The federal government would realize only a minor increase in gross oil and natural gas proceeds and production if all federal lands that are off-limits were immediately opened to leasing, according to a study by the Congressional Budget Office (CBO).
With the restrictions lifted, the CBO estimated that additional gross proceeds from federal oil and gas leases on public lands — primarily in certain sections of the Outer Continental Shelf (OCS) off the Atlantic and Pacific Coasts and in the eastern Gulf of Mexico [GOM] and in onshore areas where leasing is restricted — would total about $2 billion over the 2013-2022 period, with most of the revenue coming from OCS leases.
That pales in comparison to the approximately $150 billion that the federal government will take in from all federal oil and gas leasing on public lands over the next decade under existing laws and policies, the CBO said in the study, which was requested by the House Budget Committee.
Furthermore, the CBO said most of the added revenue would not be realized until after 2022 because of the long-lead time involved in preparing auctions, exploring and developing oil and gas fields, and obtaining the necessary state and local permits for processing and marketing oil and gas.
Based on estimates from the Energy Information Administration (EIA), the CBO projected that production from the new leases would be minimal. “EIA expects that any initial production from newly opened areas in the Atlantic, Pacific and eastern [GOM] would be far less than is produced by current operations in the [GOM]. In its Annual Energy Outlook 2011, EIA estimated that if leasing commenced in those OCS regions by 2023, production through 2035 would amount to around 0.35 billion barrels of oil equivalent [boe] — or about 3% of the 13.5 billion boe that the agency projected would be produced from federal leases in the [GOM] over that 13 year period.”
The CBO said it expects that leasing in many of the existing off-limit areas will occur over time without any changes to current law. It anticipates that the Interior Department will offer leases for most of the acreage in the OCS over the next several decades.
It doesn’t think there’s a need to immediately open up new areas. “Historical experience suggests that only a fraction of the leases awarded in the OCS will eventually be brought into production. Almost 60% of the OCS leases issued in the [GOM] through 2007 were either expired or were relinquished without producing any oil or natural gas. CBO estimates that almost 90% of the 2011 OCS production was from leases issued before 2001, reflecting the long lead-times associated with exploring and developing oil and gas fields.”
Opening the coastal plain area of the Arctic National Wildlife Refuge (ANWR) to development would yield about $5 billion in additional receipts over 10 years, primarily in the form of bonus payments from producers for the opportunity to explore for and develop resources. Under the existing law, only 10% of the amount would go to the U.S. Treasury; Alaska would get 90% of the revenues.
“According to estimates of potential resources by the…[EIA] and taking into account a range of probable oil prices, gross royalties from leasing in ANWR would probably total between $25 billion and $50 billion (in 2010 dollars) during the 2023-2035 period, or roughly $2 billion to $4 billion a year,” the study said.
But production in ANWR would be far off into the future. “If legislation was enacted in 2013 to open ANWR to leasing, no production would be likely to occur for 10 years and production probably would not peak before 2032,” CBO said.
The CBO estimated that about 175 billion boe exists in undiscovered oil and gas reserves on federal lands (excluding most of the natural gas reserves in Alaska), with nearly half of it in the central and western parts of the GOM. About 70% of the undiscovered oil and gas is under federal control on lands that are currently open to leasing, it said.
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