CONGRESSIONAL BUDGET OFFICECOST ESTIMATE
November 8, 2017

A Legislative Proposal Related to the Arctic National
Wildlife Refuge
As posted on the website of the Senate Committee on Energy and Natural Resources(FLO17783) on November 8, 2017
SUMMARY
The legislation would direct the Secretary of the Interior to implement an oil and gas
leasing program for the coastal plain of the Arctic National Wildlife Refuge (ANWR).
Based on information provided by the Department of the Interior (DOI), the Energy
Information Administration (EIA), and individuals working in the oil and gas industry,
CBO estimates that implementing the legislation would increase net offsetting receipts,
which are treated as reductions in direct spending, by about $1.1 billion over the 20182027 period.
Because enacting the legislation would affect direct spending pay-as-you-go procedures
apply. Enacting the legislation would not affect revenues.
CBO estimates that enacting legislation would not increase net direct spending or onbudget deficits in any of the four consecutive 10-year periods beginning in 2028.
The legislation contains no intergovernmental or private-sector mandates as defined in
the Unfunded Mandates Reform Act (UMRA).
ESTIMATED COST TO THE FEDERAL GOVERNMENTThe estimated budgetary impact of the legislation is shown in the following table. The
costs of this legislation fall within budget functions 300 (natural resources andenvironment) and 800 (general government).

By Fiscal Year, in Millions of Dollars
2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2018- 20182022 2027

-366
-366-1-1-1-1-725 -1,092-725 -1,092

DECREASES IN DIRECT SPENDING a
Estimated Budget Authority
Estimated Outlays

00000000-725-725****

Components may not sum to totals because of rounding; * = between -$500,000 and zero.
a. CBO estimates that implementing the legislation also would cost about $10 million over the 2018-2022 period, assuming the availability of
appropriated funds, for environmental reviews and the administrative costs of conducting the lease sales.

BASIS OF ESTIMATE
For this estimate, CBO assumes that the legislation will be enacted near the end of 2017
and that the funds necessary to implement the legislation would be available.
Description of the Legislation
The legislation would direct the Secretary of the Interior to implement an oil and gas
leasing program for lands located within the coastal plain of ANWR, which includes
about 1.5 million acres of federal land on the northeast coast of Alaska. Under current
law, activities related to oil and gas leasing in ANWR are prohibited.
The legislation would require the Secretary to hold two lease sales over a seven-year
period following enactment and to offer at least 400,000 acres of land in ANWR for leaseat each sale. Any lease sales in ANWR would be carried out in accordance withprocedures used to conduct oil and gas leasing within the National Petroleum Reserve inAlaska. For each lease awarded, lessees would pay the federal government bonus bids toacquire the leases, annual rent to retain the leases, and royalties based on the value of any
oil or gas production from the leases. The legislation would establish a 16.67 percent
royalty on oil and gas produced in ANWR. (Under current law, the federal government
charges royalties of 12.5 percent for oil and gas produced onshore and 18.75 percent foroil and gas produced in the Outer Continental Shelf.) Finally, under the legislation,
Alaska would receive one-half of the gross proceeds generated from the leasing program.
Spending Subject to Appropriation
CBO estimates that implementing the legislation would cost $10 million over the 20182022 period for environmental reviews and administrative costs associated with theleasing program subject to the availability of appropriated funds. Based on information2

provided by the Government Accountability Office, we estimate that completing theenvironmental reviews required under the National Environmental Policy Act would cost
$2 million. In addition, CBO estimates that other implementation costs would total
between $1 million and $2 million per year over that period.
Direct Spending
CBO estimates that implementing the legislation would increase net offsetting receipts byabout $1.1 billion over the 2018-2027 period.
Bonus Bids. CBO estimates that gross proceeds from bonus bids paid for the right todevelop leases in ANWR would total $2.2 billion over the 2018-2027 period. That
estimate is based on historical information about oil and gas leasing in the United Statesand on information from DOI, EIA, and individuals working in the oil and gas industry
about factors that affect the amounts that companies are willing to pay to acquire oil andgas leases. In addition, CBO relied on estimates prepared by the United States Geological
Survey of the amount of oil that might be produced from the coastal plain of ANWR. As
specified in the legislation, one-half of all receipts from leases in ANWR would be paidto Alaska, leaving net federal receipts totaling $1.1 billion over the 2018-2027 period.
Estimates of bonus bids for leases in ANWR are uncertain. Potential bidders might makeassumptions that are different from CBO’s, including assumptions about long-term oilprices, production costs, the amount of oil and gas resources in ANWR, and alternative
investment opportunities. In particular, oil companies have other domestic and overseas
investment options that they would evaluate and compare with potential investments inANWR. The potential profitability for a wide range of such global investment options
would probably be a significant factor in prospective bidders’ ultimate choices of how
much to bid for ANWR leases. The number of factors that affect companies’ investment
decisions result in a wide range of estimates for bonus bids. CBO’s estimate reflects ourbest estimate of the midpoint of that range.
Other Receipts. In addition to receipts from bonus bids, CBO estimates that the federal
government would collect net receipts from rental payments totaling about $2 million
over the 2022-2027 period. (Lease holders make an annual rental payment until
production begins.) CBO also estimates that the federal government would receive
royalty payments on oil produced from ANWR leases; however, based on informationfrom EIA regarding the typical amount of time necessary to drill exploratory wells,
complete production plans, and build the necessary infrastructure to produce andtransport any oil produced in ANWR, CBO expects that no significant royalty payments
would be made until after 2027.

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PAY-AS-YOU-GO CONSIDERATIONSThe Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement
procedures for legislation affecting direct spending or revenues. The net changes inoutlays that are subject to those pay-as-you-go procedures are shown in the followingtable.
CBO Estimate of Pay-As-You-Go Effects for the Legislative Proposal Related to the Arctic National Wildlife Refuge
By Fiscal Year, in Millions of Dollars
201820192020

20212022

2023

20242025

2026

2027

2018- 20182022 2027

0-366-1-1-725 -1,092

NET DECREASE IN THE DEFICIT
Statutory Pay-As-You-Go Impact

0000-725

0MANDATESThe legislation contains no intergovernmental or private-sector mandates as defined inUMRA.
The legislation would benefit the State of Alaska by increasing the generation of royalties
from oil and gas production on public lands in ANWR. Portions of the royalties would beshared with the state under formulas specified by the legislation and under federal laws
governing oil and gas production. Over the 2018-2027 period, CBO estimates that Alaska
would receive a total of about $1.1 billion in royalties.

INCREASE IN LONG-TERM DIRECT SPENDING AND DEFICITSCBO estimates that enacting the legislation would not increase net direct spending or onbudget deficits in any of the four consecutive 10-year periods beginning in 2028.

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ESTIMATE PREPARED BY
Federal Costs: Jeff LaFaveMandates: Zachary Bynum
ESTIMATE APPROVED BY
H. Samuel Papenfuss
Deputy Assistant Director for Budget Analysis

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