownership. Click on the image at right to see where natural gas has been produced over the last 10 years.

Turning to crude oil, the Chamber said crude oil production has risen "substantially" between 2006 and 2015, and "just about every bit of that growth has come from non-federal lands," including Texas and North Dakota. In 2006, in the early phase of the shale revolution, about 31% of crude oil was extracted on federal lands, but by 2015 that number slipped to 21%. Production from state and private lands grew sharply, but production on federal lands fell 32% over the last decade, though the report noted that offshore production, mainly in the Gulf of Mexico, rose 19% from 2006 to 2015.

Click on the image at right to see a graphic of where crude oil has been produced over the last decade.

On the coal front, the Chamber's report notes that market and regulatory forces have hit coal producers hard in recent years. Overall, coal production on federal and state/private lands fell 18% between 2006 and 2015. The decline is most evident on state and private lands. For more on the difficult market conditions facing coal companies, see August 12, 2016, article -- Coal Crisis Threatens to Consume Murray Energy. Citing data from the U.S. Energy Information Administration (EIA) (Washington, D.C.), the Chamber report noted 36,500 megawatts (MW) of coal-fired electric generation capacity have been retired over the last five years.

Click on the image at right to see a graphic of where coal has been produced over the last decade

Coal interests have been highly critical of the Obama administration's decision earlier this year to reassess its coal-leasing policies and fees for public lands. For more on that, see February 19, 2016, article -- Coal Groups Slam DOI Plan to Reassess Federal Coal-Leasing Program, and March 31, 2016, article -- NMA Chief Blasts Administration's Mining, Environmental and Public Lands Policies.

The What If? report then examined two scenarios--immediate cessation of production and a limited ban on future leasing--to see how a "Keep it in the Ground" federal lands policy might affect jobs. Fossil fuel production on federal lands employs about 380,300 people, the report said. Roughly 101,000 are direct jobs, and another 278,700 are indirect or induced jobs. Nearly all of those jobs--about 336,500--were associated with Oil & Gas extraction. All 380,300 jobs associated with fossil fuel production would disappear overnight if a "Keep in in the Ground" policy was enacted, the report predicted. Under a more gradual ban, about 268,000 jobs would be immediately impacted, though some jobs could migrate to production activities on state or private lands, the report projected.

The Chamber report does not offer a probabilistic assessment of the likelihood of Hillary Clinton or Donald Trump becoming president. Nor does it exhort readers to cast their ballot in one direction or another. But it seems clear that the Chamber believes energy interests would benefit more from a Trump presidency than a Clinton presidency. And the Chamber has been a relentless critic of President Obama's energy and environmental policies, as it has criticized Clinton's stance on energy.

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