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Trump May Open Up Arctic Drilling

Much has been made about President-elect Donald Trump’s plans to dismantle environmental regulations and streamline regulations that could lead to the construction of more pipelines. But there are a few other controversial energy issues that President Trump might ram through a Republican Congress, which would hand the oil and gas industry new areas for drilling that have long been off limits.

No other place has been more contentious, more fought over, than the Arctic National Wildlife Refuge (ANWR), a large swathe of territory in northeast Alaska, east of Prudhoe Bay where much of the state’s drilling is located. As its name suggests, the refuge is home to scenic mountains, rivers and lakes rich in wildlife and biodiversity. But it is also thought to hold large volumes of oil and gas reserves, and has been the subject of heated debate since the late 1970s over whether or not oil and gas companies should be allowed to drill. Republicans have long sought to open ANWR up for drilling, but Democrats have stymied them for decades.

But that deadlock could be broken with the unusually brazen President-elect, who is hoping to deregulate large sectors of the U.S. economy. And he has the allies in Congress to take on hugely controversial items. Alaska Dispatch News reports that the Alaskan congressional delegation, led by the powerful Senator Lisa Murkowski (R-AK), who chairs the Senate Energy and Natural Resources Committee, was shocked on election night (as was everyone else), and quickly thought to put ANWR on the table for President Trump’s agenda in his first 100 days. When asked about ANWR by a reporter on election night in Anchorage, Sen. Murkowksi voiced cautious optimism. "Well, as you know, we have been working to advance ANWR for decades now. And we need to have the support of the Congress," Murkowski said. "But if the numbers continue for us with the Senate and you have a president who has expressed support, I will be chairing the energy committee again, and I am going to look to push that early on," she added.

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"I would suspect that the opening of ANWR actually has a fairly good chance (when) Republicans hold" the House of Representatives, the Senate and the White House, Bob Gillam, founder of McKinley Capital Management, told Alaska Dispatch News.

Opening up ANWR for drilling would fit perfectly into Trump’s plans to essentially drill everywhere in an effort to make the U.S. oil independent. Alaska’s Republican delegation sees only upside. "We might take people up north where we will discover that there's still a lot of oil up there if they just give us permission to go get it," Sen. Murkowski said on election night.

In another sign that Alaska’s oil industry could win big from a Trump administration, former Alaskan Governor Sarah Palin has been rumored to be a candidate for Interior Secretary. That is important because the Interior Department oversees the stewardship of federal lands, including offshore. Palin, as readers might remember, did more than anyone to popularize the slogan “Drill, Baby, Drill.” There is little doubt that she would mark a sea change in the management of public lands. First off the bat could be to auction off offshore tracts in the Arctic Ocean in her home state, and to scrap regulations standing in the way of drillers. Sen. Murkowski has long criticized President Obama’s Interior Department for overregulation, which she says has held back drilling in the Arctic.

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The Obama administration is currently finishing up its five-year plan for offshore drilling for the years 2017 through 2022, but the draft document has not included plans to allow drilling in the Eastern Gulf of Mexico, the Pacific Ocean, or the Atlantic Ocean – areas that have long been off limits. Environmental groups have pressed President Obama to also withdraw the Arctic. Presumably, the Trump administration would be willing to open up drilling in all of these areas.

Allowing drilling in remote corners of the U.S. where drilling costs are high is one thing. But with oil prices in the mid-$40s, drilling in any of these areas is probably not profitable, so there is little chance that there will be a drilling rush even if new lands, including ANWR, are opened up. Royal Dutch Shell indefinitely canceled plans to drill in the Arctic in 2015, after spending billions of dollars and years to drill an exploration well in the Chukchi Sea. Shell did not find economically recoverable oil reserves, and wrote down its Arctic program, essentially killing off Arctic exploration for years to come.

On the other hand, oil prices won’t always be this low. Deregulation could also lower costs for the industry. And the industry has never had a shot at ANWR, where drilling could be much less costly than offshore. Either way, Donald Trump and the Republican Congress have the option of removing all barriers standing in the way of drillers, so we could find out if the industry is interested in drilling in ANWR and new offshore areas around the country.

By Nick Cunningham of Oilprice.com

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