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Vol. 22, No. 50 Week of December 10, 2017
Providing coverage of Alaska and northern Canada's oil and gas industry

Next step for ANWR

Senate passes budget bill with language opening coastal plain for leasing

Alan Bailey

Petroleum News

On Dec. 2 the U.S. Senate passed a budget bill that included language authorizing the opening of the 1002 area of the coastal plain of the Arctic National Wildlife Refuge for oil and gas exploration. The bill passed was a version previously passed by the House of Representatives but modified to include language from a parallel budget bill formulated by the Senate. The modifications included the language relating to ANWR. Legislators have now gone into conference to come up with a version of the bill that can be passed by both chambers.

Sen. Lisa Murkowski, R-Alaska, and Rep. Don Young, R-Alaska, have been appointed to the conference committee for the bill.

The concept behind the ANWR provision is that oil and gas lease sales and potential future oil and gas royalties and taxes would raise at least $1 billion in federal revenues for inclusion as part of the budget.

Lease sale program

The Senate legislation requires the secretary of the interior to hold at least two areawide lease sales within the 10-year budget window, with the first sale taking place within four years of the legislation being enacted and the second within seven years. Each lease sale must encompass at least 400,000 acres, including areas with the highest potential for hydrocarbon discoveries.

Federal management of the oil and gas program would be subject to the same statutes and regulations as those that apply to the National Petroleum Reserve-Alaska.

The royalty rate for oil production from ANWR would be 16.67 percent, with 50 percent of the royalties going to Alaska and the remainder to the federal government. Total surface development on refuge land is limited to 2,000 acres. The legislation also requires the secretary of the interior to issue any necessary rights of way for access across the ANWR coastal plain for oil and gas related activities.

Reactions to the bill

The Alaska congressional delegation expressed its enthusiasm about the move towards the opening of the 1002 area.

“Tonight is a critical milestone in our efforts to secure Alaska’s future,” said Sen. Lisa Murkowski. “Opening the 1002 area and tax reform both stand on their own, but combining them into the same bill, and then successfully passing that bill, makes this a great day to be an Alaskan.”

“Today’s historic vote is yet another milestone in bringing us that much closer to realizing a decades-long dream of opening the 1002 area of ANWR,” said Sen. Dan Sullivan. “Allowing development in the coastal plain, an area specifically set aside for exploration and development, is a win for Alaska and a win for the nation.”

“I applaud the Senate for passing this much-needed legislation to reform our tax code and unlock more of Alaska’s energy potential,” said Rep. Don Young. “Alaska is home to a vast amount of natural resources, and through the development of ANWR, we will strengthen our economy by creating new jobs and generating new revenue.”

“The U.S. Senate’s decision to include two leases sales in the coastal plain of ANWR in its tax reform bill is welcome news for the 70 percent of Alaskans who have supported development in the area specifically set aside for oil and gas, the 1002 area, for decades,” said Kara Moriarty, president and CEO of the Alaska Oil and Gas Association.

The exclusion of any part of ANWR from oil and gas development has become a rallying call for environmental organizations.

“This vote to deface and pollute one of the nation’s last pristine and untouched wild landscapes is outrageous,” said Jamie Williams, president of the Wilderness Society. “The Arctic Refuge drilling provision has no legitimate place in a tax bill, and this backdoor political deal now threatens to destroy the crown jewel of our National Wildlife Refuge System. This fight is not over. The oil industry and its allies in Congress may think they can sneak this past the American people, but communities across the country are speaking out every day.”

ANILCA

The term “1002 area” refers to section 1002 of the Alaska National Interests Lands Act, the statute that established ANWR in its current form. Recognizing the oil and gas potential of the coastal plain, ANILCA deferred a decision on whether to allow the opening of a defined area of the coastal plain for oil and gas development. Under the terms of the statute, only Congress can authorize the opening of the 1002 area.

There have been multiple attempts over the years to have Congress and the president pass legislation that would open the 1002 area. The current effort involving the placement of ANWR language in the budget bill appears to be the most likely to succeed - presumably President Trump would sign the legislation if it is passed by both the House and the Senate.

The U.S. Fish and Wildlife Service, a bureau within the Department of the Interior, manages ANWR and maintains a conservation plan for the refuge. The current plan, published in 2015 under the Obama administration, does not envisage oil and gas exploration in the refuge and, in fact, had requested Congress to designate the entire refuge, including the 1002 area, as wilderness. Congress has not made that declaration, but presumably Fish & Wildlife would need to make plan changes and undertake some form of environmental review process before conducting oil and gas lease sales, or allowing exploration activities, in the refuge.



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