State school chiefs wrote “unusual” and “absurd” letter to Biden, clearly based on oil industry talking points
Oil and gas industry advocates were involved in an “unusual” effort by five top state education officials to stoke economic fears about President Joe Biden’s climate policy, according to internal emails reviewed by Salon.
The American Petroleum Institute, the largest trade organization representing the oil and gas industry, and its allies have gone on the offensive against Biden’s early executive orders, which included a temporary but indefinite moratorium on new gas and oil leases on federal land. API has framed the order as a “ban,” which is misleading at best, since it applies only to new leases. New drilling permits are still being awarded under existing leases, and the industry is sitting on millions of acres of leased but unused land.
Internal emails show that the API’s allies were involved in crafting a self-described “unusual” letter signed by five Western state school superintendents to Biden, which was later published as an op-ed. The letter raised concerns that the moratorium would cost thousands of jobs and hundreds of millions of dollars in revenue that could impact education funding, relying heavily on misleading data from an API report written before Biden was even elected.
The emails show that the North Dakota Petroleum Council, a former division of API that has grown into a standalone organization, sent data to one of the superintendents and later thanked her for the “fantastic” op-ed. API later promoted the superintendents’ talking points on social media, though it did not mention that it supported the Trump administration’s cuts in oil royalties that had made up a much larger share of industry revenue distributed to states that helps fund education.
The letter immediately set off alarm bells among industry experts.
State school chiefs in Western energy-producing states coordinated their efforts on this letter,” she said in an email. “We are rightly concerned about the Biden administration’s open hostility to domestic energy production, and its effects on energy income that our states rely upon for educating our young people. The president’s approach to our states’ resources is not only reflected in his executive orders affecting energy, but also his action to stop the Keystone XL pipeline project, which as envisioned would carry oil production from Alberta and western North Dakota to refineries to the east and south.”
Baesler cited reports predicting that the moratorium is “widely viewed as a precursor to a more permanent ban” and disputed that Biden’s order would not affect existing operations.
Representatives for Balow, the letter’s lead signatory, and Johnson also denied they had “coordinated” with representatives of the oil and gas industry. Arntzen, Dickson, and Hamman did not respond to questions from Salon.
“Coordinate, no,” Linda Finnerty, a spokesperson for Balow, said in a statement to Salon. “We maintain relationships with industries of all types and routinely ask for information, clarification, and data.”
Finnerty pointed to a letter from Wyoming Gov. Mark Gordon to the Interior Department disputing that the order did not affect existing operations. Gordon argued in his letter that the order had resulted in a slowdown of permitting for existing leases, despite denials from the department.
“‘Moratorium’ is a misnomer,” Finnerty insisted.
But Hannah Wiseman, a law professor and faculty fellow at Penn State’s College of Earth and Mineral Sciences, said the superintendents’ data was based on revenue that was unaffected by the moratorium.
“The superintendents are using the royalty numbers from oil and gas wells on lands that are already leased and producing and translating those numbers into job losses,” she said in an email. “But the moratorium on new leases does not order existing production to shut down; the royalties that states are already receiving to fund schools and other essential programs are not affected.”
The letter falsely described Biden’s temporary halt on new leases as “actions taken to ban oil and gas leases.”
“It is imperative that we bring to light the arbitrary and inequitable move to shut down oil and gas production on federal lands in our states that depend on revenues from various taxes, royalties, disbursements, and lease payments to fund our schools, community infrastructure, and public services,” the letter said.
The superintendents repeatedly cited data from the API study, echoing its claims that a ban would cost 13,300 jobs in Wyoming, 3,300 jobs and $30 million in revenue in Montana, 11,000 jobs and $72 million in revenue in Utah, and 3,500 jobs and $24 million in Alaska.
Industry experts said the data was highly misleading.
“The ‘costs’ mentioned in the letter, or in some other studies, assume not just a pause on new leases, but rather a long term cessation in oil and gas operations,” Brad Handler, a former Wall Street analyst covering oilfield services and drilling who now serves as a senior fellow at the Payne Institute for Public Policy, said in an email.
“What the Biden administration has implemented is a temporary (albeit of undefined duration) pause on issuing new leases on public (federal) lands,” he continued. “The Department of Interior has been directed to conduct a review of leasing and management policies. … The executive action makes clear that permitting and extraction operation can continue on existing leases. Thus, broadly there is almost no impact on employment or state revenues in the near to medium term as a result of this action.”
API later promoted the superintendents’ talking points on Twitter, citing a quote from Balow claiming that Biden’s moratorium was a “lockdown of an industry our students in Wyoming really depend on.”
The API report, which was compiled last September, was based on a hypothetical “federal leasing and development ban.” But Biden’s executive order does nothing even close to that. It pauses new leases while requiring nearly a third of federal lands to be conserved over the next decade.
In fact, Reuters noted that the order only affects “leasing activities, and not permitting, raising the possibility that the government could resume providing drilling permits to those who picked up leases in a series of auctions held in the waning days of the Trump administration.”
The Interior Department approved 33 such permits in the week following Biden’s leasing pause, Bloomberg News reported. The oil and gas industry also has a stockpile of 7,700 unused leases, according to the Interior Department, leaving more than 13.9 million acres of public land available for drilling operations without any new leasing.
“Since President Biden’s Executive Order directing a review of the federal oil and gas program and pause on new leasing, API has been very clear that our concern is that this action is the first step towards a long-term federal leasing and development ban,” an API spokesperson told Salon. “Our analysis was released in September 2020, and was not in response to Biden’s EO. It found that should a long-term ban be implemented it would shift the U.S. to foreign energy sources, cost nearly one million American jobs, increase CO2 emissions and reduce revenue that funds education and key conservation programs.”
Squillace said the industry was manipulating and distorting the issue in order to attack the administration, even though Biden’s order will have little impact on revenues.
“This is a really bad time to be leasing federal oil and gas because the price has been historically low,” he said, adding that demand for new leases has been so low that most are now auctioned at the minimum bid price of $2 an acre. “That doesn’t suggest a robust market for oil and gas leases. This is just a big industry making it out to be a lot more than it is.”
Squillace said that if education officials were actually interested in boosting revenues for schools, they would support increasing the minimum bid prices as well as other revenue streams from oil and gas drilling operations.
Most of the money schools receive from public lands comes from royalties on oil and gas production, though states also get revenue from rents, bonuses and potential penalties, according to the Interior Department. Bonuses, which are payments associated with winning bids on lease sales, are the only revenue even theoretically impacted by Biden’s pause. Most revenue comes from royalties, which are calculated as a percentage of the sales value of any oil produced by the drilling operations. Although revenue from bonuses increased as the Trump administration awarded a large number of new leases, royalties make up the vast majority of revenue collected by states, according to the Congressional Research Service.
The Trump administration last year drastically cut royalty rates, which had provided states a total of $2.9 billion in revenue in 2019. In Superintendent Dickson’s state of Utah, the Bureau of Land Management cut standard royalty rates of 12.5% to as low as 0.5%, according to E&E News. BLM said the move was temporary, but House Natural Resources Committee Chairman Raúl Grijalva, D-Ariz., called for an investigation into to determine how much the change would cost in revenue and whether the cuts were necessary and properly handled.
Accountable.US and the Climate Power Education Fund argued in a news release that the oil industry’s “feigned worry about school budgets is hypocritical” given that the industry had enthusiastically supported the Trump administration’s move to slash oil and gas royalty rates, “costing states and schools untold millions during the height of a pandemic when they needed it most.”
Unlike the concern raised by superintendents, Trump’s order “involved a direct reduction in royalty revenues as opposed to a speculative one,” Wiseman told Salon.
These oil and gas royalties are an integral component of many western states’ budgets, and suspending their collection would have a direct negative effect on states,” the Western Governors’ Association warned then-Interior Secretary David Bernhardt, a former oil lobbyist, in April of 2020.
“This is a ludicrous outcome that provides an extremely generous subsidy to the oil and gas industry while robbing taxpayers and states of valuable revenue,” Grijalva argued in his own letter to Bernhardt.
The Government Accountability Office concluded last October that BLM had botched the royalty cut, failed to determine whether the policy — which cost taxpayers around $4.5 million at the time — was actually necessary and said it may have resulted in cuts for oil wells that did not need it.
Despite data showing the overwhelming share of revenue coming from oil and gas operations is from royalties, Finnerty, the Wyoming superintendent’s spokesperson, argued that “royalties are only part of the revenue realized from oil and gas.”
“Leases, bonuses, and other forms of indirect revenue are also in play,” she said. “The overall economic impact of oil and gas activity is very significant.”
Grant Robinson, a spokesperson for Johnson, acknowledged in an email that “bonuses from lease sales generate less revenue for the state than royalties” but noted that Trump’s policy was a temporary one — as is Biden’s new policy.
Baesler denied that Trump’s policy posed a greater threat than Biden’s but acknowledged that most of the state’s oil and gas revenues come from royalties. Still, she said, “the Biden administration’s anti-energy policies pose a much greater threat to education funding than any action taken by the Trump administration.”
Squillace rejected that argument and said it was ironic that education officials had not raised similar concerns when Trump reduced the royalty rate.
It was “so absurd,” he said, that states would complain about “this silly little moratorium when they said nothing about the royalty relief package Trump put into effect. I mean, it just boggles the mind.”