North Slope Oil Lease Prices Fall To 10% Of Average In 1960s-80s

[hatrack]

WASHINGTON--After shelling out an average of $564 per acre for North Slope oil leases in the 1960s, 70s and 80s, oil companies in the past 15 years have offered only $53 per acre on average, a fact that has some in Congress questioning whether proposed leasing in the Arctic National Wildlife Refuge would earn the billions estimated by President Bush's administration and the Congressional Budget Office. The questions are coming from those in Congress who oppose oil drilling in ANWR. Drilling advocates say the administration's and CBO's estimates are sound because the refuge geology is far more promising that any other recent North Slope offerings.

Also, drilling advocates say, quibbling over the initial lease income is hardly an argument against exploring ANWR. If the expected oil is found and developed, these bids for exploration and development rights will be a footnote to the economic benefits for the country and the billions in royalties and tax revenues earned by local, state and federal governments once production starts, they say. The debate over the proper income from ANWR leasing comes as Congress is about to start building a federal budget that may count on a few billion dollars from such leasing. Doing so could smooth passage of subsequent legislation authorizing such drilling in the refuge.

EDIT

Fineberg said the 1982 Beaufort Sea sale cited by Murkowski actually is a good place to start the story. Bidders paid an average of $3,000 per acre. One of the resulting leases, for which drillers paid $1.6 billion, "coughed up what the (Department of Interior) has called 'the most spectacular failure in the history of petroleum exploration,'" the Mukluk dry hole. The well was plugged in 1984, and, with the oil price collapse of 1985, industry activity on the North Slope temporarily shriveled, Fineberg said. "While industry interest in the North Slope subsequently rebounded, lease bonus payments most emphatically did not," he wrote in his report.

Bids from 1961 to 1990 averaged $564 per acre but dropped to an average of $53 from 1991 through 2004, he found by analyzing all state and federal sales. In the last four years, bids have averaged just $39. Fineberg then calculated how much the government would have to collect per acre in ANWR to match budget projections offered by the Bush administration and CBO last year. To meet the administration's projections, which didn't change this year from last, oil companies would have to bid $4,000 to $6,000 per acre, depending on the acreage offered, Fineberg found. To meet last year's CBO projection of $4.2 billion from leasing all 1.5 million acres of the ANWR coastal plain, the average bid per acre would have to be $2,667, Fineberg said. The CBO, in its 2005 analysis issued after Fineberg's report, increased its estimate to $5 billion. "To generate lease bonus payments projected in government documents, oil companies must make average bids 68 to 154 times greater than North Slope Alaska leases have generated, on average, during the last four years," Fineberg wrote in his report."

EDIT

http://www.news-miner.com/Stories/0,1413,113~7244~2747959,00.html

[havocmom]

1. Good find. Thank you, hatrack

Keeping this link handy for helping educated about the myths of how extraction leases are so good for governments.