Guest post by David Middleton
Why would anyone care what “environmentalists” have to say about potential Arctic oil revenue? I only care because their “reasoning” is both fun and easy to ridicule.
Environmentalists Say Arctic Drilling Revenue Predictions ‘Way Off’
IULIA GHEORGHIU | JUNE 19, 2017
Conservation advocates believe opening up the Arctic National Wildlife Refuge, America’s largest swath of wilderness, isn’t likely to be the boon to federal coffers that President Donald Trump expects.
Opening up the wilderness region is a perennial issue; bipartisan bills are introduced each Congress to definitively label the area as “wilderness” while industry groups seek to gain access to a section of land that had been designated for oil and gas exploration. Plans have existed since 1980 to use less than 3 percent of the more than 19 million acres of wilderness refuge for oil and gas exploration — but conservation groups argue even that amount is too much.
It is possible for the House Natural Resources Committee to meet likely revenue targets from the House budget resolution by following Trump’s budget proposal to open up the wildlife refuge for onshore oil and gas exploration, advocates from The Wilderness Society and the Alaska Wilderness League noted on a press call Monday. But the organizations say the federal government is likely to get much less than the Trump budget suggests.
The White House budget calculates opening up the region to oil and gas exploration should bring in a total $3.5 billion in revenue, half of which would be going to the federal government. But Cameron Witten, budget specialist for The Wilderness Society, called the president’s revenue assumptions “way off the mark” because Alaska’s state constitution designates that 90 percent of revenue from public land leasing will go to the state, reducing the federal intake to $350 million.
Notes to “Cameron Witten, budget specialist for The Wilderness Society”:
- ANWR is Federal acreage. While the Federal government does generally share minerals revenues with the States, the Alaska constitution isn’t the operative document here.
- The lease bonus and rental income will only be a tiny fraction of the revenue from ANWR. The vast majority of the revenue (>99%) will come from royalty payments (usually at least 1/8 of the gross revenue from oil & gas production) and income taxes.
- “Maybe next time do a little research”…
Possible Federal Revenue from Oil Development of ANWR and Nearby Areas
June 23, 2008
Specialist in Energy and Environmental Economics Resources, Science, and Industry
Federal revenues would consist primarily of corporate income taxes on profits earned by oil producers from the production and sale of ANWR oil. As landowner, the federal government would also collect royalties from such production on federal lands, which are included in the estimates. If producers were able to recover 10.3 billion barrels of oil over the life of the properties — the United States Geological Survey has estimated there is a 50-50 chance that the ANWR coastal plain contains at least this amount of oil — and if oil prices are $125/barrel, then the federal government might be able to collect $191 billion in revenues over the production period, estimated to be at least 30 years once production commences. This estimate consists of nearly $132 billion in federal corporate income taxes, and about nearly $59 billion in federal royalties.
While oil prices are unlikely to be in the $125/bbl range anytime soon, most companies are basing decisions on $50/bbl with a modest escalation over time. If 10 billion barrels of oil were produced from ANWR and the Federal government retained a 1/8 royalty, they would make a schistload of money, just from the royalties:
- $50/bbl * 10,000,000,000 bbl = $500,000,000,000 (that’s $500 billion).
- 1/8 * $500,000,000,000 = $62,500,000,000
Now, that $62.5 billion would be paid out over 20-30 years and some of the revenue would be shared with the State of Alaska; but the opening of ANWR could easily generate at least $3.5 billion/year in total revenue to the Alaskan and Federal governments. And it would do this for at least 20-30 years….