Tax act opens ANWR’s coastal plain to drilling
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January 02, 2018
Tax act opens ANWR’s coastal plain to drilling

Title II of the Tax Cuts and Jobs Act (H.R. 1) signed into law by President Donald Trump directs the secretary of the Interior to establish a competitive program for the leasing, development, production, and transportation of oil and gas (O&G) on the coastal plain of Alaska’s Arctic National Wildlife Refuge (ANWR). Officially called the 1002 Area, this part of the ANWR has been the subject of a fierce national debate about the value of domestic sources of energy and preservation of one of the most ecologically pristine regions left on earth. While the coastal plain was actually named by Congress in 1980 as one that should be set aside for O&G development, succeeding administrations have refrained from doing so. The opening of the area to the O&G industry has been a personal crusade of several Alaska lawmakers, notably the state’s two current Republican Senators, Lisa Murkowski and Dan Sullivan, and Rep. Don Young, also a Republican.

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“We have fought to open the 1002 Area for a very long time, and now, our day has finally arrived,” said Murkowski in a statement. “I thank all who kept this effort alive over the decades, especially Ted Stevens and Frank Murkowski, and all who supported this bill. Alaskans can now look forward to our best opportunity to refill the Trans-Alaska Pipeline System, thousands of jobs that will pay better wages, and potentially $60 billion in royalties for our state alone. This is a major victory for Alaska that will help us fulfill the promises of our statehood and give us renewed hope for growth and prosperity.” 

Recoverable resources

In 1998, the United States Geological Survey reported that the 1002 Area holds a mean estimate of 10.4 billion barrels of recoverable oil and 35 trillion cubic feet of recoverable natural gas. In May 2017, Interior Secretary Ryan Zinke issued a secretarial order to “jump-start” Alaska energy production. The order included directions to update estimates of recoverable O&G in the 1002 Area.

Production area, roads, pipelines

The 1002 Area occupies 1.5 million of ANWR’s total 19 million acres. The bill states that the Interior secretary must offer for sale no fewer than 400,000 acres of the 1002 Area in each of at least two lease sales within 10 years of enactment. The secretary must also authorize no more than 2,000 surface acres of the 1002 Area to be covered by production and support facilities, including airstrips and any area covered by gavel berms or piers for support of pipelines, during the term of the leases. In other words, actual support and production equipment will be placed on one ten-thousandth of all of ANWR’s area.

Sullivan has argued that claims that drilling will irreparably harm the 1002 Area are exaggerated because technological advances such as horizontal drilling will keep the industrial footprint to the smallest size possible. Furthermore, says Sullivan, Alaska’s measures to protect arctic environments from the effects of O&G production are the strongest in the world.

Environmental groups contend that the 2,000-acre provision is deception. For example, the National Audubon Society notes that the 2,000-acre limit allows for main production pads, satellite fields, seawater treatment plants, docks, and pipeline pads.

“Notice anything missing?” asks Audubon. “Roads. They’re pretty important. Also: the actual elevated pipelines. Good for moving oil around. Let's not forget about the powerlines, either. And then there's the gravel pits, which are needed to supply gravel for the areas covered by gravel pads. All of this habitat-fragmenting infrastructure is absolutely necessary and adds to the total footprint, and yet it isn’t accounted for in the proposed 2,000-acre limit. Meanwhile, industrial development on permafrost can lead to flooding and other hydrological changes, including draining the coastal plain’s ponds, which are vital for breeding shorebirds, terns, loons, and other waterfowl.”

Alaska gets 50 percent

Title II gained traction in the tax bill because it can potentially offset lost government revenues resulting in tax cuts. The Congressional Budget Office estimates that lease payments to the government may add up to $1.1 billion over the next 10 years. Alaska’s lawmakers believe the revenue will rise as O&G production actually commences. The bill directs that 50 percent of bonus, rental, and royalty receipts from the O&G program be paid to the state of Alaska.

The text of H.R. 1 is here.  

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