121322 ENR Hearing
VIDEO:  Senator Hyde-Smith Questions Use of “Socially Optimal” Standard to Govern Energy Production.

WASHINGTON, D.C. – U.S. Senator Cindy Hyde-Smith (R-Miss.) today questioned the legal authority behind a “socially optimal” standard used by the U.S. Department of the Interior to develop long-delayed regulations and guidelines for offshore energy production.

Hyde-Smith raised the issue during a Senate Energy and Natural Resources Committee hearing to examine the Interior Department’s implementation of the Infrastructure Investment and Jobs Act (IIJA).  The “socially optimal” term is used in documentation regarding imposing higher production surcharges to lower production in the Cook Inlet, Alaska.

“I think we should be wary of the term ‘socially optimal’ as it is both ambiguous and subjective, and not even in the Outer Continental Shelf Lands Act that governs offshore energy production activities off the Mississippi Gulf Coast,” Hyde-Smith said following the hearing.

The final notice of sale and Record of Decision for the Cook Inlet included documentation discussing increased rental and royalty rates that stated “a surcharge of 12 percent to account for the social costs of Greenhouse Gas (GHGs) emissions,” and that the higher rate could cause Outer Continental Shelf (OCS) activity and corresponding production to “move toward a lower, but more socially optimal level.”

Questioned by Hyde-Smith for the law that authorizes the Interior Department to assess fees for the social cost of carbon, specifically by way of royalty rates, Deputy Secretary Tommy P. Beaudreau said, “There’s not such a provision under OCSLA that I’m aware of.”

“The social cost of carbon is used as a disclosure tool to provide the public with information about the full potential impacts of oil and gas activity.  But there is not a preconceived socially optimal level that we work towards,” Beaudreau said.

Hyde-Smith also questioned missed deadlines to fulfill the IIJA deadline for promulgating regulations governing OCS carbon transportation and sequestration.  The missed Nov. 15, 2022, deadline is among Hyde-Smith’s concerns about the Department of the Interior continually missing targets for releasing a new five-year plan for conducting future lease sales in the Gulf of Mexico.