New US oil is key to a sustainable energy future.
The controversial bans on drilling offshore and in the Arctic National Wildlife Refuge have preserved precious oil and natural-gas reserves owned by the public. Thank environmentalists for this unintended gift.
But for these bans, we would have wasted the reserves without a strategic plan. Leasing and drilling would have lowered world oil prices by a few cents, benefiting more foreign consumers than Americans. The federal revenue from royalties, lease payments, and taxes would have been used to meet current federal expenditures. And our remaining publicly owned oil and natural gas would be substantially depleted. Consequently, our dependence on foreign energy sources would be even greater than it is – and it is likely that the current commodity price crisis would be worse.
We hope this price crisis prompts the adoption of a strategic plan to use the remaining value of our federally owned oil and natural-gas reserves to fund a clean, affordable, and independent energy future for America, a goal worthy of short-term environmental concessions and risks. Virtually all general drilling bans should be lifted. We should permit drilling offshore and in the ANWR and require that it be done with appropriate care.
Before granting additional drilling rights, however, we should fundamentally change the terms of future oil and gas lease agreements to ensure that taxpayers capture more of the revenue from our remaining reserves. Today's agreements provide exceptional profits for leaseholders when prices rise, so much so that leaseholders have a significant financial incentive to delay production until prices rise. That must change.
To achieve a net win for the environment, the federal revenue from future oil and gas production should be placed in a trust fund and used to foster a clean energy future for America. This must supplement, not replace, other environmental commitments we have made. We should jump-start the necessary federal investments for this secure energy future by immediately issuing bonds against this expected revenue. Doing so would guarantee that our remaining oil and natural gas revenue is actually used to establish energy alternatives. The bonds would have to be repaid with that revenue.