Energy & Environment

Budget’s oil provisions divide Congress, White House

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A trio of oil-related provisions in President Trump’s budget garnered early opposition Tuesday, after the White House sent Congress its proposal.

Trump officials want to sell off half of the nation’s emergency oil reserve, open the Arctic National Wildlife Refuge (ANWR) in Alaska to oil drilling and end offshore drilling revenue sharing with Gulf Coast states, proposals they say would raise nearly $23.5 billion over 10 years.

The budget received mixed reviews from the oil sector and Republicans, who have long hoped to drill in ANWR but resisted measures to tap the Strategic Petroleum Reserve (SPR) to raise government revenue.

{mosads}Trump’s budget, a $4.1 trillion spending outline for fiscal 2018 with 10 years worth of revenue projections, is dead on arrival in Congress, which writes the spending bills that fund the government.

But the oil proposals within the document are more like policy provisions than fiscal ones. By including them in its budget outline, the Trump administration is essentially asking the GOP-controlled Congress to get in line.

Selling off half of the SPR represents the biggest source of new revenue in the energy and environment sections of Trump’s budget.

The SPR currently holds about 688 million barrels of oil, and selling half that would raise about $16.5 billion by 2027, the White House estimates.

Lawmakers last tapped the SPR in 2016, when Congress approved a temporary spending deal that aimed to sell 7.3 million barrels of oil over three years.

Though such smaller sales have been components of past spending agreements in Congress, lawmakers have pushed back against proposals for large-scale draw-downs, citing economics and national security.

The oil holdings, lawmakers warn, serve a national security purpose by acting as an insurance policy against potential disruptions in the energy sector.

Asked about the SPR plan, Senate Energy and Natural Resources Committee Chairwoman Lisa Murkowski (R-Alaska) said simply: “Crazy.”

House Natural Resources Committee Chairman Rob Bishop (R-Utah) said he could support selling oil from the SPR, but not cutting the reserve in half.

“The ideal thing … is that if you have a process where you’re replenishing it, then actually selling some of that off would make budgetary sense,” he said. “If you’re not replenishing it, then it doesn’t make any sense at all.”

Mick Mulvaney, the director of the White House’s Office and Management and Budget, said the U.S. can afford to reduce the oil reserve because of increased domestic oil production and a decline in imported oil.

“We think it’s the responsible thing to do,” he told reporters. “I don’t need to take this much of your money to bury it in the ground out in West Texas someplace for domestic security and national security reasons when we have domestic supplies like we do.”

The ANWR drilling proposal has united oil industry supporters, who have been eager to explore for untapped oil beneath a 1.5-million acre tract of land within the massive Arctic Circle refuge.

Congress formally blocked drilling in most of ANWR in the 1980s, though lawmakers can vote to allow exploration of parts of it. Trump’s plan estimates the government could raise $1.8 billion through lease sales in ANWR, but environmentalists have vowed to fight that agenda every step of the way.

“Opening up this iconic landscape to drilling wouldn’t move the needle on our nation’s energy needs, but would cause irreversible damage to birds and the one of the wildest places we have left on earth,” David Yarnold, the president and CEO of the Audubon Society, said.

“Both Republicans and Democrats in Congress have historically supported the Arctic Refuge as a keystone of American natural heritage and we look to them to do so once more.”

Rep. Raúl Grijalva (D-Ariz.), the ranking Democrat on the Natural Resources Committee, said he expects “historic” reaction from environmentalists.

“The reaction is going to be historic, probably more intense than in the past because of how everything has been constructed, the majorities in Congress and they have the White House,” he said.

“The public intensity is going to be stronger. You could always count on a veto from the president, you could always trust that the Senate would block it. We don’t have that.”

But drilling advocates in Congress see Trump’s budget as the starting gun in their race to explore the region.

“The debate on ANWR hasn’t really caught up with the technology, so you’re going to see a lot of us making the case of why that matters,” Sen. Dan Sullivan (R-Alaska) said.

The Trump administration also faced harsh criticism for its proposal to end the revenue sharing system that allows Gulf of Mexico states to get a share of federal royalties from offshore oil and natural gas drilling.

The White House estimated that ending the sharing would direct $3.56 billion over the next decade to federal coffers that would have otherwise gone to the states.

But the states fought hard for that money and are not likely to give it up easily.

Sen. Bill Cassidy (R-La.) said it’s a matter of fairness, because states get half of the revenue from onshore federal oil and gas drilling within their borders.

“Congress set up a mechanism where there’d be greater equity — not complete equity, but greater equity — in the sharing of the royalty payments from federal land off the coast of Louisiana, with the state, and with other Gulf Coast states,” Cassidy told reporters.

“In our state’s constitution, we have to use it for coastal restoration. Put differently, we use it to prevent another [Hurricane] Katrina.”

Conservation groups are also opposed. A coalition of groups such as the National Wildlife Federation and the Environmental Defense Fund urged lawmakers to keep the sharing because it provides for restoration.

Interior Secretary Ryan Zinke defended the proposal, saying that coastal states get other benefits from offshore drilling, such as jobs and economic development.

“I’ve been to the local communities in Louisiana. I’ve see the destruction and the hardships there,” Zinke said. “When you start adding jobs, that goes a long way to mitigate it.” 

Tags Lisa Murkowski Rob Bishop
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