U.S. House Democrats vote to block ANWR drilling if leasing bids don’t deliver

A recently passed House bill would block drilling in ANWR if the initial lease bids don't earn $500 million.

By Melody Schreiber - July 9, 2019
The Jago River flows north to the Arctic Ocean and its ice pack visible in the distance in the 1990s. (Gil Mull / Alaska Division of Geological and Geophysical Surveys)

Two bills addressing natural resource exploration in the Arctic National Wildlife Refuge are gaining traction in the U.S. House of Representatives, but the Republican-controlled Senate is unlikely to move any anti-drilling legislation forward.

The Arctic Cultural and Coastal Plain Protection Act is a bipartisan bill introduced by Rep. Jared Huffman, a Democrat from California, to repeal the lease program entirely. The act cleared the natural resources committee late last month and has been queued up for a vote in the Democrat-controlled House of Representatives.

In the meantime, however, House Democrats recently moved to block leases in ANWR if the initial bids don’t raise enough money.

On June 20, the House voted that if the bids don’t raise $500 million — half of the revenue anticipated in the 2017 tax bill that authorized the ANWR lease sale — the leases would be blocked.

This provision was part of the 2020 House appropriations bill for the interior, environment, and other agencies.

In order to become law, these bills would first need to pass the Senate as well, which is controlled by a Republican majority.

“We oppose these provisions and expect them to be complete non-starters in the Senate — as standalone bills, appropriations riders, or otherwise,” said Tonya Parish, deputy press secretary of the Senate committee on energy and natural resources.

Rep. Betty McCollum, a Democrat from Minnesota and chair of the House’s interior and environment subcommittee, said that the House bills attempt to hold the administration accountable for predicted revenues in the 2017 tax bill.

“The administration and others claimed that $1 billion in revenue would go to the federal treasury over 10 years, with $500 million coming in with the first lease sale,” McCollum said. “If you complete a lease sale in 2020, then it must raise the $500 million for the treasury that you said it would.”

If the Department of Interior receives bids for 1 million acres in the coastal plain, the average price per acre would need to be $500 in order to reach the $500 million mark. But that’s a prohibitively high price that would have a chilling effect on overall bidding, experts say.

“Competition drives the process,” said Mark Myers, an energy and natural resources consultant who was previously a natural resources commissioner in Alaska and the former director of the U.S. Geological Survey. “And if the price of entry is really high, you might limit competition.”

In frontier areas like the coastal plain, Myers said, an average price of $100 to $200 an acre is considered a good sale.

If the department were to create a high minimum bid for each acre, it would limit the number of companies that could compete — and the lack of competition might drive down profits even more, Myers said. “You’re going to have less bidding, less competition, less people interested in seeing the sale because the minimum threshold might beyond their ability to do it.”

Especially in places with limited seismic data, bidders are unlikely to pay top dollar for the prospect of oil, he said. “A higher bonus bid would be, I think, more warranted with better data out there,” he said. Even so, he said, a minimum bid over $200 would be higher than average.

Myers points out that much of the money the government makes from leasing land for natural resource extraction comes not from the initial bids but from royalties — a percentage of the profit oil companies make on the oil.

“Those numbers are much larger over time,” Myers said. “Significantly larger than you get from the bonus bid.”

McCollum argued the administration should have taken all of this into consideration while drafting the tax bill provision. “So how does holding them to their claim have a chilling effect on bids?” she said. If high minimum bids do affect the lease program’s profitability, she said, “then the Department [of Interior] needs to answer why they put that number out there.”