After a three-year push by the Trump administration to open Alaska’s Arctic National Wildlife Refuge to oil drilling – an effort that culminated in a rush to sell leases before the White House changes hands – the only taker at the end of the day could be State of Alaska itself.
With Thursday’s deadline to bid on 10-year leases for areas of more than one million acres of refuge, there is little evidence that oil companies are interested in acquiring the drilling rights in difficult conditions more expensive fossil fuels to gain a world that is increasingly trying to stand out from them.
Amidst the uncertainty, a state development company voted last week to bid up to $ 20 million on some of the leases. “It’s an extraordinary opportunity,” said Frank Murkowski, a senior Alaska political statesman, told the company’s board of directors, Alaska Industrial Development and Export Authority, at a pre-vote meeting.
There are legal issues related to the action, including whether the development agency qualifies as a bidder. And environmental groups, some Alaskan indigenous groups, and others are petitioning the federal district court for an injunction to permanently stop the sale of leases, arguing that they are part of a deeply flawed process by the Home Office that, among other things, downplayed scientific evidence for possible harm the refuge.
However, if the Development Agency continues, the chances are the state will be the sole owner of leases when the sealed listings open on Jan. 6. That would give it hope that at some point over the next decade, interest in drilling the refuge will increase and it may sublet tracts to someone else.
The sales result would also be an odd end to the Trump administration’s drive to allow drilling in the Refuge, which is believed to be layering billions of barrels of oil, though that thinking is largely based on decades-old data. President Trump said opening up the haven to oil companies was among the most important of his efforts to increase domestic oil production.
About the size of South Carolina, the refuge is one of the last large tracts of virtually untouched land in the United States home to migratory caribou, polar bears, and migratory waterfowl. Alaskan officials and many Republican lawmakers have long sought to allow drilling there, citing the jobs and revenue it creates. But the refuge has been protected for decades, largely by Democrats in Congress.
That all changed in 2017 when the Republicans, who controlled both Houses of Congress, passed tax legislation that allowed the sale of leases of up to 1.5 million acres of refuge along the coast. After an environmental review, the Home Office approved a sale this summer whose plans were accelerated after Mr Trump’s election defeat. President-elect Joseph R. Biden Jr. is against drilling in the refuge.
That month, the Bureau of Land Management, the Home Office’s agency that handled the sales, removed about half a million acres from the tender, citing concerns about disturbance to caribou calves and other wildlife. This leaves approximately one million acres available in 22 areas, with a minimum bid of $ 25 per acre.
Just days before the deadline, Lesli Ellis-Wouters, a spokeswoman for the Alaska office, declined to say if offers had been received. “This information is considered confidential until the bid is opened,” she said.
The Alaska Oil and Gas Association, a trading group, has long said that companies avoid changing their plans.
Pavel Molchanov, an energy analyst with financial services firm Raymond James, said it was highly unlikely that companies would bid, given the cost of exploring and drilling oil in the Arctic, with growing movement among major banks refusing to drill in the refuge finance, and the depressed state of the industry amid the coronavirus pandemic.
“Drilling in the refuge is almost the last thing oil companies want to do right now,” said Molchanov. “But even before Covid, the industry would have had little appetite for it.”
In an opinion piece in the Anchorage Daily News prior to the Business Development Agency meeting, Mr. Murkowski, former United States Governor and Senator and father of one of the state’s current Senators, Lisa Murkowski, admitted widespread concern that there would be no bidders on the leases . “With all of our efforts, hopes, and aspirations, Alaska will look like the proverbial paper tiger,” he wrote.
Mr Murkowski said through a tender that the state would act as a setback, arguing that Alaska has expertise in oil leasing, even though that expertise is selling leases on state-owned land, not buying state leases.
He also pointed out that the state would receive a unique offer, as the lease income would be split evenly between the federal and state levels if the deals were successful. “You will get half your money back,” he told the agency’s board of directors. Only the state, he added, “can buy at a 50 percent discount.”
Mr Murkowski was one of only a handful of speakers who supported the plan. Most commentators said the refuge should be left alone and that the state should spend its money elsewhere, such as helping Covid.
Suzanne Bostrom, an attorney with Trustees for Alaska, a nonprofit public interest law firm that represents the groups trying to block the sale, said the agency’s move to approve offers was “an air of desperation”.
She said there were “very serious questions” about whether the agency could “spend government funds without oversight”.
“Legislators are supposed to make these kinds of decisions,” she said.
In the tax bill, sales were portrayed as a way to raise $ 900 million federal treasury over a 10 year period to offset more than $ 1 trillion in tax cuts. However, this figure has long been questioned by outside experts. An analysis by the New York Times last year found that the actual amount would be about $ 45 million.
And with the sales ahead, any potential financial slump for the government looks even less, said Autumn Hanna, vice president of Taxpayers for Common Sense, a non-partisan organization in Washington, DC
“We are still firmly convinced that leasing sales for taxpayers will fall dramatically,” said Ms. Hanna. “We don’t think there is any sign of industry interest and that there could be real tenders.”
The group said their latest estimate was that the federal treasury could only get $ 15 million from the lease sales.
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