Alaska Drilling Dividend

The tax bill contains a growth bonus in new oil lease sales.

 
 

Senate Committee on Energy and Natural Resources Chair Sen. Lisa Murkowski,  in Washington, Nov. 14.
Senate Committee on Energy and Natural Resources Chair Sen. Lisa Murkowski, in Washington, Nov. 14. PHOTO: JACQUELYN MARTIN/ASSOCIATED PRESS
 

Republicans aren’t advertising it, but a pro-growth bonus in the Senate tax cut bill is that it finally opens up a small part of the Arctic National Wildlife Refuge (ANWR) for oil and gas drilling. Like the rest of the tax bill, Republicans can pass it with a GOP-only majority of 50.

Or put to it another way, Lisa Murkowski’s ship has come in. The Alaska Senator chairs the Energy and Natural Resources Committee, which in early November passed legislation 13-10 (with West Virginia Democrat Joe Manchin joining Republicans) requiring the Interior Department to offer drilling rights leases in ANWR’s coastal plain within 10 years. The Budget Committee wrapped this into the broader tax reform that the Senate is expected to pass as soon as Friday. Whether or not this accounts for Ms. Murkowski’s support for the tax bill, it is a net benefit for Alaska and the U.S.

The arguments for Arctic drilling are as coldly obvious as the tundra ice, starting with the fact that ANWR offers a potentially large new supply of oil at minimal environmental cost. Alaska contains 192 million acres of parks, refuges, wilderness areas and nature preserves. ANWR makes up 19.5 million acres of this, and 92% of that 19.5 million can’t legally be touched. 

But as part of a deal to enlarge ANWR in 1980, a Democratic Senate set aside one barren, frozen strip of coastal land for exploration. Modern innovations such as horizontal drilling mean that only about 2,000 acres will even be necessary for drilling. That equals 0.0001% of the refuge and is a scant 60 miles away from the existing trans-Alaska pipeline.

Green groups have misrepresented the ANWR debate, flashing posters of protected refuge mountains rather than the tiny, moon-like landscape where the drilling will take place. Alaskans hardly want to despoil the land, but they want the jobs and tax revenue that would come from more oil development. This is especially important to the state as drilling in current areas winds down.

The U.S. Geological Survey estimates this sliver of land contains at least 10.4 billion barrels of recoverable oil and 8.6 trillion cubic feet of natural gas, and these estimates are probably conservative. By comparison, Alaska’s second-biggest oil field, Kuparuk, holds about 2.5 billion barrels. News of the ANWR lease proposals also comes amid a revival in global oil prices to more than $60 a barrel. The Trump Administration will have to reassure oil and gas companies that the government will honor its contracts, especially after the Obama Administration’s shameful treatment of Shell in the Arctic Sea, but the first step is allowing the lease sales.

Republicans have been trying for decades to make good on Congress’s ANWR drilling promise, but Democratic filibusters have blocked it in the Senate. Republicans have been as close as 57 votes, only to see Democratic leaders arm-twist no votes.

Democrats are upset that Republicans are using budget reconciliation to pass ANWR with 50 votes. But the lease sales will raise millions of dollars for the federal government, so it is rightly viewed as a budget provision under Senate rules. If Democrats cared all that much about Alaska drilling, they could have cooperated with Republicans on the tax bill to win some concessions. Instead they bet that Republicans would fail, a bet they appear to be losing. The same goes for eliminating the state-and-local tax deduction that will hurt high-tax states run by Democrats.

A majority of Americans support oil drilling that can be done in an environmentally safe way. That will be born out if the feds sell leases and drilling in ANWR begins. This is one more growth dividend from tax reform.

Appeared in the December 1, 2017, print edition.

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