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View Full Version : Question: Who owns the oil in ANWR?


Ugly Duck
05-04-2006, 07:05 PM
Its federal land, so how would it work for oil companies to drill there? Would the government sell the oil to Exxon, or sell them the right to drill? Do they give the oil to Exxon for free and then we end up buying it for 3 bucks a gallon? Would the government do the drilling to replenish the strategic oil reserve without oil company involvement? Seems like if its public land it would be public oil, I don't get the relationship between public land and the oil companies. Anybody know?

Taco John
05-04-2006, 07:51 PM
I think the money would go to the civic centers and schools in the Artic. Once those are fully funded, I'm guessing Santa Claus gets the rest.

BucEyedPea
05-04-2006, 09:11 PM
I think the money would go to the civic centers and schools in the Artic. Once those are fully funded, I'm guessing Santa Claus gets the rest.

Santa is actually located in Northern Finland's lapland area.
Yes it's true. Would you like a link?
:)

patteeu
05-04-2006, 09:55 PM
This is the way I think it works. Take it with a grain of salt though.

Oil companies are allowed to drill on government land in return for payments of royalties on the oil extracted. This is related to the fake controversy that people are trying to pin on the Republicans by saying that they are giving the oil companies subsidies during a time when those companies are making record profits. A decade ago, when oil was cheap and domestic oil companies had little incentive to develop domestic oil fields, Congress granted the oil companies a waiver of these royalties in order to encourage domestic drilling on certain federal properties.

Of course, the government also generates some revenues from the proceeds of this drilling through various taxes (business taxes on the oil companies, excise taxes on the oil products, etc.)

Taco John
05-05-2006, 12:12 AM
I think my Santa Claus angle is much more plausible, but believe what you want...

tiptap
05-05-2006, 06:24 AM
Royalties for oil have historically been one eighth for the property ownern and seven eighths for the drilling co. In todays world though that US notion doesn't work in the Middle East or elsewhere. That is because the value of the commodity is such that exploration and recovery can be financied by the property owner.

I am for holding off on using the resources in ANWAR. The reason is that there are no new oil field discoveries to be made (excepting what may exist in Anartica). Oil is not generated by geological processes alone. This is evident by old fields not regenerating (as suggested by those who think oil is produced deep in the earth and seeps to the surface) or found by deep drilling rigs. Oil is a truly limited resource. And as a need we should hold on to the resource for another 40 years when oil production will really be on the decline and we will need the resource. If in the mean time we move to different energy paradigm then grand.

Ugly Duck
05-05-2006, 07:28 AM
This is the way I think it works. Take it with a grain of salt though.

Oil companies are allowed to drill on government land in return for payments of royalties on the oil extracted. A decade ago, when oil was cheap and domestic oil companies had little incentive to develop domestic oil fields, Congress granted the oil companies a waiver of these royalties in order to encourage domestic drilling on certain federal properties. Thanks for responding, folks.

Dang.... I think we should think about changing the deal if patteeu is right. That oil is worth billions, the feds are in debt for billions, the oil belongs to the feds, so they just give the oil to Exxon for free? Come to think of it... thats MY oil! I'm the public! I say we sell the dang oil to Exxon instead of just hand it to them for nothin. Heck, they give OPEC $70 a barrel for the stuff - lets sell it to them for $50.

patteeu
05-05-2006, 08:47 AM
Thanks for responding, folks.

Dang.... I think we should think about changing the deal if patteeu is right. That oil is worth billions, the feds are in debt for billions, the oil belongs to the feds, so they just give the oil to Exxon for free? Come to think of it... thats MY oil! I'm the public! I say we sell the dang oil to Exxon instead of just hand it to them for nothin. Heck, they give OPEC $70 a barrel for the stuff - lets sell it to them for $50.

I don't know the details so, again, take this with a grain of salt, but if the deal during the 90's was that the oil companies take the risk of investing in exporation and development on specific federal properties in return for royalty-free extraction (or reduced royalties) then it's a little late to be changing the terms of the agreement. It's like a contract that one party wants to change after the other party has fulfilled their part of the bargain.

If this is true, then maybe the lesson to learn is that the "contract" should have been more creative in the first place. It chould have been written so that the terms were dynamic based on the fluctuations in market oil prices. For example, they could have agreed that if oil prices remained low the oil companies would get the oil royalty-free while if they rose to a mid-level they would pay partial royalties and if they rose to a high level they would pay full royalties.

Logical
05-05-2006, 10:44 AM
I don't know the details so, again, take this with a grain of salt, but if the deal during the 90's was that the oil companies take the risk of investing in exporation and development on specific federal properties in return for royalty-free extraction (or reduced royalties) then it's a little late to be changing the terms of the agreement. It's like a contract that one party wants to change after the other party has fulfilled their part of the bargain.

If this is true, then maybe the lesson to learn is that the "contract" should have been more creative in the first place. It chould have been written so that the terms were dynamic based on the fluctuations in market oil prices. For example, they could have agreed that if oil prices remained low the oil companies would get the oil royalty-free while if they rose to a mid-level they would pay partial royalties and if they rose to a high level they would pay full royalties.

I am not a lawyer (though I pretend I am when I stay at Holiday Inn Express) but I would think that since ANWAR was not part of the public lands open to exploration and use when that deal was brokered. A new deal could be brokered for the exploration development of ANWAR.

Help me out as to why that would not be the case?

patteeu
05-05-2006, 11:47 AM
I am not a lawyer (though I pretend I am when I stay at Holiday Inn Express) but I would think that since ANWAR was not part of the public lands open to exploration and use when that deal was brokered. A new deal could be brokered for the exploration development of ANWAR.

Help me out as to why that would not be the case?

I think you're right wrt ANWR. If Congress opened it up to drilling, they would be free to make whatever deal they wanted, up to and including creating a new Federal agency for oil exploration and development and extracting it themselves. I don't think the royalty agreement from the 90's would impact the ANWR legislation at all (other than through lessons learned of course).

Amnorix
05-05-2006, 12:10 PM
I agree with everyone here, which is quite remarkable.

I think ANWR would be opened up to the oil majors on the cheap, however, becuase historically that is what has happened. I hope I'm wrong on that.

I agree with Tiptap -- we spend alot of money buying and storing oil barrels for the strategic petroleum reserve. To me, all of freaking ANWR is a HUGE AND FREE strategic petroleum reserve.

We should hold off on developing it for that reason alone, for as long as possible. Forget the freaking Caribou. I could give a rat's ass about them. Make sure whoever drills cleans up after themselves, that's all I care about on the environment front. It's the big, free, no-thought-required strategic reserve that I'd like to hang onto for as long as possible...

Amnorix
05-05-2006, 12:15 PM
I don't know the details so, again, take this with a grain of salt, but if the deal during the 90's was that the oil companies take the risk of investing in exporation and development on specific federal properties in return for royalty-free extraction (or reduced royalties) then it's a little late to be changing the terms of the agreement. It's like a contract that one party wants to change after the other party has fulfilled their part of the bargain.

If this is true, then maybe the lesson to learn is that the "contract" should have been more creative in the first place. It chould have been written so that the terms were dynamic based on the fluctuations in market oil prices. For example, they could have agreed that if oil prices remained low the oil companies would get the oil royalty-free while if they rose to a mid-level they would pay partial royalties and if they rose to a high level they would pay full royalties.

Depends on how the contract was written, of course, but I would be desperately looking for a way out of it, if I were the Feds. Any kind of technical compliance screwup by the oil companies? Any way to argue that there was a mutual mistake when we entered into the agreement (i.e. we thought there was 20 billion barrels of oil but there were 40 billion)?

Boozer
05-05-2006, 12:27 PM
I agree with everyone here, which is quite remarkable.

I think ANWR would be opened up to the oil majors on the cheap, however, becuase historically that is what has happened. I hope I'm wrong on that.

I agree with Tiptap -- we spend alot of money buying and storing oil barrels for the strategic petroleum reserve. To me, all of freaking ANWR is a HUGE AND FREE strategic petroleum reserve.

We should hold off on developing it for that reason alone, for as long as possible. Forget the freaking Caribou. I could give a rat's ass about them. Make sure whoever drills cleans up after themselves, that's all I care about on the environment front. It's the big, free, no-thought-required strategic reserve that I'd like to hang onto for as long as possible...

The main problem with that plan is how long it would take to ramp up oil production without the infrastructure in place. A strategic oil reserve is of significantly diminished strategic value if you're always a decade away from pulling oil out of it.

mlyonsd
05-05-2006, 12:29 PM
The state of Alaska should file an eminent domain suit against the Federal government to get the land back.

Amnorix
05-05-2006, 12:59 PM
The main problem with that plan is how long it would take to ramp up oil production without the infrastructure in place. A strategic oil reserve is of significantly diminished strategic value if you're always a decade away from pulling oil out of it.

I can't imagine that it would take a decade, but I'd have no problem with taking preliminary steps to reduce the ramp-up time, but holding off on actual production. Do all the surveying, etc., now. No sweat, and short dollars.

Amnorix
05-05-2006, 01:01 PM
The state of Alaska should file an eminent domain suit against the Federal government to get the land back.


Eminent domain is the seizure of private property for public use. Federally owned lands aren't private property. They are publicly owned.

The concept of our federal government also would prohibit htis under the Constitution, just like states/cities can't tax the feds for income taxes, or property taxes, etc.

And besides, if the Feds hadn't bought the land from the Russkies, there would be no "state of Alaska", so TFB.

Ugly Duck
05-06-2006, 11:44 AM
It's like a contract that one party wants to change after the other party has fulfilled their part of the bargain.There's precedent... one party is fullfilling their part by funding Social Security and the other party is using the funds to pay Halliburton in Iraq.

patteeu
05-06-2006, 08:25 PM
I agree with everyone here, which is quite remarkable.

I think ANWR would be opened up to the oil majors on the cheap, however, becuase historically that is what has happened. I hope I'm wrong on that.

I agree with Tiptap -- we spend alot of money buying and storing oil barrels for the strategic petroleum reserve. To me, all of freaking ANWR is a HUGE AND FREE strategic petroleum reserve.

We should hold off on developing it for that reason alone, for as long as possible. Forget the freaking Caribou. I could give a rat's ass about them. Make sure whoever drills cleans up after themselves, that's all I care about on the environment front. It's the big, free, no-thought-required strategic reserve that I'd like to hang onto for as long as possible...

I think that's a sensible position, but it's not really much of a strategic reserve if it would take a decade to develop it and make it useable. Maybe there would be a way to let the oil companies drill and extract enough of the oil to recoup their costs plus a reasonable profit and then cap the wells so that it could be tapped if and when it became necessary. But I know nothing about drilling for oil so maybe this wouldn't even be possible.

patteeu
05-06-2006, 08:25 PM
The main problem with that plan is how long it would take to ramp up oil production without the infrastructure in place. A strategic oil reserve is of significantly diminished strategic value if you're always a decade away from pulling oil out of it.

I can't imagine that it would take a decade, but I'd have no problem with taking preliminary steps to reduce the ramp-up time, but holding off on actual production. Do all the surveying, etc., now. No sweat, and short dollars.


Oops. I guess I should have read the thread.

Boozer
05-06-2006, 10:10 PM
Oops. I guess I should have read the thread.

ROFL DAYLATEAND$SHORTPWND!

;)