CBO: Drilling ban removal would bring limited new revenues

A wholesale removal of oil-and-gas drilling bans that cover many public lands and waters would raise only limited federal revenues over the next decade, according to a new Congressional Budget Office study that could provide political ammunition to drilling foes.

The nonpartisan budget analysts, in a report requested by the House Budget Committee Chairman, examined the effects of allowing drilling in Alaska’s Arctic National Wildlife Refuge (ANWR), and removing restrictions that also cover other lands and offshore areas.

Royalty and leasing revenues are a big source of non-tax federal cash, and CBO estimates that under current policies, proceeds from federal leases will total about $150 billion over the next decade.

But opening new areas won’t add much to that tally any time soon, given the lag time between lease sales and when oil and natural gas actually start flowing from these regions.

Leaving aside ANWR for a moment, CBO notes that legislation that forces federal officials to immediately offer up currently off-limits federal lands and waters “would accelerate the collection of around $2 billion of future leasing receipts into the next decade.”

Republicans are pushing legislation that would allow oil-and-gas leasing off the Atlantic and Pacific coasts, which remain off-limits under White House plans, and also want more aggressive leasing program for Arctic waters off Alaska’s coast.

But CBO finds that the Gulf of Mexico would remain the main source of offshore production for decades even if these other regions were in play.

“On the basis of information from [the federal Energy Information Administration], CBO anticipates that production from newly opened areas of the OCS over the 2023–2035 period would be far less than the amounts produced by current operations in the Gulf of Mexico,” the report notes.

Opening ANWR would bring in about another $5 billion over the next 10 years, mostly from bids on drilling leases, according to CBO, which notes that a substantial portion of the revenues would be shared with the state of Alaska.

The amount of money would eventually rise as production from the leases kicks in, according to CBO.

“According to estimates of potential resources by the Department of Energy’s Energy Information Administration ... and taking into account a range of probable oil prices, gross royalties from leasing in ANWR would probably total between $25 billion and $50 billion (in 2010 dollars) during the 2023–2035 period, or roughly $2 billion to $4 billion a year,” CBO notes, adding that most legislative proposals would steer at least half the cash to the state.

“By comparison, CBO estimates that under current law gross receipts from all federal oil and gas leasing activities in 2022 will be about $12 billion, in 2010 dollars,” CBO states.

GOP White House hopeful Mitt Romney, unlike President Obama, supports calls for drilling in ANWR.