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CBO underestimated potential revenues from expanded drilling, study finds
The Congressional Budget Office’s estimate of potential revenue from expanded oil and gas leasing in federal areas was far too conservative, underestimating the potential budget impact by billions of dollars, according to an analysis issued Tuesday by the industry-backed Institute for Energy Research.
The IER-funded review by Louisiana State University economist Joseph Mason found that opening federal areas to leasing would generate an additional $24 billion annually in tax revenues initially, growing to $99 billion annually over 30 years.
“Even conservatively estimating, the economic impacts of allowing access to U.S. energy resources are significant. This old dogmatic adhesion to policies of limited access and new policies of punishing existing access, taxing that access even more heavily, just restrain economic growth at a time when the U.S. economy is sorely in need of jobs, wages and fiscal revenues,” Mason told reporters.
The IER study comes as oil and gas proponents continue to press the Obama administration to make more federal lands and offshore areas available for drilling, despite Obama’s argument during the campaign that the majority of known reserves are already open to the industry.
It also comes as the industry prepares to defend its tax incentives on Capitol Hill as Democrats look to close deductions and other tax breaks claimed by oil companies.
The report was intended to expand upon an evaluation by the Congressional Budget Office last year of possible revenues from expanded federal leasing. That evaluation was prepared for the House Budget Committee and examined areas not already open to leasing.
Those areas include the Arctic National Wildlife Refuge, the eastern Gulf of Mexico and Outer Continental Shelf areas along the Atlantic and Pacific coasts.
CBO estimated that ANWR leasing would generate about $5 billion over the next 10 years, with 90 percent going to Alaska under current law. Between $2 billion and $4 billion a year in royalties from 2023-2035 would be split between the state and Washington once production gets underway.
Another $2 billion annually could be expected from additional leases in OCS waters that are not currently open, CBO said. It estimated annual royalties ranging from tens of millions of dollars a year to a few hundred million dollars a year, because of the uncertainty about whether production would take place on the leases.
Mason estimated that beyond the additional tax revenues generated by new leasing and development, total economic output would range from $127 billion annually to $450 billion annually during production, or about 3.2 percent of gross domestic product.
Mason estimated job creation at about 552,000 jobs annually for the first seven years and two million jobs annually after that.
“Continuing to downplay the reality of the economic value of these resources just ignominiously prevents the intelligent debate of the energy industry’s place in the U.S. economy, detracting from real solutions to energy policies, including both energy independence and energy conservation,” Mason said.
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