After Decades-Long Push, It's Not Clear Who Will Bid In Arctic Refuge Oil Lease Sale

Jan 1, 2021
Originally published on January 3, 2021 3:49 pm

Just two weeks before President-elect Joe Biden takes office, the Trump administration is trying to lock-in oil and gas drilling in Alaska's Arctic National Wildlife Refuge with a hastily scheduled and controversial lease sale.

The event, January 6, marks a major moment in a 40-year fight over whether to develop the northernmost slice of the refuge's coastal plain, home to migrating caribou, birds and polar bears.

Biden, as well as his pick for Interior Secretary — Rep. Deb Haaland — oppose drilling in the refuge. The hand-off of drilling rights to the highest bidders could make it more difficult to reverse course.

But despite the high stakes, uncertainty looms over how much oil is actually trapped under the million acres of tundra up for leasing, and how much industry interest there is to go find it.

'We don't know very much about this area'

The data on what's under the coastal plain is decades old.

"We don't know very much about this area," says David Houseknecht, a geologist with the U.S. Geological Survey. Oil seeps and rock formations seem promising, but he says the agency hasn't estimated the coastal plain's oil potential since the late 1990s.

Back then, it relied on seismic testing from a decade prior, technology that's now outdated. It found that anywhere from about 4 to 12 billion barrels of recoverable oil could lie beneath the federal lands. That's a whole lot of oil, but also "a very large range of uncertainty," Houseknecht says. "The seismic data that we have are quite old, low resolution and a sparse grid."

The other challenge, he says: There's no data from actual wells in the refuge.

Just one exploratory well has been drilled in the coastal plain, on Alaska Native land in the 1980s, and the results are a closely-guarded secret.

Mark Myers, a former commissioner of the Alaska Department of Natural Resources, is among only a few people who have seen the well results outside of the oil companies that paid for it.

"I signed a confidentiality agreement, and it didn't have an end date on it," he says with a small laugh. "I can't comment on it, in terms of what I saw."

A New York Times investigation based on interviews and legal documents suggested the results were not promising.

Houseknecht says geologists don't know more about the coastal plain's oil potential because it wasn't until late 2017 that Congress decided to allow drilling there, after decades of debate.

In recent years, he says, USGS had the 1980s seismic data commercially reanalyzed and planned to use it for a new oil assessment. But after the opening of the refuge three years ago the Interior Department called off the work without providing a reason why.

Bidding could be "fairly lukewarm"

As for who will bid in the lease sale, that's another mystery.

Oil and gas companies aren't talking about their plans publicly, which isn't surprising, says Kara Moriarty, head of the Alaska Oil and Gas Association, an industry trade group.

"Participation in lease sales is one of the most competitive and secretive things between companies," she says.

Bidding has already taken place, but Moriarty says she doesn't expect to know more until the federal government unseals companies' bids during the January 6 event, which will be streamed online.

Oil industry analyst Rowena Gunn, with the research firm Wood Mackenzie, believes enthusiasm could be "fairly lukewarm."

Controversy is one reason.

"It wouldn't necessarily be good PR for them to be seen as drilling in the Arctic, or drilling in environmentally-sensitive areas," she says.

Environmental organizations and some tribal groups have been lobbying oil companies, banks and other financial institutions to stay away from developing the refuge. A number of major banks say they won't fund oil projects in the Arctic.

Opponents have also filed multiple lawsuits seeking to block drilling. They've raised concerns about its impacts on Indigenous people, the global climate, and wildlife, including the caribou that give birth in the coastal plain and the polar bears that den there. Even if leases are sold, legal experts say it's possible that courts could later cancel them.

In response to concerns about wildlife, as well as oil industry interest, the Bureau of Land Management recently removed nearly a third of the original 1.6 million acres from the sale. Geologist Houseknect says those areas do not have high potential for oil.

'Very little capital for exploration'

Supporters of drilling the refuge, including many Alaska politicians, argue that it's good for the economy and jobs.

Republican U.S. Sen. Lisa Murkowski worked with the White House to open the coastal plain to drilling as part of Trump's massive 2017 tax bill. The idea was to create revenue to offset tax cuts, so the legislation directed the federal government to carry out two oil and gas lease sales by 2024.

The Congressional Budget Office estimates the leasing program could generate a windfall of $1.8 billion over a decade, to be split between Alaska and the federal government.

Critics of the sale, including the watchdog group Taxpayers for Common Sense, say they expect the dollar-figure to be much lower.

"For right now, this absolutely seems to make no fiscal sense," says Autumn Hanna, vice president of the group. "We don't need the oil. Why would we be going into such hard-to-access, sensitive places where the costs of exploration and development are so high?"

Myers, the former Alaska commissioner, agrees development costs could dampen interest.

It's already more expensive to drill in the Arctic compared to, say, Texas. On top of that, he says, oil prices are still relatively low after an oil-price war and the coronavirus pandemic hit the industry hard.

"The prices have fallen down to a level that leaves very little capital for exploration in these companies," Myers says. "So that's one of the biggest negatives."

But perhaps the greatest uncertainty is the changing administration.

President-elect Biden says he opposes drilling in the refuge, and that he'll take steps to permanently protect it, though he hasn't said how.

It's possible his administration could delay the environmental permitting process for companies that buy leases from the Trump administration. Or a Biden administration could try to buy the leases back.

Citing concerns about limited industry interest, Alaska politicians have lobbied for the state to step in. The board of a state-owned economic development corporation recently voted to bid up to $20 million at the lease sale.

The idea is the corporation could operate as a backstop, to submit minimum bids on the tracts and secure drilling rights in case no one else makes any offers. Then, at some point, it could partner with oil companies to do the actual drilling.

If any leases are bought and finalized, it will be just the start of a long process. Industry analysts say it would take at least a decade to actually pump oil out of Alaska's Arctic refuge.

Copyright 2021 Alaska Public Media. To see more, visit Alaska Public Media.

STEVE INSKEEP, HOST:

The Trump administration has fewer than three weeks to go and is working to lock in oil drilling in the Arctic National Wildlife Refuge. It's holding an oil lease sale next week. Tegan Hanlon of Alaska's Energy Desk reports it's unclear how much oil is under the refuge.

TEGAN HANLON, BYLINE: Supporters of drilling in the Arctic Refuge's coastal plain often point to its oil potential as a reason to develop the remote stretch of land. President Donald Trump has described it as...

(SOUNDBITE OF ARCHIVED RECORDING)

PRESIDENT DONALD TRUMP: One of the great sites of energy in the world.

HANLON: But while geologists say the rock formations, oil seeps and old seismic results seem promising, the data available is still limited.

DAVID HOUSEKNECHT: We don't know very much about this area.

HANLON: David Houseknecht is a senior research geologist at the U.S. Geological Survey. And he helped with the agency's last assessment of oil potential in Alaska's coastal plain back in the late 1990s. The USGS calculated anywhere from about 4 to 12 billion barrels of recoverable oil. Houseknecht says that's a whole lot of oil but also a huge range, in part because it's based on seismic data from the 1980s. Technology has come a long way since then.

HOUSEKNECHT: Going into a lease sale in the coastal plain with the only data being 35-year-old 2D data is quite unusual.

HANLON: Houseknecht says what's also missing from the USGS assessment is any data from actual wells in the refuge. There's been just one exploratory well drilled in the coastal plain, also back in the '80s, on Alaska native land. But the results of that test well are a closely-guarded secret.

MARK MYERS: I signed a confidentiality agreement, and it didn't have an end date on it.

HANLON: Mark Myers, a geologist and former commissioner of the Alaska Department of Natural Resources, is one of the few people who have seen the results from the test well, outside of the big oil companies that paid for it.

MYERS: So I can't comment on it in terms of what I saw even though it was a lot of years ago.

HANLON: A New York Times investigation based on legal documents suggested the results were not promising. But the amount of oil is just one factor companies will consider when deciding whether to bid in the Alaska lease sale. Another is the money, Meyer says. It's already more expensive to drill in the Arctic compared to, say, Texas. On top of that, oil prices are still low after an oil-price war and the coronavirus pandemic hit the industry hard.

MYERS: The prices have fallen down to a level that leave very little capital for exploration in these companies. So that's one of the biggest negatives.

HANLON: There's also the controversy, says Rowena Gunn, an analyst with the energy research firm Wood Mackenzie. The refuge is home to migrating caribou, polar bears and other wildlife. And that has prompted multiple lawsuits to block drilling there. Some big banks cite climate change and say they won't fund oil projects in the Arctic.

ROWENA GUNN: There's a certain amount of, I guess, 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.

HANLON: But perhaps the biggest uncertainty of all is the changing administration. President-elect Joe Biden says he opposes drilling in Alaska's refuge. Although if leases are finalized before he takes office, it's not clear how he would stop it. For NPR News, I'm Tegan Hanlon in Anchorage. Transcript provided by NPR, Copyright NPR.