7 ms·

While this is an interesting idea, it's pretty comical to think that conservationists could ever come up with enough money to seriously outbid oil and gas compa

While this is an interesting idea, it's pretty comical to think that conservationists could ever come up with enough money to seriously outbid oil and gas companies in lucrative areas. The only reason this person was able to get this lease is that this area is uneconomic to produce from. Also, the BLM and other leasing organizations use these leases as a way to incentivize develompent in rural areas. Everyone involved has a strong incentive to ensure that leases are actually used for something. As an aside, here's a paper [1] that summarizes the tax revenue that individual states receive from oil and gas production. Any longterm solution to oil and gas production needs to seriously address how these tax bases (especially in rural areas) stay stable or grow with decreasing oil and gas production. Otherwise you should expect increased resistance to decarbonization as people literally see their schools close, roads deteriorate, etc. [1] https://media.rff.org/documents/RFF-DP-16-50.pdf https://media.rff.org/documents/RFF-DP-16-50.pdf

hcurtiss 5y ago
It's not necessarily that it's an uneconomic lease (I don't have any facts). But that initial payment is not the value paid to the government. The lease bid is premised on the risk of exploration, and the huge royalty payments to the government that accrue from any production. Tying up the ground with the initial bid without exploration and production locks away all of that value. To be equivalent, the environmental bid would have to offer the NPE of all of the royalty revenues that would have otherwise been produced, discounted for the likelihood of discovery. And there's no way they could afford that. Natural resource production comes at some cost, but it also produces huge benefits to society. Nobody wants to see a hole in the ground, but everybody wants schools and roads . . . and, yes, gasoline. Lease bid fees are not relevant to the conversation.
- woeirua 5y ago
  Most areas, especially in the contiguous United States, have already been explored to some extent. These ultra cheap leases reflect the fact that the likelihood of economically producing hydrocarbons in this area is extremely unlikely.
  - sdenton4 5y ago
    Or, the ultra-cheap leases represent giveaways of public goods to corporate interests. Political consideration of these deals is more about personal+crony enrichment than it is about generating public tax revenue.
    - woeirua 5y ago
      You are obviously totally ignorant about how the leasing process works. Leases are auctioned off to the highest bidder.
- CameronNemo 5y ago
  What do you mean by production? I assume you mean extraction, not production. These companies cannot synthesize fossil fuels at scale. In which case, the no-extract bid has the added benefit of not taking the resource out of the public's hands. The royalty is a pittance compared to the true value of the publicly owned resource.
- mcguire 5y ago
  Royalty payments aren't really huge. Tax revenues are, but note that the environmental leaves the petroleum in the ground, where it can be recovered later. Those huge benefits come with huge externalized expenses, too.
alach11 5y ago
> The only reason this person was able to get this lease is that this area is uneconomic to produce from. This is an important point. This much acreage would have cost $28 million in the Permian Basin.
lisper 5y ago
> it's pretty comical to think that conservationists could ever come up with enough money to seriously outbid oil and gas companies in lucrative areas It would be less comical if there were a global carbon tax that reflected the actual costs of the externalities of fossil fuels. And yes, I know that's not likely either, but a boy can dream.
- 1cvmask 5y ago
  They would then demand a tax on the sun as well. There is an old satirical essay by the French economist Frédéric Bastiat on how the candlemakers demanded protection from the Sun: Economic Sophisms and the candlemakers' petition Contained within Economic Sophisms is the satirical parable known as the candlemakers' petition in which candlemakers and tallow producers lobby the Chamber of Deputies of the French July Monarchy (1830–1848) to block out the Sun to prevent its unfair competition with their products.[9] Also included in the Sophisms is a facetious petition to the king asking for a law forbidding the usage of everyone's right hand, based on a presumption by some of his contemporaries that more difficulty means more work and more work means more wealth. https://en.wikipedia.org/wiki/Fr%C3%A9d%C3%A9ric_Bastiat https://en.wikipedia.org/wiki/Fr%C3%A9d%C3%A9ric_Bastiat
  - handrous 5y ago
    How does a call to add the costs of negative externalities to product prices have anything to do with what you posted?
    - dillondoyle 5y ago
      Or the sun? How does generating energy from sun add carbon to the atmosphere, besides looking at like supply chain production of panels.
- ootsootsoots 5y ago
  The free market of voters is not clamoring for such things. Frankly I don’t see a solution aside from labor constraining supply. Teacher strikes worked. Internet blackouts stopped SOPA. Country by of and for the people who keep putting up with bullshit. Be men and tell your bosses you’re keeping your laptop shut until things change. A lot less real risk in such a revolution. Or do as comfortable, affluent folks do and wait until it actually effects you. New technology, same old biology.
Amorymeltzer 5y ago
>it's pretty comical to think that conservationists could ever come up with enough money to seriously outbid oil and gas companies in lucrative areas. The only reason this person was able to get this lease is that this area is uneconomic to produce from. Not a hard disagree, but it certainly gets easier the less economic it is to produce/extract from the area. A good example would be coal, where plants in the US are already being closed. Expensive? Yes. But probably cheaper due to market dynamics and, for someone interested in conservation/preservation, has more bang for their buck, given the miserable nature of coal.
mcguire 5y ago
You might think so, but the lease purchase isn't exactly competitive. I did some poking around and, anecdotally, the lowest lease I could find was $11-$27/acre last year in California (https://www.reuters.com/article/usa-drilling-california/u-s-nets-46000-on-trumps-california-oil-gas-drilling-auction-idUSKBN28K1G2 https://www.reuters.com/article/usa-drilling-california/u-s-...). The highest was $15,000/acre (https://www.reuters.com/article/us-usa-trump-drilling/drillers-turn-out-for-last-chance-to-nab-federal-acreage-under-trump-idUSKBN29J1HS https://www.reuters.com/article/us-usa-trump-drilling/drille...) (Last year was a bad one for petroleum capitol expenses.) Overall, the BLM had 26,600,000 acres under lease in 2020 (down from 47M in 2008) (https://www.blm.gov/programs-energy-and-minerals-oil-and-gas-oil-and-gas-statistics https://www.blm.gov/programs-energy-and-minerals-oil-and-gas...) and received an average of $444,000,000 ("Total Receipts: The total amount of money generated from the Competitive Oil and Gas Lease Sale. This includes rents, bonuses, and administrative fees.") per year over the last 4 years or about $17/acre. (https://www.blm.gov/programs/energy-and-minerals/oil-and-gas https://www.blm.gov/programs/energy-and-minerals/oil-and-gas) BLM royalties, well, it's a confusing article. (https://www.blm.gov/programs/energy-and-minerals/oil-and-gas/about https://www.blm.gov/programs/energy-and-minerals/oil-and-gas...) Being generous, the BLM received $4B in 2018 on roughly the same 26M acres; that is $153/acre. For comparison, the Nature Conservancy received about $1B in 2019 (https://www.nature.org/en-us/about-us/who-we-are/accountability/annual-report/2019-annual-report/ https://www.nature.org/en-us/about-us/who-we-are/accountabil...). According to the paper you link to, the value of the petroleum was $269B (total value) and state/local tax revenues and the states' share of federal leases were about $28B (~10% tax rate; not bad).[1] Unfortunately it doesn't have the acreage that produced it. Being really, incredibly conservative and assuming the only land involved is BLM's 26M acres, that's $1077/acre. [1] According to the BLM, states receive half of its revenue; according to that paper, that amounted to $1.5B in 2013 which seems pretty reasonable according to the BLM numbers above.
- neltnerb 5y ago
  So if you're a big enough company that you can basically assume that a lease will be available whenever you want (which makes sense for a large number of leases, turnover must exist), you just bid enough to justify it once something looks worth the risk. And until it's worth the risk, leasing it is just a donation since no one would be trying to extract things from it anyway. It does start to sound like a corporate giveaway where only big companies ever really win. On a per-parcel basis it seems like it is beneficial (i.e. a local group maybe can keep a particular area protected), but on aggregate it doesn't seem likely to do much. The companies that want to extract resources have many options and lots of time to wait.
Iolaum 5y ago
Overall taxes paid to governments are not going down. Hence it's __just__ a matter of government re-allocating taxes from something that is growing to something that is shrinking. I really don't see why, for example, school funding should only come from oil proprerty taxes and not from other tax streams as well.
- woeirua 5y ago
  In many rural areas, there are no other growing tax bases. Indeed the population in rural areas is declining overall as people move to cities for better opportunities.

hcurtiss 5y ago

It's not necessarily that it's an uneconomic lease (I don't have any facts). But that initial payment is not the value paid to the government. The lease bid is premised on the risk of exploration, and the huge royalty payments to the government that accrue from any production. Tying up the ground with the initial bid without exploration and production locks away all of that value. To be equivalent, the environmental bid would have to offer the NPE of all of the royalty revenues that would have otherwise been produced, discounted for the likelihood of discovery. And there's no way they could afford that. Natural resource production comes at some cost, but it also produces huge benefits to society. Nobody wants to see a hole in the ground, but everybody wants schools and roads . . . and, yes, gasoline. Lease bid fees are not relevant to the conversation.

woeirua 5y ago
Most areas, especially in the contiguous United States, have already been explored to some extent. These ultra cheap leases reflect the fact that the likelihood of economically producing hydrocarbons in this area is extremely unlikely.
- sdenton4 5y ago
  Or, the ultra-cheap leases represent giveaways of public goods to corporate interests. Political consideration of these deals is more about personal+crony enrichment than it is about generating public tax revenue.
  - woeirua 5y ago
    You are obviously totally ignorant about how the leasing process works. Leases are auctioned off to the highest bidder.
CameronNemo 5y ago
What do you mean by production? I assume you mean extraction, not production. These companies cannot synthesize fossil fuels at scale. In which case, the no-extract bid has the added benefit of not taking the resource out of the public's hands. The royalty is a pittance compared to the true value of the publicly owned resource.
mcguire 5y ago
Royalty payments aren't really huge. Tax revenues are, but note that the environmental leaves the petroleum in the ground, where it can be recovered later. Those huge benefits come with huge externalized expenses, too.

alach11 5y ago

> The only reason this person was able to get this lease is that this area is uneconomic to produce from. This is an important point. This much acreage would have cost $28 million in the Permian Basin.

lisper 5y ago

> it's pretty comical to think that conservationists could ever come up with enough money to seriously outbid oil and gas companies in lucrative areas It would be less comical if there were a global carbon tax that reflected the actual costs of the externalities of fossil fuels. And yes, I know that's not likely either, but a boy can dream.

1cvmask 5y ago
They would then demand a tax on the sun as well. There is an old satirical essay by the French economist Frédéric Bastiat on how the candlemakers demanded protection from the Sun: Economic Sophisms and the candlemakers' petition Contained within Economic Sophisms is the satirical parable known as the candlemakers' petition in which candlemakers and tallow producers lobby the Chamber of Deputies of the French July Monarchy (1830–1848) to block out the Sun to prevent its unfair competition with their products.[9] Also included in the Sophisms is a facetious petition to the king asking for a law forbidding the usage of everyone's right hand, based on a presumption by some of his contemporaries that more difficulty means more work and more work means more wealth. https://en.wikipedia.org/wiki/Fr%C3%A9d%C3%A9ric_Bastiat https://en.wikipedia.org/wiki/Fr%C3%A9d%C3%A9ric_Bastiat
- handrous 5y ago
  How does a call to add the costs of negative externalities to product prices have anything to do with what you posted?
  - dillondoyle 5y ago
    Or the sun? How does generating energy from sun add carbon to the atmosphere, besides looking at like supply chain production of panels.
ootsootsoots 5y ago
The free market of voters is not clamoring for such things. Frankly I don’t see a solution aside from labor constraining supply. Teacher strikes worked. Internet blackouts stopped SOPA. Country by of and for the people who keep putting up with bullshit. Be men and tell your bosses you’re keeping your laptop shut until things change. A lot less real risk in such a revolution. Or do as comfortable, affluent folks do and wait until it actually effects you. New technology, same old biology.

Amorymeltzer 5y ago

>it's pretty comical to think that conservationists could ever come up with enough money to seriously outbid oil and gas companies in lucrative areas. The only reason this person was able to get this lease is that this area is uneconomic to produce from. Not a hard disagree, but it certainly gets easier the less economic it is to produce/extract from the area. A good example would be coal, where plants in the US are already being closed. Expensive? Yes. But probably cheaper due to market dynamics and, for someone interested in conservation/preservation, has more bang for their buck, given the miserable nature of coal.

mcguire 5y ago

You might think so, but the lease purchase isn't exactly competitive. I did some poking around and, anecdotally, the lowest lease I could find was $11-$27/acre last year in California (https://www.reuters.com/article/usa-drilling-california/u-s-nets-46000-on-trumps-california-oil-gas-drilling-auction-idUSKBN28K1G2 https://www.reuters.com/article/usa-drilling-california/u-s-...). The highest was $15,000/acre (https://www.reuters.com/article/us-usa-trump-drilling/drillers-turn-out-for-last-chance-to-nab-federal-acreage-under-trump-idUSKBN29J1HS https://www.reuters.com/article/us-usa-trump-drilling/drille...) (Last year was a bad one for petroleum capitol expenses.) Overall, the BLM had 26,600,000 acres under lease in 2020 (down from 47M in 2008) (https://www.blm.gov/programs-energy-and-minerals-oil-and-gas-oil-and-gas-statistics https://www.blm.gov/programs-energy-and-minerals-oil-and-gas...) and received an average of $444,000,000 ("Total Receipts: The total amount of money generated from the Competitive Oil and Gas Lease Sale. This includes rents, bonuses, and administrative fees.") per year over the last 4 years or about $17/acre. (https://www.blm.gov/programs/energy-and-minerals/oil-and-gas https://www.blm.gov/programs/energy-and-minerals/oil-and-gas) BLM royalties, well, it's a confusing article. (https://www.blm.gov/programs/energy-and-minerals/oil-and-gas/about https://www.blm.gov/programs/energy-and-minerals/oil-and-gas...) Being generous, the BLM received $4B in 2018 on roughly the same 26M acres; that is $153/acre. For comparison, the Nature Conservancy received about $1B in 2019 (https://www.nature.org/en-us/about-us/who-we-are/accountability/annual-report/2019-annual-report/ https://www.nature.org/en-us/about-us/who-we-are/accountabil...). According to the paper you link to, the value of the petroleum was $269B (total value) and state/local tax revenues and the states' share of federal leases were about $28B (~10% tax rate; not bad).[1] Unfortunately it doesn't have the acreage that produced it. Being really, incredibly conservative and assuming the only land involved is BLM's 26M acres, that's $1077/acre. [1] According to the BLM, states receive half of its revenue; according to that paper, that amounted to $1.5B in 2013 which seems pretty reasonable according to the BLM numbers above.

neltnerb 5y ago
So if you're a big enough company that you can basically assume that a lease will be available whenever you want (which makes sense for a large number of leases, turnover must exist), you just bid enough to justify it once something looks worth the risk. And until it's worth the risk, leasing it is just a donation since no one would be trying to extract things from it anyway. It does start to sound like a corporate giveaway where only big companies ever really win. On a per-parcel basis it seems like it is beneficial (i.e. a local group maybe can keep a particular area protected), but on aggregate it doesn't seem likely to do much. The companies that want to extract resources have many options and lots of time to wait.

Iolaum 5y ago

Overall taxes paid to governments are not going down. Hence it's __just__ a matter of government re-allocating taxes from something that is growing to something that is shrinking. I really don't see why, for example, school funding should only come from oil proprerty taxes and not from other tax streams as well.

woeirua 5y ago
In many rural areas, there are no other growing tax bases. Indeed the population in rural areas is declining overall as people move to cities for better opportunities.