Arctic refuge oil bonanza likely to fall shy of GOP expectations

Previous lease sales suggest U.S. will collect less than a fifth of billion-dollar goal

Congressional Republicans counting on a $1 billion windfall from selling oil-drilling rights in the Arctic National Wildlife Refuge to help pay for tax cuts may be in for a disappointment.

Data from previous Arctic oil lease sales suggest the U.S. is likely to collect less than a fifth of that billion-dollar goal over the next decade— about $145.5 million — from auctioning off territory in the sprawling northeast Alaska refuge where caribou and polar bears roam.

Oil companies may be scared away by the controversies and costs of drilling in that remote and fragile terrain.

Even if they aren’t, crude prices would have to be some $15 more per barrel than they are today to make the effort pay off at all.

The potential revenues from drilling on Alaska’s north coast are in the spotlight because a Senate-passed budget resolution instructs the Energy and Natural Resources Committee to come up with $1 billion in deficit reductions over the next decade to help offset the costs of a $1.5 trillion tax cut package. The panel is scheduled to hold a hearing on drilling in ANWR on Thursday.

“It’s pure fantasy that the Arctic refuge is going to generate anywhere close to the kind of revenues that are being spouted about right now,” said Adam Kolton, executive director of the Alaska Wilderness League, which opposes ANWR drilling. “This is a dry hole in the budget.”

The idea of tapping the 19-million acre preserve for its potential oil bounty has long been debated in Washington. The controversy has pitted energy industry advocates who see leasing as a way to revive production on Alaska’s North Slope against environmentalists who argue that the drilling activity would jeopardize a pristine wilderness with arctic foxes, polar bears and caribou herds.

For decades, industry allies argued ANWR drilling was necessary to boost energy security and to create jobs.

Now, after a shale drilling boom made the U.S. the world’s largest producer of oil and gas, proponents argue it’s essential for the state and federal budget.

Republicans are using congressional budget rules to advance both Arctic drilling and a planned tax overhaul.

Legislation following the budget resolution’s instructions is immune from the kind of Democratic filibuster that has blocked previous bids to drill in ANWR. This makes the prospects for drilling there much more likely than it has been than at any time in the last four decades, observers say.

Selling ANWR oil leases could yield significant royalties down the road. But that would only come after successful discoveries and construction of production facilities — not to mention nearcertain lawsuits along the way.

By contrast, congressional revenue projections are built on a 10-year time frame, counting only the government’s possible haul from selling drilling rights — not royalty checks tied to possible later oil production.

It’s not clear how many energy companies would actually pursue the opportunity.