Republicans in Congress have added a proposal to allow oil drilling in a long-disputed Alaskan wildlife refuge to their tax reform bill, but experts say that oil and gas companies might not even be interested.
The Tax Cuts and Jobs Act includes a provision to allow drilling in the Arctic National Wildlife Refuge, also referred to as ANWR, in part because it allows them to claim revenue that can be used to offset tax cuts elsewhere in the bill, but experts say both the drilling and any revenue are strictly hypothetical at this point.
“The economics are really uncertain, and it’s hard to tell what the ultimate appetite would be,” says Trevor Houser, a partner at Rhodium Group, a research firm that analyzes the energy industry. “It’s entirely possible that they will open ANWR and it will attract very little investment.”
The debate over ANWR has raged for decades as energy companies have pushed the federal government to open the refuge to oil and gas drilling arguing that would make the U.S. less dependent on foreign oil and could generate thousands of jobs in Alaska. And in that time environmentalists have typically countered that the development would endanger wildlife and disrupt pristine land that remains untouched by humans. Those arguments have halted similar Republican moves in the past, but with the GOP in control of Congress and the White House, Republicans finally have a chance — and the tax reform bill gives them an opportunity to slip in the measure as part of a larger package.
But the oil and gas industry is markedly less excited and that lack of enthusiasm has opened up a whole new angle to criticize the possibility of opening the refuge. “They’re in a hurry for something that the industry hasn’t been excited about,” Democratic Sen. Maria Cantwell of Washington told Politico. “In 50 years, [we] are going to be dead and the only thing that’s going to matter is whether we’ve preserved a place as unique as this.”
Allowing drilling in the refuge has faced bipartisan opposition in the past. Seven Republicans joined with Democrats to vote against opening ANWR to drilling in 2005, including Sens. John McCain of Arizona and Susan Collins of Maine, who remain in office today and have shown a willingness to defy their GOP colleagues this year.
The declining interest in ANWR follows rapid growth in oil resources elsewhere in the U.S. Fracking technology, which first exploded in use around a decade ago, fundamentally shifted the U.S. energy market allowing oil companies reach vast reserves of oil previously thought inaccessible. The opening of offshore drilling has also contributed to the shift in dynamics.
The result has been a vast supply and low prices. The proven U.S. crude oil reserves nearly doubled between 2008 and 2014, according to data from the Energy Information Administration. At the same time, oil prices are now a fraction of what they were a decade ago.
The revived debate on ANWR follows a directive from the Senate Budget Committee to the Energy and Natural Resources Committee to come up with $1 billion to address the federal budget deficit. Republicans on the committee, led by Alaska Sen. Lisa Murkowski, have suggested that the U.S. could collect that revenue through leasing the land to oil and gas companies to explore and develop. In a statement last week, Murkowski said that the project would “generate tens of billions of dollars in revenues over the life of the fields for every level of government.”
But as long as oil prices remain low energy analysts will remain skeptical. An analysis from Bloomberg suggested that the U.S. would earn around $145 million from leasing land in the next decade. And whether any of that development would lead to drilling is another question. Some once promising projects like Arctic offshore drilling have been halted altogether as a result of cost while others like the Keystone XL pipeline have a doubtful future even as they enjoy newfound support in Washington from the Trump Administration.
But even if drilling in the Arctic does not bring in a single dollar of revenue, Republicans can still count the hypothetical income as though it would help keep the bill from adding even more to the deficit. Then Republicans just need to make up some of the rest of the $1.5 trillion gap.
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