Trump administration moves to sell leases in ANWR, but will anyone show up for a sale?
The battle over oil drilling in the Arctic National Wildlife Refuge’s coastal plain has dragged on for decades.
And now, the Trump administration is close to auctioning off drilling rights for the land in northeast Alaska — potentially just days before President-elect Joe Biden takes office in January.
But there’s a big, unanswered question looming over the idea of a sale: To what degree would the industry actually participate?
Oil and gas companies aren’t talking publicly about whether they’d bid. Kara Moriarty, head of the Alaska Oil and Gas Association, said that’s not surprising.
“Participation in lease sales is one of the most competitive and secretive things between companies,” she said. “So I don’t know who is interested in participating in a state lease sale, any more than I know who is interested in participating in the next NPR-A lease sale, or in the coastal plain of ANWR.”
Moriarty said the public likely won’t have the full picture of industry interest until the federal government unseals the bids on the day of a sale. A sale date has not been announced yet, but the way the government’s timelines work, one could be held just before Inauguration Day.
But while oil and gas companies are mum, industry experts and analysts do have a read on what a lease sale might look like.
“My view is that any response will be fairly lukewarm,” said Rowena Gunn, an analyst for the energy research firm Wood Mackenzie.
Even though Alaska politicians and industry groups have long fought to get drill rigs on the coastal plain, which is thought to hold billions of barrels of oil, Gunn and others say there’s currently a thick layer of uncertainty and risk that could lead to limited interest in a lease sale if one happens within the next couple months.
“They’ll probably get some bids,” said Larry Persily, an oil industry observer and former federal coordinator for Alaska gas line projects. “But even at fire-sale prices, there probably won’t be a rush of interest.”
That’s for a number of reasons, he said.
One of them is money.
The coronavirus pandemic and an oil price war have both hit the oil industry hard. Oil prices are still low, and it’s expensive and difficult to explore for oil in the Arctic, said Mark Myers, a geologist and former natural resources commissioner in Alaska.
“The prices have fallen down to a level that leaves very little capital for exploration in these companies,” Myers said. “So that’s one of the biggest negatives.”
Also, there’s the opposition, Gunn said, which may weigh more heavily on publicly-traded companies.
“There’s a certain amount of public opinion that it wouldn’t necessarily be good PR for them to be seen as drilling in the Arctic or drilling in environmentally-sensitive areas,” she said.
While some, including Alaska’s congressional delegation, have celebrated the prospect of a lease sale as a way to create more jobs and revenue for the state, others are fighting to keep oil companies out of the refuge, citing concerns about impacts on ecosystems, Indigenous people and the climate.
Indigenous and conservation groups have already filed multiple lawsuits that aim to block drilling in the coastal plain. They’re asking major insurers to not support any oil and gas projects in the refuge. An array of big banks have said they won’t fund new oil development in the Arctic.
Colorado-based energy economist Philip Verleger said he also wouldn’t expect a deluge of bids because of the uncertainty of future oil demand. If a company develops a field in the refuge, he said, it’d likely want to produce oil there for 30 or so years.
“There is huge uncertainty now as to how quickly oil consumption and natural gas consumption will peak and start to decline,” Verleger said.
He said he believes a lease sale in the refuge would have been “terrifically successful” 15 years ago, but the time to develop the coastal plain has passed.
“I do not think ANWR is ever going to be produced,” Verleger said. “The cost of going there and developing and putting the resources in is too high, particularly since the production would last a long time, and we don’t know if demand would last as long.”
Gunn said some of the larger oil companies operating in Alaska are also already busy with other projects, such as ConocoPhillips work in the NPR-A and Hilcorp taking over oil fields at Prudhoe Bay.
Both companies declined to say whether they had plans to participate in a lease sale in the refuge, if one is held. ExxonMobil also declined to comment. Oil Search said it is “focused on developing the Pikka project and exploring our current leases.”
Chevron said it will not comment “on existing or future plans at ANWR,” but will “consider this opportunity in the context of its global exploration portfolio.”
Opposition, funding, demand and current projects aside, perhaps the biggest uncertainty of all is the changing administration.
Biden has said he opposes drilling in the refuge.
Andy Mack, another former Alaska natural resources commissioner, said even if the Trump administration issues leases before leaving office, Biden’s administration could delay the permits that companies need to search for oil and build their infrastructure.
“What they would try to do is make it so difficult, so onerous, to get the array of permits that the companies just kind of say, ‘Well, we’re not going to spend 10 years just trying to get a simple permit, we’re going to put our money and our investment elsewhere,’” Mack said.
However, Mack said, it’s also possible companies could secure leases and just wait for the administration to change again.
“It’s pretty long-lead stuff,” he said.
And, Mack and Myers underscored, the flip side of all this is that the refuge is still thought to hold a whole lot of oil. For some companies, that payoff could outweigh any risk or uncertainty.
PHOTO CAPTION: Caribou graze on the coastal plain of the Arctic National Wildlife Refuge, with the Brooks Range as a backdrop. (U.S. Fish and Wildlife Service)