Obama’s Green Legacy: New Possibilities in Light of Regulatory Challenges Georgetown Environmental Law Review

obama legacy Sydney MeneesObama’s Green Legacy: New Possibilities in Light of Regulatory Challenges

By Sydney Menees, Guest Contributor

President Obama’s power plant rulemakings have dominated the perception of his environmental legacy, but recently these rulemakings have faced significant administrative challenges: On June 29th, the Supreme Court remanded the EPA’s mercury rule for power plants back to the EPA for consideration of cost,[1] and, as a proposed rule, the Clean Power Plan has already faced a DC Circuit challenge questioning EPA’s authority to create such a rule. While the President’s high profile environmental agenda may ultimately prevail, there are a number of discreet actions the Obama administration can facilitate to enhance his environmental record in the areas of land management, truck emissions, and renewable energy.

Raise the Royalty Rates for Oil and Gas Extraction on Federal Land

When companies extract oil and gas on federal land, they must pay royalties to the United States for use of the land. The current royalty rate that oil and gas companies pay for onshore extraction on federal land – 12.5% – was set over 90 years ago, and now lags behind rates that many western states charge.[2] Texas, for instance, commands royalty rates of up to 25%. [3] North Dakota, New Mexico, Colorado, Montana, Utah, and Wyoming have royalty rates between 16.67% and 18.75%.[4]

To address concerns that taxpayers are not receiving proper compensation for the use of federal lands, the Bureau of Land Management issued an Advanced Notice of Proposed Rulemaking to reform federal onshore royalty rates.[5] While the oil and gas industry alleges that raising royalty rates will lower energy production, the higher state rates prove otherwise. Raising the federal onshore rate even to 16.67% could raise hundreds of millions of dollars in revenue on behalf of taxpayers, which could be put towards conservation efforts.[6]

Reduce Fuel Consumption for Large Vehicles

Although mid- and heavy-duty vehicles (i.e., semi-trucks, large pickups, vans and buses) comprise only 4.3% of vehicles on the road, they emit 25% of CO2 generated by motor vehicles.[7] To address the disproportionate environmental impact of these high-consuming vehicles, the EPA and the Nation Highway Traffic Safety Administration (NHTSA) have already enacted regulations to reduce the fuel consumption of mid- and heavy-duty vehicles by 20% between 2015 and 2020.[8]

In June 2015, the EPA and NHTSA issued a proposed rule that calls for manufacturers of mid- to heavy-duty vehicles to further reduce fuel consumption by 24% from the 2015-2020 levels between 2021 and 2027 (Phase Two).[9] The Phase Two standards alone are estimated to reduce CO2 emissions by one billion metric tons during the life of the regulations – the equivalent of annual greenhouse gas emissions generated by United States residences. [10] Although many industry groups lament the changes, recent innovations by truck manufacturers like Daimler, Mack, and Volvo have already demonstrated that these ambitious new standards are both realistic and attainable.[11]

Renew the Production Tax Credit

The past several years have exhibited the tremendous potential of wind power. Wind capacity, for instance, has more than quadrupled since 2007 and the cost of generating wind energy has fallen by more than 40% in the last three years.[12] The remarkable growth of the wind energy has been most directly fueled by the financial support that Congress has provided renewable energy facilities through the Production Tax Credit (“PTC”). Since its enactment in 1992, the PTC has conferred $13 billion of tax credits to the wind industry annually.[13] Despite the successes of the PTC, Congress must continually renew it because the PTC expires each year. By contrast, the oil and gas industry has permanent tax subsidies totally $18.5 billion annually.[14] The failure to reauthorize the PTC results in a boom-bust cycle in the wind industry.[15]

At the end of 2014, dysfunction in the Capitol led the PTC’s authorization to lapse. The failure of Congress to reauthorize the PTC has left investors apprehensive about funding wind energy projects, and risks to undo the significant strides that the wind industry has taken towards sustainability over the past decade.[16] To harness the full potential of wind power (possibly 35% of U.S. energy needs by 2050), it is critical that the Obama Administration work with Congress to reauthorized the PTC.[17]

In conclusion, there are many venues that the Obama administration can shape an environmental legacy beyond his monumental power plant rulemakings: raising land use royalties, tightening truck fuel consumption, and renewing tax credits for clean energy are actions that have a positive impact on Obama’s environmental legacy as well.

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[1] See Dan Farber, Mercury Rising: The Court Reverses EPA’s Regulation, Legal Planet (June 29, 2015), http://legal-planet.org/2015/06/29/mercury-rising-the-court-reverses-epas-regulation/.

[2] See Jessica Goad, Federal Government Charges Lower Royalties Than Many States For Oil And Gas Drilling, Taxpayers Lose Out, Think Progress (June 20, 2013, 4:56 PM), http://thinkprogress.org/climate/2013/06/20/2187071/federal-government-charges-lower-royalties-than-many-states-for-oil-and-gas-drilling-taxpayers-lose-out/

[3] See Nicole Gentile, Federal Oil and Gas Royalty and Revenue Reform, Center For American Progress (June 19, 2015), https://www.americanprogress.org/issues/green/report/2015/06/19/115580/federal-oil-and-gas-royalty-and-revenue-reform/.

[4] See id.

[5] See Bureau of Land Management, Interior Department Seeks Public Dialogue on Reform of Federal Onshore Oil and Gas Regulations (2015), available at http://www.blm.gov/wo/st/en/info/newsroom/2015/april/interior_department.html.

[6] See Royalties & Public Revenues from Energy Development on American Lands, The Center for Western Priorities, http://westernpriorities.org/issues/a-fair-share-from-resource-development/.

[7] See Alex Davies, Making Trucks More Fuel Efficient Isn’t Actually Hard To Do, Wired (June 24, 2015 4:38 PM), http://www.wired.com/2015/06/making-trucks-efficient-isnt-actually-hard/.

[8] See id.

[9] See U.S. Environmental Protection Agency, Proposed Rulemaking: Phase 2 Greenhouse Gas Emissions Standards and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles (2015), available at http://www.epa.gov/oms/climate/regs-heavy-duty.htm.

[10] See Alex Davies, Making Trucks More Fuel Efficient Isn’t Actually Hard To Do, Wired (June 24, 2015 4:38 PM), http://www.wired.com/2015/06/making-trucks-efficient-isnt-actually-hard/.

[11] See id.

[12] See Production Tax Credit for Renewable Energy, Union of Concerned Scientists, http://www.ucsusa.org/clean_energy/smart-energy-solutions/increase-renewables/production-tax-credit-for.html#.VbBgXEISJp9.

[13] See Emily Atkin, What Would Happen if Wind Power Got the Same Tax Breaks that Fossil Fuel Does, Think Progress (Mar. 13, 2015 8:00 AM), http://thinkprogress.org/climate/2015/03/13/3632999/wind-can-grow-but-it-probably-wont/.

[14] See id.

[15] See Production Tax Credit for Renewable Energy, Union of Concerned Scientists, http://www.ucsusa.org/clean_energy/smart-energy-solutions/increase-renewables/production-tax-credit-for.html#.VbBgXEISJp9.

[16] See id.

[17] See id.

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