The $449 Billion Answer
Posted August 13, 2012
The House Budget Committee had a fairly simple question for the Congressional Budget Office (CBO): If the United States immediately opened most federal areas to oil and natural gas development, how much revenue would the federal government realize in various fees and royalties?
Good question, given the size of the federal budget deficit – and in light of the president’s renewed call for higher taxes on the energy sector.
Unfortunately, CBO basically punted on the answer, hiding behind existing policies that block increased energy access in certain federal onshore and offshore areas. For example, here’s CBO’s bottom line on the budgetary effects of more offshore leasing and development:
"The uncertainty surrounding whether and when new offshore areas will be developed in the future makes it difficult to estimate the budgetary impact of accelerating leasing. If leasing started sooner than currently assumed by EIA—for example, by 2017 instead of 2023 for the California and Florida OCS—the net increase in royalties could range from an average of tens of millions dollars a year to a few hundred million dollars a year over the 2023–2035 period, depending on whether policymakers in California allowed the development of new offshore leases—which is very uncertain."
You get the drift. CBO certainly is uncertain.
Consequently, CBO’s estimate – a paltry $7 billion in additional revenue over the next decade – tees up a narrative for opponents of increased oil and natural gas development.
Yet the real answer to the House panel’s question isn’t an unknown. Last fall the Wood Mackenzie energy consulting firm produced a report detailing the effects of increased access to federal areas, onshore and offshore: An additional $800 billion in revenue to governments by 2030 – plus more than 1 million new jobs and more energy.
Now, Wood Mackenzie’s analysis covered more areas than CBO, which limited its scope to the Arctic National Wildlife Refuge in Alaska, the Atlantic and Pacific offshore areas and the Eastern Gulf of Mexico. Even narrowing Wood Mackenzie’s estimates to those areas, the potential revenue total is more than $449 billion by 2030.
In the current budget environment this is no small sum – which no doubt is why the Budget Committee asked the question in the first place. Yes, a number of new policies would be needed to increase access. But that’s the point. The additional energy, the new jobs and the added revenues for government treasures are available – with the right policy decisions and the political will to make them.
About The Author
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela have two grown children and five grandchildren.
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