“I have tried to work with this administration — even though they’ve made it extremely difficult every step of the way — but those days are now officially over.”
Lisa Murkowski, the Republican senator from Alaska, said this back in January, marking a shift in a long battle between her and the Obama administration.
A battle that, until January, had largely gone unnoticed.
Murkowski was born in Alaska and is the daughter of a former Alaskan senator and governor. She has a lifelong knowledge of the game of politics and has been using her powerful position within the U.S. Senate to advance policy positions.
One of her positions takes precedence over all others, and as the above quote shows, Murkowski is willing to fight off the federal government.
After Republicans won control of the Senate in the 2014 midterm elections, Murkowski was promoted to the head of the Senate committee on Energy and Natural Resources, a powerful entity within the government when it comes to three things: oil, gas, and coal.
And if you aren’t sure where Murkowski stands on energy, her ties to political action committees and industries show that her biggest donors come from the oil, gas, and electric utilities industries.
The latest battle is being waged in her home state of Alaska, and it will likely influence oil and gas investment for years to come…
The Battle for the ANWR
Murkowski has been battling the Obama administration and the Interior Department for the last few years over the Arctic National Wildlife Refuge (ANWR).
The ANWR is a 19 million-acre tract of land in the northeast of Alaska that is home to polar bears, gray wolves, caribou, and hundreds of species of birds, among other animals.
According to EIA estimates, the area is also the resting place of 5.7 billion barrels of technically recoverable oil.
However, in January, the Obama administration released a proposal that would mandate 12 million acres of the ANWR as wilderness. The wilderness designation protects the acreage from oil and gas drilling, mining activity, and even the development of permanent roads.
Part of the acreage included in the President’s proposal is the Coastal Plain, where most of the oil and gas reserves in the region are located and, as you can see above, have been slated for development by the Alaska Department of Natural Resources.
But there’s a big problem with the President’s plan: He doesn’t have the power to give the ANWR wilderness status — only Congress can do that.
And Murkowski has pummeled any attempt to do so. In fact, last month she spearheaded a proposal to allow states to purchase public lands from the federal government.
Her proposal won in the Senate, although the President will not likely sell the land in Alaska.
But the power still resides with Murkowski and the rest of the Senate to upgrade the ANWR to wilderness status, which, as you can probably tell by her oil and gas affiliations, she will not.
While this tedious political battle rages on, it underscores another huge issue faced by Murkowski and oil and gas investors…
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Stay Out of Alaska
Murkowski has characterized President Obama as a devious ruler who wants to cripple oil and gas production in the U.S. despite the fact that production has grown 30% since he was voted into office.
And you certainly could make the argument that by trying to close off the ANWR form drilling, the President is chipping away at the resources available to producers.
But here’s why Murkowski is so desperate to save those resources from federal protection…
As you can see, oil production in Alaska — once the biggest U.S. producer — is in a serious and dramatic free fall.
Murkowski, desperate to remain in office, wants to bring the 5.7 billion barrels to the surface and jobs to her state no matter what.
But as investors, we must remain pragmatists. If Murkowski wins, could Alaska see a profitable resurgence?
Maybe so, but the battle is still ongoing and won’t likely be solved while Obama is in office. Plus, those 5.7 billion barrels are technically recoverable, which means the technology exists to recover them, but they are not yet being recovered.
There’s still a lot of financial investment needed in the area, and even then, some of that oil may not be economically recoverable, as the chart below shows…
Of course, if drilling is allowed in the Alaskan Coastal Plain, these resources could be economically produced, and an investment in them would likely be a good one. But the time frame is uncertain.
For these reasons, I don’t suggest an investment at this time.
If anything, it seems safer to invest in the onshore production in the U.S. that’s still growing and not in precipitous decline.
That includes the Permian, the Bakken, the Marcellus, and, of course, every industry that serves these formations.
Good Investing,
Alex Martinelli
With an eye squarely focused on the long-term, Alex Martinelli takes the art of income investing to a higher level within the energy sector. His research has helped hundreds of thousands of individual investors identify well established companies that have a long history of paying out dividends to their shareholders. For more info on Alex, check out his editor’s page.
