Oil Firms May Pay $10 Billion To Drill in Alaska
WASHINGTON Energy companies may pay as much as $10 billion for the rights to drill for crude oil in Alaska's Arctic National Wildlife Refuge (ANWR), double the government's official estimate, the Congressional Budget Office said on Thursday.
The higher revenue figure could turn some U.S. lawmakers in favor of ANWR drilling to help offset the huge federal budget deficit.
Congress is expected to decide this month whether to open the Arctic refuge to energy exploration, which the Bush administration argues is needed to boost domestic oil supplies and reduce America's reliance on foreign crude.
The nonpartisan Congressional Budget Office said if long-term oil prices were roughly $50 a barrel in 2010 -- equal to $45 a barrel in today's dollars -- oil companies may pay $10 billion or more in bids to lease tracts in the refuge.
That is double the CBO's official estimate of $5 billion in bids that would be raised over the 2008-2010 period from ANWR leases, which is based on oil prices in the range of $25 to $35 a barrel.
Revenue from the bids would be split equally between the federal government and the state of Alaska.
U.S. crude oil prices are currently around $60 a barrel, and the Energy Department has forecast oil prices will stay high in the next few years.
The Bush administration believes ANWR oil production could eventually reach 1 million barrels a day. However, drilling opponents want the refuge protected and say that raising vehicle fuel standards would save the same amount of oil.
ANWR sprawls across 19 million acres, about the size of South Carolina, and is home to caribou, polar bears, migratory birds and other wildlife. About 1.5 million acres of the refuge's coastal plain would be opened to drilling, under the current congressional plan.
If the price of oil was at $25 a barrel, the CBO said there would be about 4 billion barrels of economically recoverable oil in ANWR. That number would rise to 6 billion barrels if oil was priced at $35 a barrel.
At $50 a barrel, it would be profitable for oil companies to recover about 9.5 billion barrels of ANWR crude.
The CBO cautioned that $50 a barrel oil is no guarantee energy companies would want to drill in ANWR, as the firms would weigh the investment and operating costs with other investment options that could be more profitable.
"The potential profitability for a wide range of such worldwide investment options would likely be a significant factor in prospective bidders' ultimate choices of whether and how much to bid for ANWR leases," the CBO said.
"The cost of capital and the level of perceived risk also would play a significant role in bidders' decisions about how to value such leases," the CBO said.
The U.S. Senate has passed a budget bill that includes language opening ANWR to drilling. However, the House-passed budget bill dropped the ANWR drilling provision after a group of moderate House Republicans threatened to vote against the measure if the drilling language was included.
Senate drilling supporters, particularly Republican Ted Stevens of Alaska, hope to keep the ANWR language in the final budget bill that Senate and House negotiators will try to work out and get passed by the Congress this month.