by Mac McDowell
Editor’s note: the following August 23rd article, originally titled “Errors in the CBO Report on ANWR,” is reposted from American Thinker.
In August, the Congressional Budget Office (CBO) released a little-noticed report on the budgetary effect of opening federal lands to oil and gas exploration. The report looked specifically at the Arctic National Wildlife Refuge (ANWR) in Alaska and the Outer Continental Shelf (OSC). This report was generated at the request of the chairman of the House Budgetary Committee, Representative Paul Ryan. Ryan, being the clever and fiscally conservative member of the House that he is, was looking for ways to increase revenue without raising taxes.
Unfortunately, it seems that the CBO has grossly underestimated the revenue potential generated by opening these two vast untapped areas of natural resources. The CBO has told the chairman that revenue from just putting the land under lease, without extracting one drop of oil, would yield only $50 billion a year at best. However, the CBO, in the very same paragraph, admits to a 55% margin of error. A coin toss would be more accurate.
In truth, the number is quite a bit higher than the CBO estimate. The CBO doesn’t add the royalty income in its equations. For every 1 billion barrels produced from federal lands at $80 per barrel, the royalty revenue of a standard 16.7% royalty would be $13 billion per year. So if ANWR has 500 billion barrels of oil, as some estimates suggest, the royalties to the federal government should total to $6.6 trillion over 30 years, which is the expected production life of those fields in Alaska.
Then there are other errors of omission in the report. The CBO does not cite the information in a recent Energy Information Agency report that identifies the secondary benefits of opening ANWR. The EIA says that the opening of ANWR for exploration would benefit the U.S. in a number of ways.
The opening of ANWR to oil and gas development includes the following impacts:
• reducing world oil prices,
• reducing the U.S. dependence on imported foreign oil,
• improving the U.S. balance of trade,
• extending the life of TAPS for oil, and • increasing U.S. jobs.
The EIA report goes on to say the following:
As a result, the opening of ANWR to Federal oil and natural gas leasing improves the U.S. balance of trade by $135 to $327 billion during the 2018 through 2030 timeframe[.]
It is clear that Ryan is onto something here, but it seems that the CBO does not want him to know it.
This past week the President made what seemed like an outlandish claim at the time, that those folks that are successful in this country owe their success to others. Mr. President you are right in more ways than you know. When it comes right down to it we all owe whatever living we are able to scratch out of this miserable economy to the energy industry.
You see Mr. President, your teleprompter, which you love so much, would not function without power which, by in large, is produced by the same fossil fuels that you hate. Your presidential limousine will not go anywhere without the fuel that is extracted and refined by the oil and gas industry. Many of the roads, including new ones that you claim to be “shovel ready,” are made up of asphalt; a by-product of oil refining. The heavy equipment used to build those roads runs on diesel fuel refined somewhere in America; more than likely in Texas; a state you will likely not carry.
You see Mr. President, without the hard work of the energy industry you would not have a country to run.
Think of it, Mr. President, the hard working coal miner, whom you are trying to put out of work, and the hard working roughneck on the oil rigs off shore that you are trying to shut down, are making a difference for all of us.
So Mr. President given that fact that you have now become aware that you personally benefit from the energy industry I’m hopeful that the next time you turn on your teleprompter to give a speech you will thank the hard work of the men and women that wear Red Wing Boots and Carhartt work clothes to make your success possible … but I won’t hold my breath.