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Vol. 11, No. 7 Week of February 12, 2006
Providing coverage of Alaska and northern Canada's oil and gas industry

White House says ANWR lease revenue could triple

Rose Ragsdale

For Petroleum News

Drilling for oil on the coastal plain of the Arctic National Wildlife Refuge figures prominently in the Bush administration’s fiscal 2007 budget proposal, thanks to lease sale revenue estimates that triple the $2.4 billion projected a year ago.

The U.S. Department of the Interior said Feb. 6 it expects to collect more than $7 billion from leasing tracts in the barren, but potentially oil-rich, 1002 Area of ANWR based on revised calculations from the Energy Information Administration and the Congressional Budget Office.

The $7 billion figure, to be split 50-50 with Alaska under terms of the current budget proposal, is drawn from a recent Congressional Budget Office report on the long-term projected price of oil exceeding $50 per barrel in 2010. Interior previously estimated the first sale would attract $2.4 billion in bids, based on $25 per barrel oil.

If Congress approves oil drilling in ANWR this year, the first sale would occur in 2008. A second sale in 2010 could generate nearly another $1 billion, according to Interior.

“The issue of ANWR is one that continues,” Interior Secretary Gale Norton told reporters in releasing the department’s proposed fiscal year 2007 budget. “There will be a number of opportunities this year to move ahead.”

Higher revenue proposal

Pro-ANWR lobbyist Roger Herrera said it was Sen. Ted Stevens, R-Alaska, who brought to the Bush administration’s attention the higher revenue potential of drilling in the refuge’s 1.5-million-acre coastal area.

The report resulted after Stevens requested in mid-December that the Congressional Budget Office re-examine the revenue projection for ANWR in light of recent higher oil prices.

“The CBO actually came back with a calculation of $10 billion, but they listed a more conservative figure of $6 billion,” Stevens’ aide, Courtney Boone, said Feb. 8.

This year, the Energy Information Administration came up with the higher calculation based on its own model, Boone said.

The administration’s fiscal 2006 budget request assumed the first sale would generate $2.4 billion and a total of $5 billion over a five-year period, also to be split 50-50 with Alaska. That was the basis for including ANWR drilling in the Senate’s filibuster-proof budget reconciliation process last year. But ANWR ran into trouble in the House of Representatives after passing the Senate and fell short of the final budget package.

Domenici to lead effort

Longtime ANWR supporter Sen. Pete Domenici, R-N.M., who chairs the Senate Energy and Natural Resources Committee, has said he will lead another effort to move ANWR drilling through the congressional budget process this year, based partially on recent Iranian oil-supply disruptions.

“Clearly, the administration continues to recognize ANWR’s importance,” Boone said.

Though it is widely accepted that Republican leaders will make another push to get ANWR drilling through Congress this year, Herrera said no plan has yet crystallized. “If you listen to the grapevine in D.C., it’s accepted that another effort will be made. … There are all sorts of options. … Beyond that, it’s just rumor and supposition, and I don’t think that has much value at this early stage,” he added.

Additional Interior monies

Interior’s budget proposal also asked for an increase of $12.4 million for Bureau of Land Management activities on the North Slope, based on the assumption that Congress will authorize ANWR energy development in 2006. The additional funds will support the required environmental analyses and other preparatory work in advance of the first ANWR lease sale in 2008.

The request will support BLM’s leasing, inspection, and monitoring program in the National Petroleum Reserve-Alaska and BLM’s participation in the North Slope Science Initiative. BLM also will use funds to respond to the environmental threat posed by abandoned legacy wells and related infrastructure on the North Slope, according to Interior.

The 2007 budget proposal also includes an increase of $6.5 million for the Minerals Management Service to meet new responsibilities for offshore renewable energy development. The budget proposes $3.8 million in increases in BLM and the U.S. Geological Survey for oil shale development and a $1.9 million package of increases for gas hydrate research and development by MMS, BLM and USGS.

Environmentalists blasted the budget proposal as contradicting President Bush’s January State of the Union address in which he declared America is “addicted to oil,” and called the projections wildly inflated.

“Last week the president had what we thought was a landmark speech about our addiction to oil,’ Brian Moore of the Alaska Wilderness League told E&E Daily. “It turns out we may be addicted to oil, but he’s standing on the corner looking for a fix.”

“We shouldn’t even be talking about this,” Moore said. “How many times has Congress said no to this thing?”

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