Oil companies and their allies are getting closer to opening the Arctic National Wildlife Refuge to drilling for the first time as congressional Republicans seek to use the tax overhaul to end the nearly 40-year debate.
A refuge that some consider the last slice of pristine U.S. Arctic wilderness is also a long-sought target for oil companies and Alaskan lawmakers who want oil development to raise money and boost their economy. Republican Sen. Lisa Murkowski of Alaska is spearheading the latest effort, which would open most of the refuge's coast to drilling in an effort to raise $1 billion in oil revenue to offset new federal tax cuts.
Ms. Murkowski, whose no-vote was central to killing the Republican health-care bill earlier this year, is also considered a swing vote on taxes and spent the year pressing leaders of the newly Republican-controlled Congress to help expand Alaskan drilling lands. The Senate Committee on Energy and Natural Resources that she chairs passed a bill to do that earlier this month, and the Budget Committee approved the tax measure, including the ANWR provision, on Tuesday.
The bill now goes to the Senate floor, likely for a vote by the end of the week. But the House hasn't passed a similar provision, and leaders from both chambers will likely negotiate whether to include it in a final tax bill that would have to pass before it could be signed into law by the president.
The refuge covers nearly 20 million acres in the northeast corner of the state, a wilderness almost free of roads and people, and home to a coastal plain important to migrating birds, caribou, polar bears and other wildlife. It was originally protected by President Dwight Eisenhower in 1960 before Congress formally created the refuge in 1980. The prospect for big Alaskan oil finds had drawn interest in developing the land by then, and Congress responded both with further protection and parameters for early studies of how much oil might be there and how safely drillers could reach it.
Ms. Murkowski's measure would open 1.5 million acres, most of the refuge's coast, to drilling. It would require that the federal government lease out at least 800,000 of those acres in at least two separate lease sales over seven years.
The bill limits surface disturbance to just 2,000 acres for oil platforms and permanent development in support such as airstrips and piers. But critics point to other language approving "any rights of way or easements across the Coastal Plain," which could allow roads or facilities that lead to much greater impact.
"It's not just a few acres. The consequence is you will have destroyed this unique area," Sen. Maria Cantwell (D., Wash.) said Tuesday. "This is an incredible place that should be preserved. It is a wild, natural environment that is an asset to the United States."
The $1 billion in revenue will help fund the tax package, but whether the plan could produce that much money is unclear. Advances in oil drilling in the last decade have led to a global glut that has cut prices by about half and drawn drillers away from Alaska in favor of the continental U.S.
A study commissioned by the Alaska Wilderness League -- which opposes refuge drilling -- concluded that leasing in neighboring regions of Alaska's North Slope produced an average of $194 an acre between 2010 and 2016. The bill would have the state and federal government split any money, so bid prices would have to increase by seven to 13 times for the federal government to pocket $1 billion from leasing.
The Congressional Budget Office forecast earlier this month that the leasing would produce $2.2 billion in total bid revenue for the state and federal governments to split between 2018 and 2027. Although the claim is highly disputed, supporters say the refuge is a much better drilling prospect than other recently leased land nearby, and they point to the $2.1 billion Royal Dutch Shell PLC spent for more acres of offshore Alaskan oil rights in 2008 as a better comparison.
Alaska is trying to lure new oil investment to ease an increasingly critical threat to its oil industry, which the state relies on both for taxes and economic development. Falling interest in the North Slope has caused the amount of oil flowing through the Trans-Alaska Pipeline to slow and cool, a trend that could eventually clog the major artery and shut down most of the state's oil industry.
Prices are up about 25% to two-year highs in just the past three months, and oil producers have announced two major finds in the North Slope in about the past year. That shows that oil companies may be willing and able to take a shot in the region, but they still face a high degree of difficulty from the challenging conditions there, the high environmental risks and what are certain to be lengthy legal challenges, said Alison Wolters, analyst at energy consultancy Wood Mackenzie in Houston.
"The lead time will be so long and the scrutiny will be so high," she said. "It's very highly prospective."
Write to Timothy Puko at email@example.com
(END) Dow Jones Newswires
November 28, 2017 16:36 ET (21:36 GMT)