The Brink of ANWR

After decades of fighting, the Bush administration is trying a new strategy to allow drilling for oil in the Arctic National Wildlife Refuge. Because debating the issue on its merits means the ban on drilling has yet to be lifted, the administration has now included the change in its budget. That way it will be subject to fewer debates under rules governing congressional budget votes.

Maine’s senators, however, were quick to point out that drilling in ANWR and the $2.4 billion in 2006 the administration assumes will come from the oil found there does not belong in the budget because these revenues may not be realistic.

Sens. Olympia Snowe and Susan Collins have joined eight other senators in asking the Congressional Budget Office to review its findings regarding potential ANWR revenues. Such a review will serve two purposes. The first is to understand what assumptions the CBO made in its revenue projections. The second is to determine if those assumptions are correct. If they are not and the projected revenues are too high, this bolsters the case that such assumptions do not belong in the federal budget.

In their letter to the CBO, sent earlier this month, the senators point out that oil companies have recently bid just $40 per acre for recent oil drilling projects on Alaska’s North Slope. To generate $4 billion in lease revenues, which would be split between the state of Alaska and the federal government, the oil companies would have to bid at least $6,667 per acre to drill in ANWR.

Further, the senators note that the costs of oil development in Alaska are the highest in the world, making the region unattractive for exploration. Two companies that have long been exploring for oil in Alaska, ConocoPhillips and British Petroleum, have announced plans to direct their attention elsewhere. BP recently shut down an exploratory well, the closest to ANWR, and said it plans to focus on new exploration in China and Venezuela. ConocoPhillips has said that drilling in ANWR is no longer a priority for the company.

A 1998 study by the U.S. Geological Survey estimated the refuge might hold 10.4 billion barrels of recoverable oil. This is less oil than the United States consumes in six months. According to the Energy Information Administration, the United States will import 63 percent of its oil in 2015. If drilling in ANWR is allowed, 62 percent of America’s oil needs would be met through imports. As Sens. Snowe and Collins point out, raising fuel efficiency standards for cars and encouraging energy conservation would do much more to reduce American dependence on foreign oil than would drilling in ANWR.

Further, Sen. Collins argues that ANWR is the last major source of untapped oil in the United States and that, in the absence of an emergency, it would be irresponsible to tap that resource without first further developing alternative fuel sources and pushing for more energy efficiency.

Deciding whether to drill for oil in ANWR is a major decision that should be based on many factors including how much oil is thought to lie beneath the refuge, how expensive it will be to recover it, whether the resource should be saved for consumption at a later date and whether environmental damage outweighs the benefits of drilling. To change the argument now to one solely of economics, while using inflated revenue projections, is a corruption of the congressional review process.