BY JEREMY DILLON AND ELVINA NAWAGUNA
The Trump administration’s fiscal 2018 budget proposal pitches a variety of legislative changes to boost federal revenue from the oil and gas industry, including the sale of oil and gas drilling leases in the Arctic National Wildlife Refuge and ending a revenue sharing program with states that allow offshore drilling.
The administration also proposed to reduce — presumably by selling — crude oil held in the Strategic Petroleum Reserve by half.
The policy proposals are likely to face significant opposition from lawmakers from Gulf Coast states over the revenue sharing plan, and Democrats in particular over opening up ANWR to potential development.
But for the Trump administration, they speak to two key priorities: A combined $22 billion contribution to eliminating the deficit over the next 10 years while expanding economic opportunities for the oil and gas industry.
The administration estimated that federal drilling leases in the Arctic National Wildlife Refuge would reduce the deficit by $1.8 billion over the next 10 years — but the proposal will trigger passionate resistance from environmental protection advocates and their mainly Democratic supporters in Congress.
ANWR — a 19-million acre wildlife refuge in northeast Alaska — has been a battlefield in a long-running war between green groups and supporters of oil- and gas-driven economic development in the state. Congress prevented oil and gas development on most of the land in a 1980 law, but left open an option for a future congressional vote to allow energy exploration in a 1.5-million-acre section near the Arctic coast.
Alaska's congressional delegation, led by Senate Energy and Natural Resources Chairwoman Lisa Murkowski, has pushed to open that portion of ANWR, introducing a bill that would enable development in that area, which is 60 miles away from the Trans-Alaska Pipeline System.
“Alaskans overwhelmingly support responsible development in the non-wilderness portion of ANWR and there is no valid reason why we should not be allowed to proceed,” Murkowski, the bill’s co-sponsor, said in a statement when it was introduced. “Allowing development would create new jobs, reduce our deficits, and protect our national security and competitiveness for a generation.”
The U.S. Geological Survey estimates the area contains at least 10.4 billion barrels of oil and 8.6 trillion cubic feet of natural gas, according to a Murkowski news release.
A group of 40 Democrats, however, led by Sens. Michael Bennet, D-Colo., and Edward J. Markey, D-Mass., reintroduced competing legislation in April that would redefine those 1.5 million acres as wilderness, and make them off-limits to development.
“The Arctic National Wildlife Refuge is one of our nation's greatest treasures," Bennet said in a statement at the time. “This bipartisan bill recognizes the Coastal Plain as the invaluable wilderness that it is, and provides lasting protections for critical arctic wildlife habitat.”
Trump's proposal to end the sharing of federal revenues from offshore oil and gas drilling leases with the Gulf Coast states — Texas, Louisiana, Mississippi and Alabama — that host the operations would require change to a law (PL 109-432), known as the Gulf of Mexico Energy Security Act, or GOMESA.
The Trump administration estimates that removing the state revenue sharing portion would help reduce the deficit over a 10 year period by $3.6 billion. Of course, that represents an equal loss of revenue for those states, all of which provided substantial electoral support for the president.
The Obama administration also proposed changes to the revenue sharing program in its fiscal 2017 spending plan, but that proposal would have instead transferred the money to a newly created Coastal Climate Resilience Fund to help coastal states respond to the effects of climate change.
Murkowski called the Obama proposal a “non-starter,” vowing that it would not go anywhere in the Senate. And she was right. Indeed, Sen. Bill Cassidy, R-La., fought for a vote last Congress on a bill that would have increased the states' share from offshore activities. That measure died in a procedural vote, despite its support from 51 senators.
Trump’s proposal for the Energy Department, meanwhile, calls for drawing down the Strategic Petroleum Reserve by half, which the administration said would help shrink the deficit by $500 million in 2018 and by $16.6 billion by 2027.
The U.S. holds the world’s largest government stockpile of emergency crude oil in the SPR, which was created in the 1970s following Arab oil embargo, to protect the country from future shortages or disruptions. According to the Energy Department, the SPR currently holds about 688 million barrels.
Encouraged by a boom in U.S. shale oil production, Congress has over the last few years came to view the SPR as a sort of piggy bank, approving through different bills the sale of crude to pay for spending initiatives.
To modernize SPR facilities, the five-year surface transportation bill passed in 2015 allowed the Energy Department to sell oil from the reserve in increasing amounts each year starting in 2016, reaching a maximum of 25 million barrels in 2025.
The 21st Century Cures Act, which became law in December, also approved sales of 25 million barrels of the SPR over three years to raise money to pay for medical research, starting with 10 million barrels this year.