Next week House lawmakers will be voting on repealing an extraneous provision tucked into the massive 2017 Tax Bill. The provision laughably authorized oil and gas development in the Coastal Plain of the Arctic National Wildlife Refuge (ANWR) in Alaska as a partial offset to the tax bill’s big price tag. How laughable? Estimated to generate $1 billion of revenue, drilling would offer up little more than a drop to counter the tax law’s $1.4 trillion bucket of deficit.
But, if a billion dollar gimmick to chip away at a trillion-dollar tax bill wasn’t already enough of a joke, how about a $20 million one?
At Taxpayers for Common Sense we analyzed comparable onshore lease sales in the region. The results are in and the new lease sales in ANWR will most likely only bring in around $20.8 million. So instead of needing 1,400 ANWRs to offset the bill’s cost, it would have taken 70 billion.
The drilling authorization, which was eventually passed as section 20001 of the Tax Act (P.L. 115-97), directed the Department of the Interior (DOI) to hold two oil and gas lease sales that offer up at least 800,000 acres in the Coastal Plain for development within seven years.
We tediously combed through all the drilling activity in the region over the last several decades and came nowhere near the billion estimates even when using pie in the sky projections. No sale has demonstrated that ANWR parcels will receive anything close to the $2,250/acre average bid needed to generate the last official revenue estimate from the Congressional Budget Office.
In fact, if you look at all oil and gas leasing in the North Slope region of Alaska over the last 20 years, which covered 300 times the acreage of the entire ANWR Coastal Plain, there was only $611 million in bids—still a third less than projected revenues for the planned ANWR sales.
The most plausible scenario is that DOI offers all available 1.56 million acres for sale, and oil and gas companies bid on 50 percent—the total portion of parcels adjacent to the Coastal Plain they’ve historically bid on; and they bid an average of $53.21/acre—the average received for all onshore North Slope sales over the last five years. In that scenario, federal taxpayers would receive a mere $20.8 million.
Despite an overwhelming lack of evidence that drilling in the Arctic will provide any significant revenue or overall taxpayer benefit, the Department of the Interior continues to push forward with leasing at record pace.
They are considering four main alternatives of varying acreages with varying restrictions to offer in upcoming lease sales and their plan is expected to be final this fall.
Next week, the House will vote on a bill to repeal the oil and gas drilling authorization included in the 2017 Tax Bill. Putting the brakes on this drilling proposal makes a lot of sense to us.
We don’t like deficits. And sure, revenue helps. But you have to look at the whole equation and make sure that a relatively small amount of short-term revenue doesn’t turn into costly long-term liabilities. Drilling in the Arctic refuge will be difficult and costs from mistakes high. Right now oil and gas is plentiful and prices are low, so this isn’t the time to develop marginal areas. It’s not like the oil is going away. So without huge returns, this action will put taxpayers on the hook for a lot of risk with little potential reward. In the current fiscal and energy climate, if drilling proposals in the Arctic Refuge move forward the joke’s on us.