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Obama hints at a reform greens have been pursuing for a long time

"I'm looking at you, cheap coal leases."
"I'm looking at you, cheap coal leases."
(Photo by Evan Vucci - Pool/Getty Images)

In last night's State of the Union speech, just after affirming the urgency of climate change and rehearsing a few of his clean energy accomplishments, Obama delivered this somewhat enigmatic passage:

Now we’ve got to accelerate the transition away from dirty energy. Rather than subsidize the past, we should invest in the future — especially in communities that rely on fossil fuels. That’s why I’m going to push to change the way we manage our oil and coal resources, so that they better reflect the costs they impose on taxpayers and our planet. That way, we put money back into those communities and put tens of thousands of Americans to work building a 21st century transportation system.

What is this about? Let's unpack it.

The revenue part

They key is "change the way we manage our oil and coal resources." That's a reference to the enormous fossil fuel deposits located underneath federal land, mainly in the West. That land has historically been leased to oil, gas, and coal companies at relatively cheap prices. Environmentalists want it to stop.

coal trucks
This land was made for you and ... ew.

This has been on the green radar for years, but recently things have been coming together. Climate activists are looking for a new, post-Keystone focus, and "keep it in the ground" has risen to the fore. After the Clean Power Plan, the administration is also looking around for a few more climate wins to close out the Obama era. And with coal battered by the market and oil too cheap to drill, opposition from fossil fuel interests is somewhat muted.

There were signals all last year that the administration was preparing some kind of move on the issue.

In March, the Center for American Progress and the Wilderness Society — both friendly with the administration — issued a joint call for the feds to account for the climate impacts of fossil fuel extraction on public lands.

In an accompanying report, they found that greenhouse gas emissions from oil, gas, and coal extracted from federal lands and waters "account for more than 20 percent of all U.S. GHG emissions and 24 percent of all U.S. energy-related emissions." (That assumes the US should be responsible for those emissions, no matter where the fuels are burned, which is of course a controversial proposition.)

ghg from federal lands (CAP)

Also in March, Interior Secretary Sally Jewell gave a speech at the Center for Strategic and International Studies promising to "put in place common-sense reforms that promote good government and help define the rules of the road for America's energy future on our public lands." Those reforms included new rules on fracking, royalty rates, and protected areas (more from Ben Adler here). In July, DOI announced a "listening tour" on the coal leasing program.

Meanwhile, activists have been boosting their calls for reform, escalating since a 2014 Government Accountability Office report that found coal leases were being undervalued. (Brad Plumer explained the green push on coal leases.)

Last November, Sens. Bernie Sanders (I-VT) and Jeff Merkley (D-OR) introduced a bill that would halt all new leasing of coal, oil, gas, oil shale, and tar sands on federal land. It has no chance of passing, of course, but it's a sign of where activist energy is focusing.

In coming weeks, the administration has promised to release details on leasing reforms. They will likely involve trying to integrate the "social cost of carbon" into leasing decisions. (I wrote about the challenges around that approach in a post last week.)

The devil will be in the details. However, under almost any reform scenario, leases will get more expensive and the feds will end up with more revenue. What will happen to it?

The spending part

Obama mentioned investing in "communities that rely on fossil fuels." That could be an oblique reference to his POWER+ Plan, a proposal that would funnel millions of dollars into struggling coal mining communities. (I wrote about it here.)

He also mentioned putting "tens of thousands of Americans to work building a 21st-century transportation system." What's that got to do with fossil fuels on public land? Good question. And what would it mean? Another good question!

One possible answer (hat tip to Sam Ori) can be found in Obama's 2013 SOTU, in which he proposed funneling oil and gas revenues to an energy security trust. That proposal would have put $2 billion toward "research into a range of technologies — things like advanced vehicles that run on electricity, homegrown biofuels, and domestically produced natural gas" — that would serve the long-term goal of decarbonizing the US transportation sector.

energy security trust (White House)

It's not clear that research would put tens of thousands of Americans to work, though, so perhaps Obama has something different in mind, something more like a "green bank."

A green bank uses public money (which in turn leverages private capital) as a stable source of investment capital for promising green projects. Four states have green banks now, most notably New York. A bill that would create a national green bank passed the House in 2009 but failed in the Senate; it was reintroduced in 2014 and has since gone nowhere.

A related but somewhat broader idea is a national infrastructure bank, which would plow public and private capital into crumbling US infrastructure. The American Jobs Act, which Obama unsuccessfully begged Congress to pass in 2011, would have created one, seeding it with $10 billion.

The idea of a national infrastructure bank has been floating around US politics for decades, to no effect. It's back in front of Congress now; Hillary Clinton has backed the idea, as has Bernie Sanders.

The Congress problem

Obama can reform Department of Interior leasing practices on his own, through executive actions. All these spending ideas, however, would require the cooperation of Congress, which, if the past seven years are any indication, is unlikely to be forthcoming.

It wouldn't be unprecedented for a president to make promises he knows Congress won't let him keep, especially in a State of the Union address. But that seems a bit out of character with Obama's post-2014 "lame duck" period, which has seen an astonishingly productive flurry of executive actions and incremental steps. Obama has clearly, and smartly, abandoned hope of any congressional help.

Why would he reference something he can't accomplish, in this speech of all speeches? It's a puzzle. The only alternative is that he's figured out some way to channel the money to positive purposes using executive authority — but if there's precedent for that, I don't know what it is.

We'll find out soon enough.

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