CBO Refutes Claims of Greater Leasing Access, More Profit

Opening the Arctic National Wildlife Refuge (ANWR) and portions of the Outer Continental Shelf (OCS) to oil and gas leasing would generate royalty revenues that represent a small fraction of gross royalty proceeds to the U.S. federal government, according to a recent analysis by the U.S. Congressional Budget Office (CBO).

CBO's recent analysis was done in response to calls by U.S. lawmakers to open ANWR and portions of the OCS currently off limits for exploration and production. Last month, the U.S. House of Representatives rejected President Obama's proposed five-year offshore drilling plan, replacing it with legislation that would open up for leasing OCS tracts currently off-limits to leasing and expanding the number of lease sales held.

The U.S. Senate also sought to overturn Obama's proposed plan, introducing their own legislation that would expand the number of lease sales and open up additional areas for drilling, saying that increased energy production revenues would boost the U.S. economy.

Under current laws and policies, gross proceeds to the U.S. government from all federal oil and gas leases on public lands will total about $150 billion over the next decade, CBO estimates.

Opening ANWR for development would yield about $5 billion in additional receipts over the next 10 years, primarily in the form of bonus payments from private firms for exploration and development. Between 50 percent and 90 percent of those receipts would be paid to Alaska, CBO reported.

The U.S. federal government would also collect royalties if oil and gas production eventually commenced from these lands, but most would not be collected until much later due to the long lag between leasing and start-up of production.

The U.S. Energy Information Administration (EIA) estimates gross royalties from ANWR leasing of between $2 billion to $4 billion a year, while CBO estimates under current law gross receipts from all federal oil and gas leasing activity in 2022 to be about $12 billion in 2010 dollars.

"The projected royalties from leasing in ANWR are very uncertain, however, as they depend both on the amount of oil that might be produced and on future oil prices," CBO said in a statement.

New legislation requiring the Department of the Interior to immediately open most other federal lands for oil and gas leasing without restrictions would speed up collection of around $2 billion of future leasing receipts into the next decade. Most of that revenue would come from OCS leases, with state governments sharing a portion of the proceeds.

CBO estimates that production from newly opened areas of the OCS from 2023-2035 would be far less than current U.S. Gulf of Mexico production.

The California OCS accounts for nearly of 80 percent of EIA's estimate of potential production from newly opened areas during that time. CBO said expects state and local policies toward resource development will play a major role in determining whether these resources are developed.

CBO also estimates that approximately 70 percent of undiscovered oil and gas resources are on federal lands already available for leasing.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com


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Joe | Aug. 24, 2012
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Andy | Aug. 10, 2012
True, royalties would come much further in the future, but I wonder if congress had passed, and the president signed off on this just a few years ago if we wouldn't be better off economically right now. When a government is as in the hole as ours is, $2 billion is not a lot of progress per year, but it does go in the revenue column. The jobs and economy created by OCS drilling would have most assuredly produced more than $2 billion in taxes and fees paid to the states and feds simply from jobs, sales taxes, and increased economic activity within the areas where this drilling takes place. The current administration, however, will not budge, and as long as Interior and EPA are controlled by liberals, I would not expect any changes.


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