Drill, Baby, Drill? It Won’t Necessarily Pay, Baby, Pay

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By Deborah Solomon

Republican presidential nominee Mitt Romney continually faults President Barack Obama for not allowing more oil and gas drilling in the U.S., saying he's leaving money on the table in the midst of an energy boom.

A new report shows that claim comes up a bit short.

The Congressional Budget Office found the potential revenue from expanded offshore and onshore drilling may be less of a budgetary boon than lawmakers hope. Immediately opening most federal lands to oil and gas leasing, including Alaska's Arctic National Wildlife Refuge, would yield about $7 billion in additional receipts over the next 10 years, according to CBO. Much of that money would flow not to the U.S. Treasury but to the state of Alaska.

Oil and gas drilling is now restricted on some federal lands, including ANWR and sections of the Outer Continental Shelf, which consists of submerged lands off the Atlantic, Pacific and Florida coastlines. Lawmakers -- particularly those in coastal states like Virginia and Louisiana -- have asked Obama to allow expanded drilling for economic reasons, saying leases and royalties will provide much-needed revenue.

In July, a group of bipartisan lawmakers proposed legislation to open drilling in ANWR and the outer-continental shelf, saying it would create jobs, produce revenue and reduce dependence on foreign sources of oil.

The potential amount of money has seemed tantalizing. The U.S. is expected to realize $150 billion over the next decade from oil and gas drilling that's currently allowed on federal land. Opening additional lands to oil and gas drilling would provide more revenues to the U.S. government but the actual economic boost depends on many variables, including how much oil is found, its future price and any revenue-sharing deals cut with coastal states.

Take ANWR, which is estimated to contain about 8 percent of the nation's undiscovered oil. CBO says opening the area to oil and gas drilling would result in about $5 billion in additional receipts over the next 10 years and gross royalties could total $25 billion to $50 billion in the following decade, depending on a series of unknowable factors. Under current legislative proposals to open ANWR, about 90 percent of that money would flow back to Alaska.

The bipartisan bill introduced last month includes revenue sharing with "all participating coastal states," meaning the federal piece of the pie would be even smaller than CBO's top-line numbers.

Obama has vowed to drill "everywhere we can" but the administration has so far resisted efforts to open ANWR, saying the area is "not suitable for resource extraction."

Romney, who has made criticism of Obama's energy policy a staple of his campaign, has said he'll dramatically expand oil and gas drilling, including allowing leasing ANWR.

(Deborah Solomon is a member of the Bloomberg View editorial board. Follow her on Twitter.)

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-0- Aug/09/2012 20:46 GMT