ANWR clears Senate, Young named to conference panel
The northern edge of the Arctic National Wildlife Refuge is almost open for business after some late maneuvering by Sen. Lisa Murkowski.
With the inclusion of Murkowski’s provision to open the ANWR coastal plain to oil exploration in the Senate’s tax reform bill, the Alaska congressional delegation is as close as it has ever been to what would be a landmark victory for the Republicans.
In statements following the Senate’s Dec. 2 early morning vote, they described it as a way to jumpstart Alaska’s economy and improve national security by producing more oil domestically.
However, it took some last-minute technical adjustments to specific language in the ANWR legislation to keep it viable, which also led to Murkowski having to do an about-face on a longstanding policy stance.
The issue arose during initial Senate floor debate on the tax bill Nov. 30, when the Senate parliamentarian deemed the language relating to the regulatory steps needed before holding an ANWR lease sale required consideration from the Environment and Public Works Committee and not just the Energy and Natural Resources Committee chaired by Murkowski.
Specifically, the original language directed the Interior Secretary to manage ANWR lease sales under the 1976 Naval Petroleum Reserves Production Act — the law that transferred what is now the 23 million-acre National Petroleum Reserve-Alaska from the Navy to Interior — and follow the requisite regulations.
Because an environmental impact statement is required to put together a management plan and hold lease sales in the NPR-A, the decision to lease the coastal plain should’ve also gone through Environment and Public Works, the parliamentarian concluded.
Murkowski’s Energy and Natural Resources Committee had been the only non-Budget committee tasked with reviewing her proposal to generate at least $1 billion in deficit-reducing revenue over the next 10 years.
The Budget Committee’s directive to find the $1 billion was a nod to Murkowski to introduce the ANWR option as part of the tax bill that needed only a simply majority vote and not meet the filibuster-proof, 60-vote threshold standard for non-budget legislation.
The revised language broadened the ANWR management guidelines away from the indirect National Environmental Policy Act reference to “a manner similar to” how NPR-A sales are managed, but Sen. Dan Sullivan said in Dec. 1 press briefing that the technical correction doesn’t eliminate the NEPA process prior to holding ANWR lease sales.
In floor debate, Murkowski said the extensive oil production on nearby state lands is proof that Arctic oil development can be done with minimal environmental impact, a point proponents of opening the coastal plain have often made.
“Environment and local wildlife will always be a concern, that’s why we didn’t waive NEPA,” she said.
Democrats argued that Murkowski’s legislation ostensibly renders environmental reviews of ANWR leasing meaningless because it states the Interior secretary “shall” hold two lease sales, each offering at least 400,000 acres of the 1.5 million-acre coastal plain, regardless of what the reviews conclude.
The technical wording change did, though, create uncertainty over what exactly the regulatory process would entail and whether the lease sales would still generate the $1 billion.
To offset that, a 5 million-barrel sale from the Strategic Petroleum Reserve authorized in the Energy Committee rider was upped to 7 million barrels on the Senate floor.
A Strategic Petroleum Reserve oil sale — something Murkowski had previously been steadfastly against — was first approved in the Energy Committee Nov. 15 as an add-on amendment by Louisiana Republican Sen. Bill Cassidy.
He asked for the oil sale amendment to offset his proposal to appropriate $300 million more to Gulf states through the Land and Water Conservation Fund in 2020 and 2021. Murkowski voted for the amendment, which passed out of her committee on a party-line vote, saying the increased revenue to states would help them mitigate the impacts of offshore oil and gas activity.
The Land and Water Conservation money is derived from offshore lease revenue and Cassidy said the extra $300 million would go back into restoring damaged coastline.
His amendment capped the oil sale at either 5 million barrels or no more than $325 million in revenue.
When the Senate voted on the tax bill, the sale limits had been increased to 7 million barrels or up to $600 million to the Treasury; however, Cassidy’s Land and Water Conservation Fund appropriation did not grow.
In 2015 Murkowski opposed a Strategic Reserve sale to help pay for a federal highway bill. A Senate Energy Committee press release at the time stated: “Murkowski has long cautioned against calls to sell crude oil from the reserve to pay for unrelated legislative initiatives” because she considers it a “vital national security asset.”
Spokeswomen for Murkowski did not respond to questions regarding her stance on the oil sales from the SPR.
The ANWR provision isn’t home free quite yet, as it was not in the House version of the tax bill. Therefore it must be approved in a conference committee, which is expected to resolve the differences in the House and Senate bills before the holiday break.
Rep. Don Young, picked by House Speaker Paul Ryan Dec. 4 to sit on the tax bill conference committee, said in a statement that there is still a lot of work left for the delegation in its effort to maximize Alaska’s energy resources but he is looking forward to securing a final victory on ANWR.
“It’s been over 40 years since this battle began — a generations-long battle that is finally coming to a head,” Young commented. “I thank Speaker Ryan and the House leadership for recognizing my role in this important debate and for entrusting me to be part of the effort to craft an agreement that will positively improve the lives of Alaskans and Americans for generations to come.”
While Republicans hold a 240-194 majority in the House, 12 of them sent a letter on Nov. 30 to Ryan and Senate Majority Leader Mitch McConnell pleading for the refuge’s protection. They cite legacy bipartisan support for leaving ANWR intact since Republican President Dwight Eisenhower established its predecessor area in 1960.
The Republicans further note the oil under the coastal plain is not worth the troubles likely to accompany it.
The U.S. Geological Survey’s mean estimate for oil in the coastal plain is about 7 billion barrels of technically recoverable reserves. In May, Interior Secretary Ryan Zinke ordered the USGS to update the rough 1998 estimate.
“If proven, the estimated reserves in this region would represent a small percentage of the oil produced worldwide,” the House Republicans wrote. “Moreover, the likelihood that lawsuits would accompany any development is high. Business-savvy oil companies are more likely to turn to the National Petroleum Reserve, a 23.5 million (acre) area in northwest Alaska specifically allocated for energy development, which is closer to infrastructure and significantly less controversial.”
The letter concludes with the representatives stating that on behalf of their constituents they “look forward to working with (Ryan and McConnell) to maintain this longstanding balance that protects and preserves the refuge’s incredible natural resources and wildlife habitat and allows for responsible American energy development elsewhere.”
Native corporations, CDQ provisions
The final Senate tax bill would also included a deduction for Alaska Native corporations, but an amendment for Western Alaska fishing groups did not make it.
Under the bill, Alaska Native corporations would be allowed to deduct either cash payments made into settlement trusts or the market value amount of land contributed to such a trust in the year the contribution was made.
The legal and financial implications of putting Native lands into trusts have generally not been an issue until recently as it hasn’t been a common practice.
Over the last couple years the Alaska Department of Law in Gov. Bill Walker’s administration has worked to clarify the process for putting Tribal lands in the state into trust status to provide an avenue for Alaska Native Tribes wishing to do so.
Nonprofit Bering Sea fishing groups, on the other hand, did not get the clarification they were looking for in the tax overhaul.
The six Community Development Quota groups established in 1992 by the North Pacific Fishery Management Council were hopeful the Alaska delegation would be able to add a provision noting the income received from their subsidiary companies is tax-exempt.
The CDQ program was intended to be a way to increase local ownership in Bering Sea fisheries. Collectively, the six nonprofit CDQ groups representing 65 communities within 50 miles of the Bering Sea coast receive 10 percent of the annual total allowable catch in most of the fisheries.
The profits derived from the harvest quota the groups own is supposed to be invested into economic development programs in their regions.
Norm Van Vactor, CEO of Bristol Bay Economic Development Corp., said he is disappointed the tax-exempt language didn’t make the Senate bill, but added that the delegation has assured the groups it is a priority they will keep working.
“Everything we do flows back to our communities, so we stressed to (Murkowski) that this provision would be very helpful towards securing our future,” Van Vactor said.
The Aleutian Pribilof Island Community Development Association got a private letter ruling from the Internal Revenue Service in 2014 stating subsidiary income derived from fish harvests is not taxable, but BBEDC has taken a more conservative stance and thus has led the push to get the clarification in law, according to Van Vactor.
Being on solid tax ground would make it easier for the groups to purchase additional shares of quota from individual quota holders getting out of fishing and turn that into more community investment without the worry about tax implications, he said.
“We just want real clarity that our understanding is in fact what the IRS intends because we don’t want to do anything at all that at a later date might come under scrutiny or jeopardize the investments that we might otherwise make,” Van Vactor described.
Elwood Brehmer can be reached at [email protected].