Key features of the House omnibus energy bill that would offer producers royalty relief and expand leasing opportunities would cost the federal government as much as $462 million over the next decade.

This was the chief conclusion of the Congressional Budget Office (CBO) in scoring the energy bill, H.R. 2436, that was voted out by the Resources Committee earlier this month. The bill, sponsored by Committee Chairman James Hansen (R-UT), has been incorporated in omnibus legislation that is scheduled to come to the House floor this week for debate and a vote.

The CBO estimates that the royalty and leasing portions of the bill would mean $326 million less for federal coffers over the 2002-2011 period, as well as an additional $136 million in out-of-pocket expenses to administer certain budgetary procedures during the 2002-2006 period.

Alaska would come out the biggest winner if, as the Hansen bill proposes, the Arctic National Wildlife Refuge (ANWR) is opened to oil and natural gas drilling. The CBO projected that the proposed initial lease sales in the coastal plain of the refuge could generate as much as $3.3 billion, with the majority of the money ($2.97 billion) being paid to Alaska. The net benefit to the federal government would be about $330 million over the next 10 years, it said.

The CBO scoring is based on the Department of Interior (DOI) holding its first lease sale in ANWR during fiscal year 2004 and another in 2006. This, of course, assumes that drilling in ANWR will be approved by both houses of Congress, the chances of which are looking slimmer and slimmer.

The Resources Committee bill also would provide royalty relief to oil and gas producers when prices fall below specified thresholds. The provision would reduce gross federal royalties by about $491 million over the next 10 years, which the CBO said is less than 1% of the anticipated royalty receipts during that time. The reduction in royalties would be almost evenly split between the onshore and offshore, it said.

The portion of the bill that would give royalty waivers for deepwater leases would boost receipts from bonus bids by about $30 million for the four lease sales scheduled for the 2002-2003 period, but it would cut receipts from royalties by about $91 million during the 2002-2011 period, the CBO said.

The legislation also would require the Interior secretary to grant royalty credits to producers who, in order to speed up the permitting process, pay third-party consultants to complete work under the National Environmental Policy Act (NEPA) that is Interior’s responsibility. The CBO estimates the oil and gas industry will spend about $200 million over the next decade on NEPA work.

It further estimated the federal government will lose about $1 million a year between 2002 and 2006 by expanding the DOI’s pilot program to take royalties in-kind.

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