by Justin Pidot, Associate Professor, University of Denver Sturm College of Law
In its zeal to block regulations adopted by the Obama Administration, the U.S. House of Representatives recently approved a Congressional Review Act (CRA) resolution to overturn BLM’s Waste Prevention Rule, sometimes called the venting and flaring rule. The effort is another in a recent spate of misguided uses of the CRA and represents poor stewardship of natural resources owned by the American public.
The Waste Prevention Rule requires companies drilling for oil and gas on federal land to take reasonable steps to prevent natural gas from being released into the atmosphere. Gas in the air cannot be used to generate electricity and it significantly contributes to climate change. Companies also do not have to pay royalties on gas that they do not bring to market, meaning that taxpayers receive no revenue from these public resources.
The CRA allows Congress to overturn any regulation adopted by a federal agency within the last sixty legislative days. Until this year, Congress only used the CRA once. This week Congress used it to torpedo the Office of Surface Mining’s Stream Protection Rule, which required coal mining companies to restore waterways after mining, and Congress is considering a raft of other CRA resolutions.
Congress should think twice before using the CRA casually and frequently. Federal agencies spend years developing regulations: the Stream Protection Rule was in development for eight years and the Waste Prevention Rule for more than two. The process of developing a regulation harnesses the wisdom of policy, scientific and legal experts and involves extensive public participation. Under the CRA, Congress undoes years of work in the span of hours; a feature of the CRA is that it limits congressional debate. Perhaps most troublingly, language in the CRA suggests that Congressional action also blocks any similar rule the agency may want to issue in the future, thereby threatening to permanently prevent federal agencies from tackling important issues.
The arguments advanced to reverse the Waste Prevention Rule illustrate the dangers of the CRA: they make for good political rhetoric, but poor policy.
Argument one: the BLM is a land management agency and lacks authority to regulate air quality. This argument fails because the Rule manages only natural gas owned by the federal government. The Rule applies a simple maxim. If you want to make money on public land, you cannot waste public resources. Preventing waste of publicly-owned natural gas easily falls within the BLM’s authority to steward public lands and resources for the benefit of America today and in the future.
Argument two: the Rule is bad for the economy. Not so fast. The federal government earns royalties when companies sell federally-owned natural gas and those royalties are shared with state governments. Royalties can then be used to fund government programs, reduce the national debt or lower taxes. Wasted natural gas generates no royalties. In 2010, the non-partisan Government Accountability Office estimated that tens of millions of dollars in royalties are lost each year because of waste.
Argument three: the Rule is economically inefficient because companies already take all cost-effective measures to reduce waste. This argument is also flawed. Companies pay royalties on the natural gas they sell, not on the natural gas they extract. From a company’s perspective, the return-on-investment for reducing waste is, therefore, artificially depressed because the company will pay royalties only if gas is captured. In addition, companies undervalue leaving oil and gas in the ground for future use because their leases will expire. The market failure caused by these perverse incentive is reflected in reality. The Government Accountability Office found that about 40 percent of wasted natural gas could be economically captured.
The Rule also produces considerable environmental benefits, particularly because it reduces the emission of methane, a potent greenhouse gas. A rule that generates revenue, corrects market failures and helps the environment should not be overturned after only limited congressional debate. Nor should Congress constrain the BLM from issuing regulations in the future to ensure that public resources are well used. Hopefully, the Senate will not follow the course set by the House, and will leave the Waste Prevention Rule in place.