In case you missed it, the U.S. Congress decided not to try to include the Artic National Wildlife Refuge (ANWR) drilling in the energy bill because it is not so much about energy as it is about ... um ... well, I guess it is about energy. But, the problem is the energy bill wouldn't have passed if ANWR drilling was included. The next strategy is to include ANWR drilling in the budget bill because it is easier to get it passed that way due to certain rules, etc:
Domenici said he will include a provision authorizing ANWR drilling as part of a budget procedure that is immune to filibuster. A similar maneuver is being planned in the House, although the final strategy is still being worked out.
Unlike normal legislation, the budget process is not subject to filibuster, so only 51 votes will be needed in the Senate for it to clear Congress and be signed into law by the president. Just such a tactic was used a decade ago when Congress approved ANWR drilling as part of the budget process, only to see the measure vetoed by then-President Clinton, a drilling opponent.
Should we be for or against?
A couple of weeks ago, in a couple of posts (here and here), I commented on the forthcoming Conrad and Kotani paper by calculating my own trigger oil prices relative to some threshold values that people might place on a protected ANWR. The trigger price is the price above which it is efficient (benefits > costs) to drill in ANWR.
Since then I've been trying to find an estimate of the value that U.S. households might place on ANWR (WTP*). Will Wheeler has generously brought to my attention his master's thesis from a number of years ago (disclaimer: Will in no way is liable for the ways in which I use and abuse his numbers). As far as I can tell, this is the only study that generates an ANWR benefit estimate.
Will finds that people do care about ANWR but maybe not enough to keep it protected, especially with oil prices at $65/barrel. His best estimate for the present value of national willingness to pay to preserve ANWR is $77 billion (2005 dollars). Annualizing these using the assumptions from the simple model here gives household willingness to pay values of about $23 when r = 2%.
According to my simple model, when the price is $65/barrel, the willingness to pay must be at least $29 in order for preservation to be the most efficient option. Based on this simple analysis we gotta say ... drill it, boyz.
By the way, my household's annual willingness to pay is above the $29 threshold. In other words, I'd rather we not open ANWR up for drilling.
Don't shoot the messenger.
