Analysis Summary

The opening of the ANWR 1002 Area to oil and gas development is projected to increase domestic oil production starting in 2013. In 2025, the coastal plain of ANWR is projected to reach 0.9 million barrels per day under the USGS mean oil resource case, and 0.6 and 1.6 million barrels per day under the low and high resource cases, respectively. These cases include the impact of production in the Federal 1002 Area plus Native lands and the State offshore area within a 3-mile limit.

Petroleum imports are projected to decline one barrel for every barrel of ANWR production. Opening the coastal plain of ANWR is projected to reduce 2025 oil import dependence from 70 percent in the AEO2004 reference case to 66 percent in the mean resource case. The high and low oil resource cases project a 2025 oil import dependency of 64 percent and 67 percent, respectively. Expenditures on foreign oil and petroleum products are also projected to be lower in 2025 by $8 billion dollars (2002 dollars) in the mean oil resource case, and by $15 and $6 billion dollars in the high and low oil resource cases, respectively.

The opening of the coastal plain of ANWR to oil and gas development is expected to have little impact on the development of an Alaska gas pipeline. Although the opening of ANWR might reduce the gas resource risk of building an Alaska gas pipeline, there is expected to be a much larger gas resource in the National Petroleum Reserve-Alaska (NPRA). The NPRA is currently being leased and explored for oil and gas resources, and has an expected gas resource base six times larger than that expected for the coastal plain of ANWR. The NPRA is expected to have a greater impact on reducing the gas resource risk associated with an Alaska gas pipeline than ANWR.

Background

The Federal Government currently prohibits oil and natural gas development in ANWR. ANWR was created by the Alaska National Interest Lands Conservation Act (ANILCA) in 1980. Section 1002 of ANILCA deferred a decision on the management of oil and gas exploration and development of 1.5 million acres of Federal lands in the coastal plain of ANWR. Division C, Title III, Sections 30401 through 30412 of H.R. 6 proposes to open the 1002 Area to oil and gas exploration and production. The USGS estimates that 74 percent of the oil resources in ANWR’s coastal plain area are on Federal lands, with the remaining 26 percent on State and Tribal lands.

The estimates presented in this report include oil production from the Federal 1002 Area, the Native lands within ANWR, and the State offshore areas of the coastal plain. The linkage between development on Federal and Tribal lands is legally driven: under terms of ANILCA, development on the Native lands can only proceed after a Congressional decision to open the Federal 1002 Area. In contrast, the linkage between development in ANWR and State offshore lands is economic, not legal; without ANWR development, the necessary infrastructure for offshore development would likely not be available. Since both the State and Native corporations have expressed a strong interest in developing their respective oil resources, an approach that reflects the legal and economic linkages operating on the North Slope is appropriate in evaluating the potential production impact of a Congressional decision to allow development in ANWR. Estimates for the Federal 1002 Area alone, such as those in the USGS Economic Assessment issued in 1999,⁷ are most useful for an assessment of physical development impacts within the Federal ANWR area and for development of Federal revenue estimates. The difference in geographical coverage is one of several important factors leading the results of this report to differ from those presented in the USGS Economic Assessment.

ANWR is located on the northern coast of Alaska, due east of both Prudhoe Bay, the largest oil field ever discovered in the United States, and NPRA (Figure 1.) Surveys conducted by the USGS suggest that between 5.7 and 16.0 billion barrels of technically recoverable oil⁸ are in the coastal plain area of ANWR, with a mean estimate of 10.4 billion barrels, divided into many fields.⁹ This estimate includes oil resources in Native lands and State waters out to a 3-mile boundary within the coastal plain area. The mean estimated size of oil resources in the Federal portion of the ANWR coastal plain is 7.7 billion barrels. In comparison, the estimated volume of technically recoverable, accessible, unproved oil in the rest of the United States is 105 billion barrels, as of January 1, 2002.¹⁰

To date, there has been no assessment of the oil and natural gas resources in the rest of ANWR outside of the coastal plain area. However, it is unlikely that the non-coastal plain area of ANWR has the same level of resources that are estimated to be in the coastal plain area, due to differences in geology. The House version of the Energy Policy Act of 2003¹¹ calls for opening the coastal plain area to development and does not open any of the rest of ANWR.