Lifting Drilling Restrictions Could Increase U.S. Reserves by 30 Percent, Study Finds

August 13, 2012 - 5:24 AM
ANWR

Caribou, shown in this undated photo, graze in part of the Arctic National Wildlife Refuge. (AP Photo)

(CNSNews.com) - A report from the Congressional Budget Office (CBO) estimates that lifting the ban on federal oil drilling in certain areas could increase U.S. petroleum reserves by 30 percent, including an estimated 8 billion barrels of oil in the Alaska National Wildlife Refuge (ANWR).

Using estimates from the Department of the Interior (DOI), CBO said that lifting federal drilling restrictions could bring billions more barrels of oil and gas to market.

“CBO estimates that about 175 billion barrels of oil equivalent (BOE) exists in undiscovered oil and gas reserves on federal lands (excluding most of the natural gas reserves in Alaska)—nearly half of it in the central and western parts of the Gulf of Mexico,” CBO said.

“About 70 percent of the undiscovered oil and gas is under federal control on lands that are currently open to leasing; thus, additional receipts would come from opening the other 30 percent to leasing and production.”

Thus, by lifting federal drilling bans in place in areas like ANWR and areas of the Outer Continental Shelf, oil-producing companies could gain access to an additional 30 percent of U.S. reserves – 52.5 billion barrels.

While the reserves are technically recoverable – meaning oil companies could extract the oil and gas -- legal restrictions and current administration policies prohibit oil companies from doing so.

CBO excluded most of Alaska’s gas reserves because there is no infrastructure in place to transport the gas to market, a fact CBO said made them unlikely to be tapped.

The figures come from an August 9 CBO report examining the benefits the federal government would receive if it lifted all current drilling bans on federal lands, including ANWAR.

The report found that the government would earn $150 billion in additional revenue over the next decade if it lifted all current drilling restriction on federal lands.

However, CBO noted that the value of the leases would depend on oil prices – which largely determine whether oil companies develop the land on which they are permitted to drill.

If oil prices were to drop in coming years, oil companies would probably not develop all of their leases. However, if oil prices continue to climb, oil companies would probably move to develop as many leases as they can.

The oil and gas reserves that are closed to production are divided into two general categories – onshore and offshore. About 60 billion barrels of oil and gas are located onshore, of which about 20 percent – 12 billion barrels – are currently off-limits. Of those 12 billion barrels, five percent are under national parks where drilling is legally prohibited and 15 percent are on other federal lands where government policy prohibits drilling.

Most of the prohibited reserves lie in the OCS, the underwater region between three and 200 nautical miles from the U.S. coastline, which are currently off-limits due to federal policy. However, CBO and Interior estimate that due to current technological limitations, only about 350 million barrels will actually be recovered from this region over the next decade.

That estimate could change should the industry make technological advances like those that have enabled current deep water drilling to take place or if prices rise sufficiently to make increased production cost effective.

Also, state policy, particularly in California, will also play a large role in whether oil companies are allowed to develop reserves in the OCS.

ANWR is the most promising region that is currently off limits. While the exact amount of royalties the federal government would receive would depend on legislation lifting the ban on drilling in ANWR, CBO said that “significant new opportunities” for oil and gas production would become available.

“If the statutory ban on leasing in ANWR — which is estimated to contain roughly 8 percent of the nation’s undiscovered oil — was lifted, significant new opportunities for oil production would become available,” CBO said.