Oil Production in the Arctic National Wildlife Refuge: Impacts on Deficit and National Energy Security

David J. Murphy

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November 1, 2017

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 Assistant Professor, Environmental Studies Department St. Lawrence University, Canton, NY 13617 dmurphy@stlawu.edu 

 

OIL PRODUCTION IN THE ARCTIC NATIONAL WILDLIFE REFUGE

:

 IMPACTS ON DEFICIT AND NATIONAL ENERGY SECURITY

 

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Executive Summary

HE MOST RECENT PRESIDENTIAL BUDGET

, released on May 23

rd

, 2017, assumes that government revenue will be generated from the sale of oil and gas leases within the Arctic National Wildlife Refuge (henceforth Arctic Refuge), as do the

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budgets from the U.S. House and Senate. Once again, therefore, the executive and representative branches of the U.S. federal government will likely be considering legislation aimed at authorizing oil and gas leasing  within the 1.5 million acre Coastal Plain region of the Arctic National Wildlife Refuge, reigniting a multi-decade debate. Some see the Arctic Refuge as a way to reduce U.S. dependence on foreign oil

or for the U.S. to “dominate” world oil markets,

 while simultaneously reducing the deficit through collecting revenue generated by leasing federal land for oil and gas development. Others see the  Arctic Refuge as a place that should be sacrosanct from such activity due to the human, wild and  wildlife values that led the United States to include the area within the National Wildlife Refuge System.  This report aims to contextualize the production of oil in the Arctic Refuge within the broader national energy and budget landscapes, focusing specifically on the following questions: 1) What likely impact would oil development in the Arctic Refuge have on U.S. domestic energy security, and  what alternatives to such drilling exist that can advance U.S. energy security, and 2) is it likely that lease sales in the Arctic Refuge will reduce the deficit.  With respect to the first question, this report concludes that there simply is not enough oil

projected to be under the Refuge’s coastal plain to appreciably increase U.S. energy security, and the

legitimacy of this policy goal is further undercut by the export of domestically-produced oil to the  world market. For the same reason, oil from the Arctic Refuge, or from the United States in its entirety, cannot

meaningfully advance the Trump administration’s “energy dominance” goal. At the

same time, the U.S. has made great strides toward enhancing U.S. energy security through, among other things, the progressive Corporate Average Fuel Economy (CAFE) increases enshrined in current law. In sum, pursuing better fuel efficiency by simply maintaining the current 2017-2025 CAFE standards would reduce domestic oil consumption by roughly six times the amount of oil projected to be within the Arctic Refuge. Such decreases in oil demand also represent a permanent solution, whereas oil production in the Arctic Refuge would only temporarily and marginally address oil dependence.

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OIL PRODUCTION IN THE ARCTIC NATIONAL WILDLIFE REFUGE

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 IMPACTS ON DEFICIT AND NATIONAL ENERGY SECURITY

 

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In addition, revenue targets from bonus bids in the presidential and congressional budgets are inconsistent with recent lease sale bids in the likely Arctic Refuge lease sale scenario. Oil companies  would have to bid an average of $2400 per acre for each of the roughly 1.5 million acres on the coastal plain of the Arctic Refuge to meet the presidential budget, and over $1300 per acre to meet congressional targets. Two main issues with this scenario are that 1) it is highly unlikely that oil companies will lease every acre, and 2) even if they did, recent bidding activity has resulted in average lease values of $194 per acre, more than ten times lower than the $2400 per acre level needed to meet the current budget.

Shell’s 2008 bid in the Chukchi Sea

 was an outlier on the higher end

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 an offshore sale, with only 10% of the total acreage offered resulting in a bid, and the per acre bid level was $977 per acre, roughly three times less than that projected in the current presidential budget.  This report starts with an explanation of trends in U.S. oil and gas development from the mid-2000s to the present; the time period since Congress last placed significant attention on Arctic Refuge drilling. It then addresses the relationship between Arctic Refuge drilling and U.S. energy security, and considers alternatives to Arctic Refuge drilling that can advance that security. Finally, it addresses the relationship between lease sales in the Arctic Refuge and the U.S. budget.