[Senate Prints 115-20]
[From the U.S. Government Publishing Office]
115th Congress} { S. Prt.
1st Session } COMMITTEE PRINT { 115-20
======================================================================
RECONCILIATION RECOMMENDATIONS
PURSUANT TO H. CON. RES. 71
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COMMITTEE RECOMMENDATIONS AS SUBMITTED TO THE COMMITTEE ON THE BUDGET
PURSUANT TO H. CON. RES. 71
COMMITTEE ON THE BUDGET
UNITED STATES SENATE
Michael B. Enzi, Chairman
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
December 2017
Prepared for the use of the Committee on the Budget. This document has
not been officially approved by the Committee and may not reflect the
views of its members.
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115th Congress} { S. Prt.
1st Session } COMMITTEE PRINT { 115-20
======================================================================
RECONCILIATION RECOMMENDATIONS
PURSUANT TO H. CON. RES. 71
__________
COMMITTEE RECOMMENDATIONS AS SUBMITTED TO THE COMMITTEE ON THE BUDGET
PURSUANT TO H. CON. RES. 71
COMMITTEE ON THE BUDGET
UNITED STATES SENATE
Michael B. Enzi, Chairman
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
December 2017
Prepared for the use of the Committee on the Budget. This document has
not been officially approved by the Committee and may not reflect the
views of its members.
COMMITTEE ON THE BUDGET
MICHAEL B. ENZI, Wyoming, Chairman
CHARLES E. GRASSLEY, Iowa BERNARD SANDERS, Vermont
MIKE CRAPO, Idaho PATTY MURRAY, Washington
LINDSEY O. GRAHAM, South Carolina RON WYDEN, Oregon
PATRICK TOOMEY, Pennsylvania DEBBIE STABENOW, Michigan
RON JOHNSON, Wisconsin SHELDON WHITEHOUSE, Rhode Island
BOB CORKER, Tennessee MARK R. WARNER, Virginia
DAVID A. PERDUE, Georgia JEFF MERKLEY, Oregon
CORY GARDNER, Colorado TIM KAINE, Virginia
JOHN KENNEDY, Louisiana ANGUS S. KING, Jr., Maine
JOHN BOOZMAN, Arkansas CHRIS VAN HOLLEN, Maryland
LUTHER STRANGE, Alabama KAMALA D. HARRIS, California
Elizabeth McDonnell, Republican Staff Director
Warren Gunnels, Minority Staff Director
C O N T E N T S
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Page
A. Foreword...................................................... 1
B. Title-by-Title Analysis....................................... 2
I. Committee on Finance...................................... 3
CBO Cost and Budgetary Considerations.................... 430
II. Committee on Energy and Natural Resources................ 439
CBO Cost and Budgetary Considerations.................... 456
C. Rollcall Vote in Budget Committee............................. 462
D. Additional Views.............................................. 463
A. FOREWORD
On October 26, 2017, H. Con. Res. 71, the Concurrent
Resolution on the Budget for Fiscal Year 2018, was adopted. The
resolution included reconciliation instructions for the Senate
Finance and Energy and Natural Resources committees, along with
the House Ways and Means Committee. To facilitate pro-growth
tax reform, the resolution instructed the Ways and Means and
Finance Committees to report changes in laws within their
jurisdiction that would increase the deficit by not more than
$1.5 trillion on a static basis for the 10-year period of
fiscal years 2018 through 2027. The Energy and Natural
Resources Committee was instructed to report changes in laws
within its jurisdiction that would reduce the deficit by not
less than $1 billion over the same 10-year period.
On November 15, the Energy and Natural Resources Committee
reported recommendations to meet its instruction by opening the
Coastal Plain of Alaska's Arctic National Wildlife Refuge to
oil and gas exploration and development. This legislation will
create jobs and further enhance America's energy independence.
The Congressional Budget Office estimates this legislation will
raise nearly $1.1 billion over the next decade.
On November 16, the Finance Committee reported
recommendations providing tax cuts for the American people. The
legislation would reform the U.S. tax system to promote
economic growth and job creation and to boost wages for
American workers. The Joint Committee on Taxation estimates
this legislation will cost $1.4 trillion over the next decade.
On November 28, the Senate Budget Committee reported the
combined Finance and Energy and Natural Resources
recommendations without revision, sending the bill to the
Senate floor.
This Budget Committee print contains descriptive materials
for the legislative recommendations reported by the instructed
Senate committees. The analyses and background materials of the
respective committees appear without revision.
B. TITLE-BY-TITLE SUMMARY
The following is a title-by-title analysis of the
legislation. In each case, the analysis is that of the
respective committee and is presented as it was submitted to
the Budget Committee without revision.
Title I--Committee on Finance
contents
Page
I. Explanation of the Bill............................. 5
II. Budget Effects of the Bill.......................... 411
III. Votes of the Committee.............................. 422
IV. Regulatory Impact and Other Matters................. 423
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CBO Cost and Budgetary Considerations
The following estimate of the costs of this measure has
been provided by the Congressional Budget Office:
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
summary
The Reconciliation Recommendations of the Senate Committee
on Finance, the Tax Cuts and Jobs Act, would amend numerous
provisions of U.S. tax law. Among other changes, the bill would
reduce most income tax rates for individuals and modify the tax
brackets for those taxpayers; increase the standard deduction
and the child tax credit; and repeal deductions for personal
exemptions, certain itemized deductions, and the alternative
minimum tax (AMT). Those changes would take effect on January
1, 2018, and would be scheduled to expire after December 31,
2025. The bill also would permanently repeal the penalties
associated with the requirement that most people obtain health
insurance coverage (also known as the individual mandate).
The legislation would permanently modify business taxation
as well. Among other provisions, beginning in 2019, it would
replace the structure of corporate income tax rates, which has
a top rate of 35 percent under current law, with a single 20
percent rate. The legislation also would substantially alter
the current system under which the worldwide income of U.S.
corporations is subject to taxation.
The staff of the Joint Committee on Taxation (JCT)
estimates that enacting the legislation would reduce revenues
by about $1,633 billion and decrease outlays by $219 billion
over the 2018-2027 period, leading to an increase in the
deficit of $1,414 billion over the next 10 years. A portion of
the changes in revenues would be from Social Security payroll
taxes, which are off-budget. Excluding the estimated $27
billion increase in off-budget revenues over the next 10 years,
JCT estimates that the legislation would increase on-budget
deficits by about $1,441 billion over the period from 2018 to
2027. Pay-as-you-go procedures apply because enacting the
legislation would affect direct spending and revenues.
JCT estimates that enacting the legislation would not
increase on-budget deficits by more than $5 billion in any of
the four consecutive 10-year periods beginning in 2028.
Because of the magnitude of its estimated budgetary
effects, the Tax Cuts and Jobs Act is considered major
legislation as defined in section 4107 of H. Con. Res. 71, the
Concurrent Resolution on the Budget for Fiscal Year 2018. It
therefore triggers the requirement that the cost estimate, to
the greatest extent practicable, include the budgetary impact
of the bill's macroeconomic effects. The staff of the Joint
Committee on Taxation is currently analyzing changes in
economic output, employment, capital stock, and other
macroeconomic variables resulting from the bill for purposes of
determining these budgetary effects. However, JCT indicates
that it is not practicable for a macroeconomic analysis to
incorporate the full effects of all of the provisions in the
bill, including interactions between these provisions, within
the very short time available between completion of the bill
and the filing of the committee report.
CBO and JCT have determined that the tax provisions of the
legislation contain no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
estimated cost to the federal government
The estimated budgetary effects of the Tax Cuts and Jobs
Act are shown in the table below.
basis of estimate
Revenues and Direct Spending
The Congressional Budget Act of 1974, as amended,
stipulates that JCT's estimates of revenues will be the
official estimates for all tax legislation considered by the
Congress. Therefore, CBO incorporates JCT's estimates into its
cost estimates of the effects of legislation. JCT provided
virtually all estimates for the provisions of the bill, but JCT
and CBO collaborated on the estimate of the provision that
would eliminate the penalties associated with the requirement
that most people obtain health insurance coverage.\1\ The date
of enactment of the bill is generally assumed to be December 1,
2017.
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\1\ See Joint Committee on Taxation, Estimated Revenue Effects of
the ``Tax Cuts and Jobs Act,'' as Ordered Reported by the Committee on
Finance on November 16, 2017, JCX-59-17 (November 17, 2017), https://
go.usa.gov/xnKQv.
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JCT estimates that, together, the provisions contained in
the legislation would decrease Federal revenues, on net, by
about $38 billion in 2018, by $972 billion over the period from
2018 to 2022, and by $1,633 billion over the period from 2018
to 2027. Net outlays would be nearly unchanged in 2018, and
would decrease by $46 billion from 2018 to 2022, and by $219
billion over the period from 2018 to 2027. On net, deficits
would increase by $38 billion in 2018, by $926 billion from
2018 to 2022, and by $1,414 billion from 2018 to 2027. A
portion of those effects reflect changes to revenues from
Social Security taxes, which are off-budget. JCT estimates that
over the 2018-2027 period, the bill would increase on-budget
deficits by $1,441 billion and reduce off-budget deficits by
$27 billion.
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Tax Changes for Individuals.--The bill would make numerous
changes to tax law pertaining to individuals.
JCT estimates that the individual tax provisions would, on
net, reduce revenues by $1,119 billion from 2018 to 2027. Those
provisions also would decrease outlays by an estimated $233
billion over the 2018-2027 period. Some provisions would
increase off-budget revenues by $20 billion over the period
from 2018 to 2027, JCT estimates. On-budget revenues would
decrease by an estimated $1,139 billion.
Revenue-Reducing Provisions.--Provisions that are estimated
to reduce revenues over the 2018-2027 period include the
following, which would take effect on January 1, 2018 and
expire on December 31, 2025:
--Modify the seven tax brackets in place under current law
to create brackets with rates of 10 percent, 12 percent, 22
percent, 24 percent, 32 percent, 35 percent, and 38.5 percent;
--Increase the standard deduction;
--Repeal the individual AMT;
--Allow a 17.4 percent deduction, subject to certain
limits, for qualified business income that individuals receive
from pass-through entities, namely partnerships, S
corporations, and sole proprietorships;
--Increase the child tax credit to $2,000, and, among other
related changes, provide a new $500 credit for certain other
dependents; and
--Double the exemption allowed under estate and gift taxes.
According to JCT's estimates, the largest revenue
reductions would result from the provision that would modify
income tax rates and brackets: Revenues would fall by $1,165
billion and outlays for refundable tax credits would increase
by $9 billion over the 2018-2027 period. The increase in the
standard deduction would reduce revenues by $654 billion and
increase outlays for refundable tax credits by $83 billion over
the same period, JCT estimates. Repealing the individual AMT
would reduce revenues by $769 billion from 2018 to 2027.
JCT also estimates that the bill's provisions that provide
a deduction for qualifying income from pass-through entities
would reduce revenues by $362 billion over the 2018-2027 period
and that modifications to the child tax credit would, over the
same period, reduce revenues by $431 billion and increase
outlays for refundable tax credits by $154 billion. JCT
estimates that additional revenue reductions, totaling $83
billion from 2018 to 2027, would result from the modifications
to estate and gift taxes.
Revenue-Increasing Provisions.--Provisions that are
estimated to increase revenues over the 2018-2027 period would:
--Repeal deductions for personal exemptions through 2025;
--Repeal certain itemized deductions, including those for
State and local taxes and interest on home equity indebtedness,
also through 2025;
--Disallow immediate use of certain losses by active owners
of pass-through entities; and
--Permanently index tax parameters to the chained consumer
price index instead of the traditional consumer price index.
The largest revenue increases would result from the
provision to repeal deductions for personal exemptions, which
JCT estimates would increase revenues by $1,086 billion and
reduce outlays for refundable credits by $134 billion over the
2018-2027 period. JCT estimates that the repeal of certain
itemized deductions also would increase revenues by $974
billion and reduce outlays for refundable credits by $3 billion
from 2018 to 2027.
Substantial but smaller increases in revenues would result
from two other provisions. First, disallowing certain losses by
pass-through entities would increase revenues by an estimated
$137 billion over the 2018-2027 period. Second, the change in
the inflation measure used to index tax parameters would
increase revenues by $115 billion and reduce outlays for
refundable credits by $19 billion over the 2018-2027 period,
according to JCT's estimates.
Repealing the Individual Mandate.--The bill's most
significant effects on outlays would occur as a result of the
elimination, beginning in 2019, of the penalties associated
with the individual mandate. CBO and JCT estimate the following
effects of that provision:
--Federal budget deficits would be reduced by about $318
billion between 2018 and 2027, consisting of estimated
reductions in outlays of $298 billion and increases in revenues
of $21 billion over the period;
--The number of people with health insurance would decrease
by 4 million in 2019 and 13 million in 2027;
--Nongroup insurance markets would continue to be stable in
almost all areas of the country throughout the coming decade;
and
--Average premiums in the nongroup market would increase by
about 10 percent in most years of the decade (with no changes
in the ages of people purchasing insurance accounted for)
relative to CBO's baseline projections. In other words,
premiums in both 2019 and 2027 would be about 10 percent higher
than is projected in the baseline.
Those effects would occur mainly because healthier people
would be less likely to obtain insurance and because,
especially in the nongroup market, the resulting increases in
premiums would cause more people to not purchase insurance. In
this estimate for the Tax Cuts and Jobs Act, the estimated
reduction in the deficit is different from a CBO and JCT
estimate published on November 8, 2017.\2\ The differences
occur because the provision of this legislation eliminates the
penalties associated with the mandate but not the mandate
itself and because of interactions with other provisions of the
bill.
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\2\ See Congressional Budget Office, Repealing the Individual
Health Insurance Mandate: An Updated Estimate (November 2017),
www.cbo.gov/publication/53300.
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Business-Related Tax Changes.--The bill would make many
permanent changes to business taxes. The provisions with the
largest effects on revenues, as estimated by JCT, are those
that would:
--Replace, starting in 2019, the current graduated
structure of corporate income tax rates, which has a top rate
of 35 percent under current law, with a single 20 percent rate;
--Limit the deduction for net interest expenses to the sum
of business interest income and 30 percent of an adjusted
measure of taxable income; and
--Limit the deduction for past net operating losses to a
portion of current taxable income, and generally repeal the 2-
year period over which losses may be carried back to previous
tax years.
JCT estimates that those tax provisions would, on net,
reduce revenues by $669 billion from 2018 to 2027. In addition,
those provisions would increase outlays for refundable tax
credits by an estimated $14 billion over the 2018-2027 period.
JCT estimates that the modifications to the rate structure,
including reducing the top corporate tax rate from the 35
percent that is assessed on most taxable income to a 20 percent
rate that would apply to all amounts of taxable income, would
reduce revenues by $1,329 billion over the 2018-2027 period.
JCT also estimates that limiting the deductions for interest
expenses would increase revenues by $308 billion and that
limiting the use of net operating losses would raise revenues
by $158 billion over the same period.
Other changes to business taxes would increase revenues, on
net, according to JCT. The largest of those estimated increases
over the 2018-2027 period would come from repealing the
deduction for income attributable to domestic production
activities ($81 billion over the period) and from requiring
that certain research or experimental expenditures be amortized
over a period of 5 years or longer, starting in 2026 ($62
billion over the period).
The outlay effects from the business provisions would
result from repealing the corporate alternative minimum tax.
That change would reduce receipts by $26 billion and increase
outlays by $14 billion over the period from 2018 to 2027,
according to JCT's estimates.
International Tax Changes.--The bill would substantially
modify the current system of taxation of worldwide income of
U.S. corporations, generally including foreign earnings in
taxable income when paid to businesses as dividends by their
foreign subsidiaries and with an allowance for tax credits for
certain foreign taxes that businesses pay. Under the Tax Cuts
and Jobs Act, the tax system would provide an exemption for
dividends paid by a foreign corporation to its U.S. parent, and
no foreign tax credits would be allowed for taxes paid on the
amount of such dividends. Other changes also would be
implemented. The international tax provisions with the largest
estimated effects on revenues are those that would:
--Provide a deduction for the foreign-source portion of
dividends received by domestic corporations from certain
foreign corporations;
--Require that certain untaxed foreign income of U.S.
corporations be deemed to be immediately paid to those
corporations as dividends and included in taxable income,
subject to taxation at a rate of 10 percent (or 5 percent for
certain illiquid assets), and with an option to spread the
resulting tax payments over an 8-year period with 60 percent
paid in the final 3 years;
--Impose on U.S. corporations a minimum tax of 10 percent
(12.5 percent starting in 2026) on a tax base that excludes
certain otherwise tax-deductible payments to foreign
affiliates; and
--Require that U.S. corporations immediately include in
taxable income certain amounts earned from low-taxed
investments by foreign subsidiaries.
JCT estimates that the provisions related to international
taxation would, on net, increase revenues by $155 billion from
2018 to 2027. It also estimates that the deduction for
dividends received from foreign corporations would reduce
revenues by $216 billion over that period. JCT estimates that
three other provisions would have large budgetary effects that
would increase revenues from 2018 to 2027. Those provisions
would require a deemed repatriation of untaxed foreign income
($185 billion), impose a new minimum tax ($138 billion), and
require the immediate inclusion in taxable income of certain
amounts earned by foreign subsidiaries ($135 billion).
Revenue-Dependent Repeals.--The bill would make parts of
six business and international taxation provisions dependent on
future revenue collections. The parts that would be affected
generally begin in 2026, and would increase revenues in 2026
and 2027. Those amounts are incorporated into the overall
revenue effects shown in the estimate of this legislation. The
provisions include those that would require that certain
research or experimental expenditures be amortized, that would
limit the deduction for net operating losses, and that would
impose a minimum tax on a tax base that excludes certain
otherwise tax-deductible payments to foreign affiliates.
Under the legislation, the parts of those provisions
beginning in 2026 would not take effect if an overall revenue
target was reached. Specifically, if on-budget revenues for the
period from 2018 to 2026 exceeded $28.387 trillion, then those
revenue-raising provisions would be repealed starting in 2026.
Under CBO's latest baseline revenue projections, adjusted to
include the revenue effects of the bill (without incorporating
any macroeconomic feedback), the on-budget revenue target would
not be reached and therefore the revenue-raising modifications
would occur. JCT has estimated that the revenue-dependent
repeals would have a negligible effect on revenues. Given
variations in inflation, economic output, and many other
economic developments that affect revenues, including the
response of overall economic activity to this legislation,
there is some probability that the target would be reached and
that the modifications to those provisions, and the resulting
revenues, would not occur.
pay-as-you-go considerations
The Statutory Pay-As-You-Go Act of 2010 establishes budget-
reporting and enforcement procedures for legislation affecting
direct spending or revenues. The net changes in outlays and
revenues that are subject to those pay-as-you-go procedures are
shown in the following table. Only on-budget changes to outlays
or revenues are subject to pay-as-you-go procedures.
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allocation of budgetary effects across income groups
Section 4107 of H. Con. Res. 71 requires that CBO and JCT's
estimates of budgetary effects for major legislation include,
to the extent practicable, the legislation's distributional
effects across income categories.
JCT has published a distributional analysis of the Tax Cuts
and Jobs Act that includes the effects of the bill on revenues
and on the portion of refundable tax credits recorded as
outlays.\3\ That analysis included effects on outlays for
premium tax credits stemming from eliminating the penalty
associated with the requirement that most people obtain health
insurance coverage. However, other spending related to
eliminating that penalty was not included, specifically changes
in spending for Medicaid, cost-sharing reduction payments, the
Basic Health Program, and Medicare.
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\3\ See Joint Committee on Taxation, Distributional Effects of the
``Tax Cuts and Jobs Act,'' as Ordered Reported by the Committee on
Finance on November 16, 2017, JCX-60-17 (November 24, 2017), https://
www.jct.gov/publications.html?func=startdown&id=5044.
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CBO has separately allocated across income groups the
budgetary effects of those other changes for an earlier version
of the legislation, under consideration by the Senate Finance
Committee; those estimates also apply to the bill as ordered
reported.\4\ In making those estimates, CBO did not attempt to
estimate the value that people place on such spending, which
may be different from the actual cost to the government of
providing the benefits. CBO also did not attempt to make any
distributional allocations for people who would choose to
obtain unsubsidized health insurance in the nongroup market and
who face higher premiums there compared with what would occur
otherwise.
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\4\ For the estimates and associated methodology, see Congressional
Budget Office, letter to Honorable Ron Wyden on the distributional
effects of changes in spending under the Tax Cuts and Jobs Act as of
November 15, 2017 (November 17, 2017), www.cbo.gov/publication/53333.
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The combined distributional effect of the provisions
estimated by JCT and CBO, thus representing the total
distributional effect of the bill, was calculated by
subtracting the estimated change in Federal spending from the
change in Federal revenues allocated to each income group. The
resulting changes in the Federal deficit allocated to each
income group are reflected in the following table.
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Overall, the combined effect of the change in net Federal
revenues and spending is to decrease deficits (primarily
stemming from reductions in spending) allocated to lower-income
tax filing units and to increase deficits (primarily stemming
from reductions in taxes) allocated to higher-income tax filing
units. Those effects do not incorporate any estimates of the
budgetary effects of any macroeconomic changes that would stem
from the proposal.
increase in long-term on-budget deficits
JCT estimates that enacting the legislation would not
increase on-budget deficits by more than $5 billion in any of
the four consecutive 10-year periods beginning in 2028.
mandates
CBO and JCT have determined that the legislation contains
no intergovernmental or private-sector mandates as defined by
UMRA.
Estimate prepared by: Staff of the Joint Committee on
Taxation and Cecilia Pastrone of the Congressional Budget
Office.
Estimate approved by: John McClelland Assistant Director
for Tax Analysis and Theresa Gullo Assistant Director for
Budget Analysis.MOVE THIS TO THE MIDDLE OF HUGE
FINANCE INSERT
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Title II--Committee on Energy and Natural Resources
contents
Page
I. Amendment........................................... 440
II. Purpose............................................. 440
III. Background and Need................................. 441
IV. Legislative History................................. 445
V. Committee Recommendation and Tabulation of Votes.... 445
VI. Committee Amendment................................. 446
VII. Section-by-Section Analysis......................... 446
VIII. Regulatory Impact Evaluation........................ 447
IX. Congressionally Directed Spending................... 448
X. Executive Communications............................ 448
XI. Dissenting Views of Senators Cantwell, Wyden, 449
Sanders, Stabenow, Franken, Heinrich, Hirono,
Duckworth, and Cortez Masto........................
XII. Changes in Existing Law............................. 452
I. Amendment
The amendment [stated in terms of the page and line numbers
of the introduced bill] is as follows:
On page 4, after line 20, add the following:
SEC.----. LIMITATIONS ON AMOUNT OF DISTRIBUTED QUALIFIED OUTER
CONTINENTAL SHELF REVENUES.
Section 105(f)(1) of the Gulf of Mexico Energy Security Act of 2006
(43 U.S.C. 1331 note; Public Law 109-434) is amended by striking
``exceed $500,000,000 for each of fiscal years 2016 through 2055.'' And
inserting the following: ``exceed--
``(A) $500,000,000 for each of fiscal years 2016
through 2019;
``(B) $650,000,000 for each of fiscal years 2020
through 2021; and
``(C) $500,000,000 for each of fiscal years 2022
through 2055.''.
SEC.----. STRATEGIC PETROLEUM RESERVE DRAWDOWN AND SALE.
(a) Drawdown and Sale.--
(1) In general.--Notwithstanding section 161 of the Energy
Policy and Conservation Act (42 U.S.C. 6241), except as
provided in subsections (b) and (c), the Secretary of Energy
shall draw down and sell from the Strategic Petroleum Reserve
5,000,000 barrels of crude oil during the period of fiscal
years 2026 through 2027.
(2) Deposit of amounts received from sale.--Amounts
received from a sale under paragraph (1) shall be deposited in
the general fund of the Treasury during the fiscal year in
which the sale occurs.
(b) Emergency Protection.--The Secretary of Energy shall not draw
down and sell crude oil under subsection (a) in a quantity that would
limit the authority to sell petroleum products under subsection (h) of
section 161 of the Energy Policy and Conservation Act (42 U.S.C. 6241)
in the full quantity authorized by that section.
(c) Limitation.--The Secretary of Energy shall not drawdown or
conduct sales of crude oil under subsection (a) after the date on which
a total of $325,000,000 has been deposited in the general fund of the
Treasury from sales authorized under that subsection.
II. Purpose
The purpose of Title II is to direct the Secretary of the
Interior to establish and administer a competitive oil and gas
program in the non-wilderness portion of the Arctic National
Wildlife Refuge (ANWR), known as the ``1002 Area'' or Coastal
Plain, and for other purposes.
III. Background and Need
H. Con. Res. 71, the Concurrent Resolution on the Budget
for Fiscal Year 2018, directs the Senate Energy and Natural
Resources Committee to report legislation within its
jurisdiction to the Senate Budget Committee to reduce the
deficit by not less than $1 billion for the 10-year period of
fiscal year 2018 through fiscal year 2027. In accordance with
that instruction, the Committee is reporting reconciliation
legislation to establish and administer a competitive oil and
gas program for the leasing, development, production, and
transportation of oil and gas in and from the Coastal Plain of
ANWR; to increase revenue sharing for Alabama, Louisiana,
Mississippi, and Texas, all of which produce energy from the
Gulf of Mexico; and to sell 5 million barrels of oil from the
Strategic Petroleum Reserve (SPR). The Congressional Budget
Office (CBO) estimates that this legislation will generate net
Federal receipts of $1.107 billion over the specified time
period.
COMPETITIVE OIL AND GAS PROGRAM IN THE 1002 AREA
History of ANWR
The issue of development of the roughly 135 miles of the
Arctic Coastal Plain between Alaska's border with Canada and
the Canning River traces back to at least 1923, when 23.7
million acres were ``withdrawn'' from some public land and
mineral laws to establish the National Petroleum Reserve No. 4
(now the National Petroleum Reserve-Alaska, or NPR-A).\1\
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\1\ Withdrawals by Executive Order 3797-A, Feb. 23, 1923, as
reported in the Department of the Interior's ``Arctic National Wildlife
Refuge Revised Comprehensive Conservation Plan,'' Apr. 3, 2015; pg. 4-
1, www.fws.gov/home/arctic-ccp.
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In 1943, the Federal Government modified that land
withdrawal and during World War II issued a new public land
order (PLO) that withdrew more than 500 miles of Arctic
coastline and coastal plain, about 49 million acres of land in
total, from entrance for ``use in connection with the
prosecution of the war.'' \2\
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\2\ PLO 82, issued, Jan. 22, 1943.
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Soon after Alaska attained Statehood in 1959, the
Eisenhower administration, through Interior Secretary Fred
Seaton, formally designated 8.83 million acres of the coastal
plain and uplands as the Arctic National Wildlife Range on
December 6, 1960.\3\ The designation permitted oil and gas
development to occur as the Range designation withdrew the
acreage from mining, but not from mineral leasing laws.\4\ The
twin PLOs that lifted the 1943 land order reduced the size of
the withdrawals substantially and effectively allowed the new
State of Alaska to select roughly 4 million acres near Prudhoe
Bay for State ownership. In December 1968, the Nation's largest
single oil discovery was made at Prudhoe Bay--a field that is
still in production today.
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\3\ PLO 2214, signed Dec. 6, 1960, and PLO 2215, signed the same
day, revoked PLO 82; DOI ``Arctic National Wildlife Refuge Revised
Comprehensive Conservation Plan, Apr. 3, 2015, pg. 4-1.
\4\ Ibid.
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Alaska Native Claims Settlement Act and Alaska Land Use Issues
With the discovery of oil in northern Alaska, Congress
turned its attention to resolving a host of land issues in the
State that might have affected efforts to move the oil to
market, including the issue of aboriginal land claims. In 1971,
Congress approved the Alaska Native Claims Settlement Act
(ANCSA; Public Law 92-203), which provided Alaska Natives
$962.5 million and a total of 44 million acres of land in
return for settlement of all aboriginal land claims.\5\ ANCSA
also authorized the Secretary of the Interior to withdraw ``up
to, but not to exceed, 80 million acres of unreserved public
lands, including previously classified lands, which the
Secretary deems are suitable for addition to or creation as
units of the National Park, Forest, Wildlife Refuge, and Wild
and Scenic River Systems,'' \6\ and required Congress to make a
land use decision within 7 years.
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\5\ Public Law 92-203.
\6\ Id. Section 17(d)(2)(A) of ANSCA further provided that ``such
withdrawals shall not affect the authority of the State and the
Regional and Village Corporations to make selections and obtain patents
within the areas withdrawn pursuant to section 11.''
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Throughout the 1970s, Congress attempted to develop a
public land use agreement for Alaska. After compromise
legislation failed in 1978, Secretary of the Interior Cecil
Andrus used section 204(e) the Federal Land Policy and
Management Act of 1976 (Public Law 94-579) to withdraw roughly
110 million acres of Alaska from development for a 3-year
period.\7\ Later that month, Secretary of Agriculture Robert
Bergland withdrew an additional 11 million acres from mining
for 2 years under section 204(b) of the same Act.\8\ On
December 1, 1978, President Carter designated 56 million acres
as national monuments under the 1906 Antiquities Act (54 U.S.C.
320301-320303).\9\ Finally, in February 1980, Secretary Andrus
extended the withdrawal on 40 million acres for another 20
years.\10\
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\7\ Department of the Interior, ``Andrus Commends Alaska Governor
Hammond; Exercises 204e,'' Nov. 16, 1978, https://www.fws.gov/news/
Historic/NewsReleases/1978/19781116b.pdf.
\8\ Letter from Secretary Berglund to President Carter, Nov. 28,
1978, https://www.jimmycarterlibrary.gov/digital_library/sso/148878/99/
SSO_148878_099_04.pdf
\9\ Presidential Proclamations 4611-4627. Dec. 1, 1978.
\10\ Department of the Interior, ``Andrus Extends Withdrawals on 40
Million Acres of Federal Lands In Alaska to 20 Years; Cites Senate
Inaction,'' Feb. 12, 1980, https://www.fws.gov/news/Historic/
NewsReleases/1980/19800212a.pdf.
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The Antiquities Act withdrawals and associated PLOs stopped
the State of Alaska and Alaska Native Corporations from making
land selections under the Alaska Statehood Act and under ANCSA.
The withdrawals encouraged Representative Mo Udall of Arizona
to reintroduce legislation calling for 127 million acres of
conservation system units in Alaska. Negotiations in the 96th
Congress resulted in a compromise Alaska lands bill,\11\ the
Alaska National Interest Lands Conservation Act (ANILCA; Public
Law 96-487), signed by President Carter on December 2, 1980.
---------------------------------------------------------------------------
\11\ On Feb. 29, 1980, about 9 months before final passage of
ANILCA, the Arctic National Wildlife Range was renamed as the William
O. Douglas Arctic Wildlife Range by Presidential Proclamation 4729 to
honor the former Supreme Court Justice. The designation was repealed by
ANILCA.
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Alaska National Interest Lands Conservation Act
ANILCA is the largest land withdrawal ever undertaken in
the United States. Through it, more than 104 million acres were
withdrawn or conserved in the form of 13 new or expanded parks,
16 wildlife refuges, 26 wild and scenic rivers, the two largest
national forests in the Nation, and two national monuments.
More than half of those acres (57 million acres, an area of
land nearly the size of Oregon) were designated as Federal
Wilderness. ANILCA single-handedly doubled the size of the
National Park System and significantly expanded the National
Wildlife Refuge System, as well.\12\
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\12\ Congressional Research Service, ``Federal Land Ownership:
Overview and Data,'' C. Hardy Vincent, Mar. 2, 2017, (R42346).
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The Coastal Plain of the Arctic National Wildlife Refuge
Section 303(2) of ANILCA expanded the Arctic National
Wildlife Range to the south and west by 9.2 million acres of
public domain lands and renamed the 19.64 million acres the
Arctic National Wildlife Refuge.\13\ ANILCA also designated
7.16 million acres of the refuge, including the foothills and
45 miles of the eastern-most coastline bordering Canada, as
wilderness under the Wilderness Act of 1964.\14\ The remainder
of the land in ANWR, including all of the 1.57 million acre
Coastal Plain, or the so-called ``1002 Area,'' was not included
in the wilderness designation. Section 1002 of ANILCA
specifically set aside the 1002 Area for further study and
exploration of its oil and gas potential. Pursuant to section
1003 of the Act, oil and gas production was prohibited and no
``leasing or other development leading to production of oil and
gas'' could take place until authorized by Congress.\15\
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\13\ ``Acreages . . . are derived from many sources and may not
agree with previously published values,'' according to a disclaimer
(pg. S-9) in the Executive Summary for the 2015 Arctic National
Wildlife Refuge Revised Comprehensive Conservation Plan (Jan. 2015).
\14\ This is usually referred to as about 8 million acres because
in 1980 GIS technology was not as precise.
\15\ Public Law 96-497; 16 U.S.C. 3143.
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Section 1002 of ANILCA further directed the Secretary of
the Interior to study the Coastal Plain's biological and
geological resources and provide recommendations for future
management decisions by Congress. The Department produced the
report in 1987 after 5 years of biological baseline studies and
geological studies; two seasons of seismic exploration
activities; public hearings; and the receipt of 11,000 public
comments. The report contained five management alternatives,
ranging from opening all of the 1002 Area to designating it as
wilderness. The Secretary recommended that Congress pass
legislation to open the entire 1002 Area to responsible oil and
gas development, stating that, ``[the] coastal plain is rated
by geologists as the most promising onshore oil and gas
exploration area in the United States.'' \16\
---------------------------------------------------------------------------
\16\ Department of the Interior, Arctic National Wildlife Refuge,
Alaska, Coastal Plain Assessment, Apr. 1987, https://pubs.usgs.gov/
fedgov/70039559/report.pdf.
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Projected Resources in the 1002 Area
Estimates of the 1002 Area's resource potential stem from a
variety of historical data. There are three known oil seeps
inside the Coastal Plain. Additional data comes from
evaluations of the geology after the discovery of oil at nearby
Prudhoe Bay; from seismic testing conducted in the winter of
1984-1985 as part of the Interior Department's study of the
area (as directed by section 1002 of ANILCA); and from
proprietary data from an exploratory test well drilled on
Alaska Native-owned lands southeast of the Village of Kaktovik
in 1985-1986.
According to the U.S. Geologic Survey's (USGS) most recent
re-evaluation of the 1002 Area's potential, there is a 95
percent probability that the area contains 5.72 billion barrels
of oil, a mean (50 percent) chance that it contains 10.36
billion barrels, and a 5 percent chance that it contains 15.95
billion barrels of oil.\17\
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\17\ Department of the Interior, USGS, 1999 Open File Report 98-34.
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Importance of Production in the 1002 Area
Responsible development of up to 2,000 Federal acres of the
1002 Area is projected to yield significant long-term benefits
for the United States.
Deficit Reduction.--While bonus bids from lease sales are
projected to raise more than $1 billion for the Federal
Treasury between fiscal year 2018 and fiscal year 2027, the
largest share of revenues will accrue outside the 10-year
window as leases enter commercial production. Federal taxes are
likely to raise even greater revenues, further reducing Federal
deficits.
Energy Security.--Production from the 1002 Area will help
restore throughput to the Trans-Alaska Pipeline System, which
is currently operating at just one-quarter of its capacity.\18\
This is expected to provide a needed supply of domestic oil to
West Coast refineries in Washington and California, which have
become significantly more dependent on foreign suppliers in
recent years.\19\ Despite some suggestions that U.S. oil
exports have obviated the need for new production, the Federal
Energy Information Administration projects the United States
will remain a significant net importer through at least 2050,
with net import levels beginning to rise again after 2030.\20\
---------------------------------------------------------------------------
\18\ Alyeska Pipeline Company, Throughput, available online at
http://www.alyeska-pipe.com/TAPS/PipelineOperations/Throughput
\19\ California Energy Commission, ``Oil Supply Sources to
California Refineries,'' available online at http://www.energy.ca.gov/
almanac/petroleum_data/statistics/crude_oil_receipts.html
\20\ Energy Information Administration, Annual Energy Outlook 2017,
Appendix Table A11, ``Petroleum and other liquids supply and
disposition,'' available online at https://www.eia.gov/outlooks/aeo/
pdf/appa.pdf.
---------------------------------------------------------------------------
Global Stability.--Production from the 1002 Area will
likely add a measure of stability to oil markets, which are at
considerable risk of tightening. Global oil prices reached a 2-
year high the week before the committee's business meeting,\21\
with artificial supply restrictions or supply disruptions
possible or underway in a range of major exporting nations. In
its new World Energy Outlook 2017, the International Energy
Agency notes that, ``[o]nce U.S. tight oil plateaus in the late
2020s and non-OPEC production as a whole falls back, the market
becomes increasingly reliant on the Middle East to balance the
market. There is a continued large-scale need for investment to
develop a total of 670 billion barrels of new resources to
2040, mostly to make up for declines at existing fields rather
than to meet the increase in demand.'' \22\
---------------------------------------------------------------------------
\21\ CNBC, ``Oil hits 2 year high and the path of `least resistance
is higher,' '' Nov. 6, 2017, available online at https://www.cnbc.com/
2017/11/06/oil-hits-two-year-high-and-the-path-of-least-resistance-is-
higher.html.
\22\ International Energy Agency, ``World Energy Outlook 2017,''
available online at https://www.iea.org/weo2017/.
---------------------------------------------------------------------------
Job Creation.--Responsible development in the 1002 Area
will also create thousands of jobs throughout the United
States, while indirectly supporting the creation of many
thousands more. This is particularly important in Alaska, which
had the highest unemployment rate of any State at 7.2 percent
in October 2017, as compared to the national average of 4.1
percent.\23\
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\23\ Bureau of Labor Statistics, State-by-State Unemployment
Levels, Nov. 2017, available online at https://www.bls.gov/
news.release/laus.t01.htm
---------------------------------------------------------------------------
IV. Legislative History
The Senate passed H. Con. Res. 71, the Concurrent
Resolution on the Budget for fiscal year 8, on October 19,
2017, by a vote of 51-49. The Senate amendment to H. Con. Res.
71 was agreed to in the House of Representatives on October 26,
2017, by a vote of 216-212.
Pursuant to H. Con. Res. 71, the Senate Committee on Energy
and Natural Resources was directed to achieve $1 billion in
outlay reductions in the period of fiscal year through fiscal
year 2027. On November 2, 2017, the Committee held a hearing
``to receive testimony on the potential for oil and gas
exploration and development in the non-wilderness portion of
the Arctic National Wildlife Refuge, known as the `1002 Area'
or Coastal Plain, to raise sufficient revenue pursuant to the
Senate reconciliation instructions included in H. Con. Res
71.''
The Committee adopted amendment 16, sponsored by Senators
Cassidy, Strange, and King, at its business meeting on November
15, 2017, on a roll call vote of 13-10.
At the business meeting on November 15, 2017, the Committee
ordered reconciliation legislation, Title II, favorably
reported as amended, in accordance with its reconciliation
instruction, by a vote of 13-10.
V. Committee Recommendation and Tabulation of Votes
The Senate Committee on Energy and Natural Resources, in
open business session on November 15, 2017, by majority vote of
a quorum present, recommends that the Senate pass Title II, if
amended as described herein.
The roll call vote on reporting the measure was 13 yeas and
10 nays, as follows:
------------------------------------------------------------------------
Name & Answer Name & Answer
State Yea Nay Present State Yea Nay Present
------------------------------------------------------------------------
MURKOWSKI X CANTWELL X
(AK) (WA)
(Chairma (Ranking
n) )
------------------------------------------------------------------------
BARRASSO X WYDEN X
(WY) (OR) *
------------------------------------------------------------------------
RISCH X SANDERS X
(ID) (VT)
------------------------------------------------------------------------
LEE (UT) X STABENOW X
(MI)
------------------------------------------------------------------------
FLAKE X FRANKEN X
(AZ) (MN) *
------------------------------------------------------------------------
DAINES X MANCHIN X
(MT) (WV)
------------------------------------------------------------------------
GARDNER X HEINRICH X
(CO) (NM)
------------------------------------------------------------------------
ALEXANDER X HIRONO X
(TN) (HI) *
------------------------------------------------------------------------
HOEVEN X KING (ME) X
(ND)
------------------------------------------------------------------------
CASSIDY X DUCKWORTH X
(LA) (IL) *
------------------------------------------------------------------------
PORTMAN X CORTEZ X
(OH) MASTO
(NV)
------------------------------------------------------------------------
STRANGE X
(AL)
------------------------------------------------------------------------
* Indicates vote by proxy.
VI. Committee Amendment
During the Committee's consideration of this legislation,
one amendment was adopted.
The first section of the amendment increases the annual
limitation on offshore revenue sharing under section 105(f)(1)
of the Gulf of Mexico Energy Security Act of 2006 (GOMESA,
Public Law 109-432) for the Gulf producing States of Alabama,
Louisiana, Mississippi, and Texas, from $500 million annually
for fiscal year 2016 through fiscal year 2055, to $500 million
annually for fiscal year 2016 through fiscal year 2019, $650
million annually for fiscal year 2020 through fiscal year 2021,
and $500 million annually for fiscal year 2022 through fiscal
year 2055.
The second section of the amendment directs the Secretary
of Energy to draw down and sell 5 million barrels of crude oil
from the SPR during fiscal year 2026 and fiscal year 2027. The
Secretary is prohibited from taking action that would limit the
authority to sell petroleum products pursuant to the national
energy security provision in section 161(h) the Energy Policy
and Conservation Act (42 U.S.C. 6241). The Secretary is further
directed to stop the drawdown or sale of crude oil after the
date on which a total of $325 million has been deposited in the
general fund of the Federal Treasury.
VII. Section-by-Section Analysis
Section 20001(a) sets forth definitions for use in this
section.
Subsection (a)(1) defines the term ``Coastal Plain'' by
referencing a map prepared by the USGS entitled ``ANWR Map--
Plate 1'' and ``ANWR Map--Plate 2'' and dated October 24, 2017.
This map is attached to this Report in Appendix A.
Subsection (a)(2) defines the term ``Secretary'' as the
Secretary of the Interior, acting through the Bureau of Land
Management.
Subsection (b)(1) repeals section 1003 of the ANILCA (16
U.S.C. 3143).
Subsection (b)(2)(A) directs the Secretary to establish and
administer a competitive oil and gas program for the leasing,
development, production, and transportation of oil and gas in
and from the Coastal Plain.
Subsection (b)(2)(B) amends section 303(2)(B) of ANILCA by
adding ``to provide for an oil and gas program on the Coastal
Plain'' as an additional purpose for ANWR.
Subsection (b)(3) directs the Secretary to manage the oil
and gas program in accordance with the Naval Petroleum Reserves
Production Act of 1976 (42 U.S.C. 6501 et seq.) and associated
regulations.
Subsection (b)(4) sets the royalty rate for leases issued
pursuant to this section at 16.67 percent.
Subsection (b)(5) specifies that of the amount of adjusted
bonus, rental, and royalty receipts derived from Federal oil
and gas leasing and operations in the Coastal Plain, 50 percent
shall be paid to the State of Alaska and the remaining 50
percent shall be deposited into the Federal Treasury as
miscellaneous receipts.
Subsection (c)(1)(A) directs the Secretary to conduct not
fewer than two area-wide lease sales within 10 years after the
Act's enactment.
Subsection (c)(1)(B) directs the Secretary to make
available not fewer than 400,000 acres of land in each lease
sale and to include the areas with the highest hydrocarbon
potential. This subsection further directs the Secretary to
conduct the first lease sale within 4 years of enactment of
this Act, and the second lease sale within 7 years of
enactment.
Subsection (c)(2) directs the Secretary to issue any
rights-of-way or easements across the Coastal Plain necessary
for the exploration, development, production, or transportation
associated with the oil and gas program.
Subsection (c)(3) directs the Secretary to authorize up to
2,000 surface acres of Federal land on the Coastal Plain to be
covered by production and support facilities. Such facilities
include airstrips and any area covered by gravel berms or piers
for support of pipelines.
Section 20002 amends section 105(f)(1) of GOMESA to
increase the revenue sharing limits on the disbursement of
qualified revenues to Gulf producing States from $500 million
to $650 million in fiscal year 2020 and fiscal year 2021. The
current limitation of $500 million per year would remain from
fiscal year 2016 through fiscal year 2019 and from fiscal year
2022 through fiscal year 2055.
Section 20003(a) requires the Secretary of Energy to sell 5
million barrels of crude oil from the SPR from fiscal year 2026
through fiscal year 2027 and to deposit the revenue into the
general fund of the Federal Treasury.
Subsection (b) provides emergency protection by prohibiting
the Secretary from taking action that would limit the authority
to sell petroleum products pursuant to the national energy
security provision in section 161(h) the Energy Policy and
Conservation Act (42 U.S.C. 6241).
Subsection (c) directs the Secretary to stop the drawdown
or sale of crude oil after the date on which a total of $325
million has been deposited in the general fund of the Federal
Treasury.
VIII. Regulatory Impact Evaluation
In compliance with paragraph 11(b) of Rule XXVI of the
Standing Rules of the Senate, the Committee makes the following
evaluation of the regulatory impact which would be incurred in
carrying out this legislation.
The bill is not a regulatory measure in the sense of
imposing Government-established standards or significant
economic responsibilities on private individuals and
businesses.
No personal information would be collected in administering
the program. Therefore, there would be no impact on personal
privacy.
Little, if any, additional paperwork would result from the
enactment of this measure, as ordered reported.
IX. Congressionally Directed Spending
This measure, as ordered reported, does not contain any
congressionally directed spending items, limited tax benefits,
or limited tariff benefits as defined in Rule XLIV of the
Standing Rules of the Senate.
X. Executive Communications
The testimony provided by the Department of the Interior on
November 2, 2017, which addresses development in the 1002 Area,
follows:
Statement of Greg Sheehan, Principal Deputy Director, U.S. Fish and
Wildlife Service, Before the Senate Energy and Natural Resources
Committee, on Oil and Gas Exploration and Development in the Arctic
Coastal Plain
Chairman Murkowski, Ranking Member Cantwell and Members of the
Committee, thank you for the opportunity to appear before you today to
testify on behalf of the Department of Interior (Department) regarding
resource development in the 1002 area of the coastal plain of Alaska's
North Slope. I am Greg Sheehan, Principal Deputy Director of the U.S.
Fish and Wildlife Service.
the arctic national wildlife refuge
The original 8.9 million acre Arctic National Wildlife Range was
established on December 6, 1960 to protect the wildlife, wilderness,
and recreational values of the range. It was later expanded through the
Alaska National Interest Lands Conservation Act (ANILCA) on December 2,
1980 to 19.3 million acres and renamed the Arctic National Wildlife
Refuge. ANILCA also designated 8 million acres of the original Range as
Wilderness, requiring this area to be managed in accordance with the
Wilderness Act, and added new Refuge purposes. These purposes include
conservation of fish and wildlife populations; fulfillment of
international treaty obligations of the United States with respect to
fish and wildlife and their habitats; providing the opportunity for
continued subsistence uses by rural residents; and ensuring water
quality and quantity within the refuge.
the 1002 area
In section 1002 of ANILCA, Congress and President Carter deferred a
decision regarding future management of the 1.5-million-acre coastal
plain--now referred to as the 1002 area--in recognition of the area's
natural resource potential. Section 1002 of ANILCA provides for the
comprehensive and continuing inventory and assessment of the fish and
wildlife resources of the coastal plain of the Arctic Refuge; an
analysis of the impacts of oil and gas exploration, development, and
production, and authorization of exploratory activity within the
coastal plain in a manner that avoids significant adverse effects on
the fish and wildlife and other resources.
Due to its unique purpose and potential, Congress did not include
the 1002 area in the refuge's designated wilderness when ANILCA was
enacted in 1980. Since then, no Congress has designated the 1002 area
as wilderness.
The 1002 area is currently managed as a Minimal Management Area in
the National Wildlife Refuge System. As such, Service activities are
directed at maintaining the existing conditions of areas that have high
fish and wildlife values or other resource values. Opportunities for
public use and access are available for subsistence purposes and for a
variety of recreational activities, including hunting, fishing,
trapping, backpacking, and camping. Traditional motorized access via
aircraft and motorboats is allowed. The Service focuses its efforts in
the 1002 area primarily on conducting studies and survey/inventory
programs. Section 1003 stipulates that production of oil and gas from
the Arctic Refuge is prohibited and no leasing or other development
leading to production of oil and gas shall be undertaken until
authorized by an Act of Congress.
In an assessment completed and sent to Congress in 1987, the
Secretary recommended that Congress consider leasing the 1002 area for
oil and gas. In 1988, the Arctic Refuge's initial Comprehensive
Conservation Plan (CCP) recognized the coastal plain as a critical
calving area for the Porcupine caribou herd, which is an important
subsistence resource for Alaska Native people. In 2009, the U.S.
Geological Survey determined in its most recent economic analysis the
area had a mean estimate of 10.35 billion barrels of recoverable oil,
with 80 to 90 percent of that volume being economically recoverable at
$42 per barrel.
Since the 1987 assessment was completed, the Service has continued
to inventory, monitor, and assess the fish and wildlife resources
within the 1002 area so that current data is available to inform future
activity.
Last spring, Secretary Zinke visited the North Slope with Chairman
Murkowski and a bipartisan Senate delegation. After seeing it first
hand, he signed a secretarial order in Anchorage that requires the USGS
to update its resource assessments for the 1002 area. The plan includes
consideration of new geological and geophysical data, as well as
potential for reprocessing existing geological and geophysical data.
The secretarial order does not reduce, eliminate, or modify any
environmental or regulatory requirements for energy development. This
evaluation is consistent with the intent of ANILCA and will improve the
Department's understanding of the 1002 area.
administration support
The administration's fiscal year 2018 budget proposes oil and gas
leasing in the 1002 area. If production is authorized by Congress, the
administration believes this will bolster our Nation's energy
independence and national security, provide economic opportunity for
Alaskans and provide much-needed revenue to both the State of Alaska
and Federal Government. With passage of the budget reconciliation
provisions in H. Con. Res. 71, and its revenue-raising instructions to
your Committee, the Department stands ready to assist Congress as it
considers legislation, consistent with ANILCA, to authorize the
potential development of the resources contained in this area.
Chairman Murkowski, I appreciate the opportunity to testify on
behalf of the Department on this issue and look forward to answering
any questions you might have. Thank you.
XI. Dissenting Views of Senators Cantwell, Wyden, Sanders, Stabenow,
Franken, Heinrich, Hirono, Duckworth, and Cortez Masto
Section 2001(b) of the Concurrent Resolution on the Budget
for Fiscal Year 2001, H. Con. Res. 71, instructs the Committee
on Energy and Natural Resources to report changes in laws
within its jurisdiction to reduce the deficit by not less than
$1 billion for the period of fiscal years 2018 through 2027.
The majority has chosen to meet this instruction by turning the
Arctic National Wildlife Refuge into an oil field. We strongly
oppose this action.
The Arctic National Wildlife Refuge is considered ``the
Last Great Wilderness.'' It exemplifies the idea of wilderness.
It preserves arctic and subarctic ecosystems in their natural
and unaltered state. It provides critical habitat for
threatened polar bears, and it serves as the calving ground for
caribou and the breeding ground for more than 200 species of
migratory birds. It was first protected by the Eisenhower
administration in 1960 to preserve the area's ``unique
wildlife, wilderness, and recreational values.'' It was
established as a national wildlife refuge by Congress in 1980
``to conserve fish and wildlife populations and habitats in
their natural diversity. . . .''
Congress acted in 1980 to preserve the lands ``for the
benefit, use, education and inspiration of present and future
generations.'' It declared the protection of these lands to be
in ``the national interest'' because of the ``unrivaled . . .
natural landscapes,'' the ``inestimable value'' of the area's
wildlife to the Nation, and the opportunities its unaltered
ecosystems provide for scientific research. We should not now
permit this priceless patrimony to be auctioned off to oil
companies in order to fund tax cuts for the wealthiest among
us.
To begin with, we do not need to sacrifice the Arctic
Refuge to balance the budget. According to the Congressional
Budget Office, the proposal will reduce the deficit by, at
most, less than $1.1 billion. At the same time, the Concurrent
Resolution on the Budget has instructed the Finance Committee
to increase the deficit by up to $15 trillion in order to
provide tax cuts to the wealthy. Auctioning off the Nation's
premier wildlife refuge to the oil companies to plunder will
only reduce the deficit created by tax cuts for the wealthy by
less than 0.067 percent.
Nor does the Nation need the oil. Oil imports and oil
prices have fallen. Domestic oil production is at historic
highs. The Trump administration has declared that we have a
``domestic surplus of oil.'' We now export significant amounts
of the oil we produce in this country. Much of the oil produced
in the Refuge will likely be exported. We are selling off much
of the Strategic Petroleum Reserve, which once provided an
emergency reserve of oil to see us through supply disruptions.
Indeed, at the same time the majority approved auctioning off
the Arctic Refuge to the oil companies, it adopted an amendment
to sell off another 5 million barrels of the Strategic
Petroleum Reserve.
The majority bases this ill-advised legislation on a fabric
of false premises. First, it asserts that the oil and gas
leasing program it authorizes would not significantly affect
the 19.6 million-acre Refuge because it would only permit
leasing on a 1.5 million-acre area of the coastal plain. But
the coastal plain is the ``biological heart'' of the Refuge. It
has been designated as critical habitat for threatened polar
bears. It is where the Porcupine Caribou Herd calves and most
of the migratory birds nest and breed.
Second, the majority contends that Congress intended the
coastal plain to be leased for oil and gas development when it
established the Refuge. It did not. The Congress that
established the Refuge expressly prohibited oil and gas
production, leasing, or any other development leading to oil
and gas production on the coastal plain without further
statutory authorization. It withdrew the coastal plain from the
operation of the mineral leasing laws. Although it did
authorize temporary, limited exploratory activities on the
coastal plain, it did so only in the context of an
environmental assessment of the coastal plain's fish and
wildlife resources and the impacts of any oil and gas
development on those fish and wildlife resources. It did not
promise that oil and gas development would ever be permitted on
the coastal plain.
Third, the majority argues that the oil and gas development
that its proposal authorizes would occupy no more than 2,000
acres of the 1.5 million-acre coastal plain. But it counts only
the area ``covered by production and support facilities''
toward the 2,000-acre limit. It excludes from its calculation
the many miles of roads, causeways, and pipelines (other than
the support piers) that will be needed to connect the
production and support facilities, and which will destroy fish
and wildlife habitat and disrupt migration patterns. Nor does
it count that vast areas that may be affected by seismic
testing and other exploration activities.
Moreover, the majority neglects to mention that if Congress
authorizes any leasing or other development leading to
production on the coastal plain, the Arctic Slope Regional
Corporation, will be entitled to lease all 100,000 acres in the
northeast corner of the Refuge pursuant to a 1983 contractual
agreement with the Department of the Interior.
Finally, the majority asserts that its proposed oil and gas
development program will be compatible with fish and wildlife
protection and that the legislation will not waive any
environmental laws or regulations. While it is true that the
proposal does not expressly waive any environmental laws, it
fundamentally alters the purpose of the Refuge and dramatically
diminishes the legal protections currently afforded to the
Refuge. By mandating the oil and gas program, the legislation
will have the effect of waiving many of the protections of
these environmental laws.
Under current law, oil and gas development is prohibited in
a national wildlife refuge unless the Secretary of the Interior
determines it is ``compatible'' with the purpose for which the
refuge was established. The Arctic National Wildlife Refuge was
established ``to conserve fish and wildlife populations and
habitats.'' Oil and gas development is not compatible with
conserving fish and wildlife populations and habitats. That is
why prior legislative proposals to authorize oil and gas
development in the Refuge have ``deemed'' it to be
``compatible.'' Rather than deeming oil and gas development to
be compatible with wildlife conservation, the majority simply
makes oil and gas development a purpose of the Refuge.
The proposal then gives responsibility for managing the oil
and gas program to the Bureau of Land Management and directs
the Bureau to manage the program in accordance with the
National Petroleum Reserve Production Act. Under current
regulations, no oil and gas development can occur within a
national wildlife refuge except ``with the concurrence of the
Fish and Wildlife Service as to the time, place and nature of
such operations in order to give complete protection to
wildlife populations and wildlife habitat on the areas leased.
. . .'' The Fish and Wildlife Service cannot concur unless it
determines that the operations, ``based on sound professional
judgment, will not materially interfere with or detract from''
the wildlife protection purposes of the refuge.
The majority's proposal fundamentally alters that
environmental protection standard. By directing the Bureau of
Land Management to conduct an oil and gas development program
in the Arctic Refuge in accordance the National Petroleum
Reserve Production Act, the proposal makes oil and gas
development, rather than wildlife protection, its principal
purpose. The Production Act affords wildlife protection only to
the extent consistent with the requirements . . . for the
exploration'' for oil and gas, and it only requires the
Department of the Interior to ``mitigate,'' not avoid or
prevent, ``reasonably foreseeable and significantly adverse
effects'' on fish and wildlife and their habitats.
By mandating that the Bureau of Land Management to
establish an oil and gas leasing program and to conduct at
least two lease sales, offering at least 400,000 acres in each
lease sale, the proposal will statutorily require the Bureau to
grant leases in the Refuge regardless of the harmful
environmental impacts the program will inevitably have on fish
and wildlife and their habitats.
Simply put, the proposal, if enacted, will turn the
Nation's premier national wildlife refuge into another national
petroleum reserve, in which oil and gas development will have
priority over the protection of the Refuge's wildlife. Doing so
will violate our trust responsibility, as stewards of our
public lands, to preserve and protect this priceless piece of
our national heritage for the benefit of present and future
generations.
We strongly dissent.
Maria Cantwell,
Ron Wyden,
Bernard Sanders,
Debbie Stabenow,
Al Franken,
Martin Heinrich,
Mazie K. Hirono,
Tammy Duckworth,
Catherine Cortez Masto,
U.S. Senators.
XII. Changes in Existing Law
In compliance with paragraph 12 of Rule XXVI of the
Standing Rules of the Senate, changes to existing law made by
the legislation, as ordered reported to the Committee on the
Budget, are shown as follows (existing law proposed to be
omitted is enclosed in black brackets, new matter is printed in
italic, existing law in which no change is proposed is shown in
roman):
ALASKA NATIONAL INTEREST LANDS CONSERVATION ACT
PUBLIC LAW 96-487, AS AMENDED
* * * * * * *
SEC. 303. ADDITIONS TO EXISTING REFUGES. * * *
(2) Arctic national wildlife refuge. * * *
(B) The purposes for which the Arctic National
Wildlife Refuge is established and shall be managed
include--
(i) to conserve fish and wildlife populations
and habitats in their natural diversity
including, but not limited to, the Porcupine
caribou herd (including participation in
coordinated ecological studies and management
of this herd and the Western Arctic caribou
herd), polar bears, grizzly bears, muskox, Dall
sheep, wolves, wolverines, snow geese,
peregrine falcons and other migratory birds and
Arctic char and grayling;
(ii) to fulfill the international treaty
obligations of the United States with respect
to fish and wildlife and their habitats;
(iii) to provide, in a manner consistent with
the purposes set forth in subparagraphs (i) and
(ii), the opportunity for continued subsistence
uses by local residents; [and]
(iv) to ensure, to the maximum extent
practicable and in a manner consistent with the
purposes set forth in paragraph (i), water
quality and necessary water quantity within the
refuge[.]; and
(v) to provide for an oil and gas program on
the Coastal Plain.
* * * * * * *
[Sec. 1003. Prohibition on development. Production of oil and
gas from the Arctic National Wildlife Refuge is prohibited and
no leasing or other development leading to production of oil
and gas from the range shall be undertaken until authorized by
an Act of Congress.]
* * * * * * *
GULF OF MEXICO ENERGY SECURITY ACT
PUBLIC LAW 109-432, AS AMENDED
* * * * * * *
SEC. 105. DISPOSITION OF QUALIFIED OUTER CONTINENTAL SHELF REVENUES
FROM 181 AREA, 191 SOUTH AREA, AND 2002-2007
PLANNING AREAS OF GULF OF MEXICO. * * *
(f) Limitations on Amount of Distributed Qualified Outer
Continental Shelf Revenues.--
(1) In general.--Subject to paragraph (2), the
total amount of qualified outer Continental Shelf
revenues made available under subsection (a)(2) shall
not [exceed $500,000,000 for each of fiscal years 2016
through 2055.] exceed--
(A) $500,000,000 for each of fiscal years
2016 through 2019;
(B) $650,000,000 for each of fiscal years
2020 through 2021; and
(C) $500,000,000 for each of fiscal years
2022 through 2055.
* * * * * * *
Appendix A--ANWR Map Plate 1 and ANWR Map Plate 2
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
CBO Cost and Budgetary Considerations
The following estimate of the costs of this measure has
been provided by the Congressional Budget Office:
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
SUMMARY
The legislation would direct the Secretary of the Interior
(DOI) to implement an oil and gas leasing program for the
coastal plain of the Arctic National Wildlife Refuge (ANWR). It
also would authorize DOI to spend $300 million from proceeds
from oil and gas leasing on the Outer Continental Shelf (OCS)
over the 2018-2027 period. Finally, the legislation would
direct the Department of Energy (DOE) to sell a portion of the
petroleum stored in the Strategic Petroleum Reserve (SPR). On
the basis of information provided by DOI, DOE, and individuals
working in the oil and gas industry, CBO estimates that
implementing the legislation would increase net offsetting
receipts, which are treated as reductions in direct spending,
by about $1.1 billion over the 2018-2027 period.
Because enacting the legislation would affect direct
spending pay-as-you-go procedures apply. Enacting the
legislation would not affect revenues.
CBO estimates that enacting legislation would not increase
net direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2028.
The legislation contains no intergovernmental or private-
sector mandates as defined in the Unfunded Mandates Reform Act
(UMRA).
ESTIMATED COST TO THE FEDERAL GOVERNMENT
The estimated budgetary impact of the legislation is shown
in the following table. The costs of this legislation fall
within budget functions 270 (energy), 300 (natural resources
and environment), 800 (general government), and 950
(undistributed offsetting receipts).
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]>
BASIS OF ESTIMATE
For this estimate, CBO assumes that the legislation will be
enacted near the end of 2017 and that the appropriated funds
necessary to implement the legislation would be available.
Description of the Legislation
The legislation would direct the Secretary of the Interior
to implement an oil and gas leasing program for lands located
within the coastal plain of ANWR, which includes about 1.5
million acres of Federal land on the northeast coast of Alaska.
Under current law, activities related to oil and gas leasing in
ANWR are prohibited.
The legislation would require the Secretary to hold two
lease sales over a 7-year period following enactment and to
offer at least 400,000 acres of land in ANWR for lease at each
sale. Any lease sales in ANWR would be carried out in
accordance with procedures used to conduct oil and gas leasing
within the National Petroleum Reserve in Alaska. For each lease
awarded, lessees would pay the Federal Government bonus bids to
acquire the leases, annual rent to retain the leases, and
royalties based on the value of any oil or gas production from
the leases. The legislation would establish a 16.67 percent
royalty on oil and gas produced in ANWR. (Under current law,
the Federal Government charges royalties of 12.5 percent for
oil and gas produced onshore and 18.75 percent for oil and gas
produced in the Outer Continental Shelf.) Under the
legislation, Alaska would receive one-half of the gross
proceeds generated from this leasing program.
The legislation would authorize DOI to spend $300 million
over the 2018-2027 period without further appropriation from
receipts from oil and gas leases on the Outer Continental
Shelf. In addition, the legislation would direct the Department
of Energy to sell 5 million barrels of oil from the Strategic
Petroleum Reserve over the 2026-2027 period, subject to certain
conditions.
Direct Spending
CBO estimates that implementing the legislation would
increase net offsetting receipts, and thus reduce direct
spending, by about $1.1 billion over the 2018-2027 period.
Oil and Gas Leasing in ANWR.--CBO estimates that gross
proceeds from bonus bids paid for the right to develop leases
in ANWR would total $2.2 billion over the 2018-2027 period.
That estimate is based on historical information about oil and
gas leasing in the United States and on information from DOI,
the Energy Information Administration (EIA), and individuals
working in the oil and gas industry about factors that affect
the amounts that companies are willing to pay to acquire oil
and gas leases. In addition, CBO relied on estimates prepared
by the U.S. Geological Survey of the amount of oil that might
be produced from the coastal plain of ANWR. As specified in the
legislation, one-half of all receipts from leases in ANWR would
be paid to Alaska, leaving net Federal receipts totaling $1.1
billion over the 2018-2027 period.
Estimates of bonus bids for leases in ANWR are uncertain.
Potential bidders might make assumptions that are different
from CBO's, including assumptions about long-term oil prices,
production costs, the amount of oil and gas resources in ANWR,
and alternative investment opportunities. In particular, oil
companies have other domestic and overseas investment options
that they would evaluate and compare with potential investments
in ANWR. The potential profitability for a wide range of such
global investment options would probably be a significant
factor in prospective bidders' ultimate choices of how much to
bid for ANWR leases. The number of factors that affect
companies' investment decisions result in a wide range of
estimates for bonus bids. CBO's estimate reflects our best
estimate of the midpoint of that range.
In addition to receipts from bonus bids, CBO estimates that
the Federal Government would collect net receipts from rental
payments totaling about $2 million over the 2022-2027 period.
(Lease holders make an annual rental payment until production
begins.) CBO also estimates that the Federal Government would
receive royalty payments on oil produced from ANWR leases;
however, based on information from EIA regarding the typical
amount of time necessary to drill exploratory wells, complete
production plans, and build the necessary infrastructure to
produce and transport any oil produced in ANWR, CBO expects
that no significant royalty payments would be made until after
2027.
Spending of OCS Receipts.--Section 20002 would authorize
DOI to spend an additional $300 million over the 2018-2027
period without further appropriation from receipts collected
from certain OCS leases. Under current law, DOI is directed to
pay a portion of the receipts from leases issued after 2006 in
the Central and Western Gulf of Mexico to four States--Alabama,
Louisiana, Mississippi, and Texas--and to the Land and Water
Conservation Fund. Current law caps those payments at $500
million a year through 2055. This legislation would raise that
cap to $650 million in 2020 and 2021. CBO estimates that
enacting that change would increase spending by $150 million in
each of the fiscal years 2021 and 2022, reflecting the 1-year
lag between the time receipts are collected and spent.
SPR Drawdown..--Section 20003 would direct DOE to sell 5
million barrels of oil from the SPR over the 2026-2027 period,
subject to certain conditions. Under the legislation, the
proceeds from such sales would be deposited in the general fund
of the Treasury by the end of each fiscal year and could not be
spent for other purposes. The legislation would limit the cash
proceeds resulting from those sales by prohibiting DOE from
offering oil for sale under this section after it has deposited
$325 million in the Treasury.
CBO estimates that enacting this section would increase
offsetting receipts by $315 million over the 2018-2027 period.
That estimate is based on the projection of oil prices in CBO's
June 2017 baseline forecast, adjusted for the technical
characteristics of the oil being sold from the SPR, and
reflects the net effect of the legislation's limit on total
proceeds from the sales.
Spending Subject to Appropriation
CBO estimates that implementing the legislation would cost
$10 million over the 2018-2022 period for environmental reviews
and administrative costs associated with the leasing program,
subject to the availability of appropriated funds. Based on
information provided by the Government Accountability Office,
we estimate that completing the environmental reviews required
under the National Environmental Policy Act would cost $2
million. In addition, CBO estimates that other implementation
costs would total between $1 million and $2 million per year
over that period.
PAY-AS-YOU-GO CONSIDERATIONS
The Statutory Pay-As-You-Go Act of 2010 establishes budget-
reporting and enforcement procedures for legislation affecting
direct spending or revenues. The net changes in outlays that
are subject to those pay-as-you-go procedures are shown in the
following table.
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
MANDATES
The legislation contains no intergovernmental or private-
sector mandates as defined in UMRA, and would benefit the State
of Alaska by increasing the generation of royalties from oil
and gas production on public lands in ANWR. Portions of the
royalties would be shared with the State under formulas
specified by the legislation and under Federal laws governing
oil and gas production. Over the 2018-2027 period, CBO
estimates that Alaska would receive a total of about $1.1
billion in royalties.
INCREASE IN LONG-TERM DIRECT SPENDING AND DEFICITS
CBO estimates that enacting the legislation would not
increase net direct spending or on-budget deficits in any of
the four consecutive 10-year periods beginning in 2028.
PREVIOUS ESTIMATE
On November 8, 2017, CBO transmitted a cost estimate for a
legislative proposal related to the Arctic National Wildlife
Refuge, as posted on the Web site of the Senate Committee on
Energy and Natural Resources on November 2, 2017. CBO's
estimates of the budgetary effects for the provisions related
to oil and gas leasing in ANWR are the same for each piece of
legislation.
Estimate prepared by: Jeff LaFave (Federal Costs) and
Zachary Bynum (Mandates).
Estimate approved by: H. Samuel Papenfuss, Deputy Assistant
Director for Budget Analysis.
C. ROLLCALL VOTE IN THE BUDGET COMMITTEE
Rollcall vote on the Enzi motion to report the
reconciliation measure to the Senate was 12 yeas and 11 nays,
as follows:
------------------------------------------------------------------------
Name & Answer Name & Answer
State Yea Nay Present State Yea Nay Present
------------------------------------------------------------------------
ENZI (WY) X SANDERS X
(Chairma (VT)
n) (Ranking
)
------------------------------------------------------------------------
GRASSLEY X MURRAY X
(IA) (WA)
------------------------------------------------------------------------
CRAPO X WYDEN X
(ID) (OR)
------------------------------------------------------------------------
GRAHAM X STABENOW X
(SC) (MI)
------------------------------------------------------------------------
TOOMEY X WHITEHOUS X
(PA) E (RI)
------------------------------------------------------------------------
JOHNSON X WARNER X
(WI) (VA)
------------------------------------------------------------------------
CORKER X MERKLEY X
(TN) (OR)
------------------------------------------------------------------------
PERDUE X KAINE X
(GA) (VA)
------------------------------------------------------------------------
GARDNER X KING (ME) X
(CO)
------------------------------------------------------------------------
KENNEDY X VAN X
(LA) HOLLEN
(MD)
------------------------------------------------------------------------
BOOZMAN X HARRIS X
(AR) (CA)
------------------------------------------------------------------------
STRANGE X
(AL)
------------------------------------------------------------------------
D. ADDITIONAL VIEWS
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