Sale of Drilling Leases in Arctic Refuge Fails to Yield a Windfall

In a blow to the Trump administration’s efforts to open the Arctic National Wildlife Refuge to fossil fuel development, only half of the oil and gas leases offered for sale Wednesday received bids, and all but two of those came from the state of Alaska itself.

Only two companies, neither of them major oil producers, made bids to acquire 10-year rights to explore and drill for oil on two tracts totaling about 75,000 acres. A state-owned economic development corporation, offering the minimum of $25 an acre, was the sole bidder on the other tracts, totaling about half a million acres. The rights to another 400,000 acres remained unsold.

Once billed as a potential windfall that, over time, could bring in close to a billion dollars for the federal Treasury, in all the sale netted less than $15 million, with half of that going to the state.

Both the financial results, and the lack of interest from major companies, are quite likely a disappointment to the Trump administration, and to Alaska officials who have long favored oil development for the jobs and revenue it could bring.

President Trump made opening part of the 19-million-acre refuge in northeast Alaska a centerpiece of his program for developing more domestic production of fossil fuels.

Chad Padgett, Alaska state director for the Bureau of Land Management, the Department of Interior agency overseeing the sale, acknowledged that financially, the results “might not meet some of the targets some folks think it should.” But he hailed the sale as a success.

“Obviously it’s a historic day for the nation and a historic day for Alaska,” Mr. Padgett said in a news conference following the sale in Anchorage. “It reflects an interest in the further development of Alaska’s energy resources.”

But the outcome was ridiculed by environmental groups and others who had long opposed it.

“This lease sale was an epic failure for the Trump administration and the Alaska congressional delegation,” Adam Kolton, executive director of the Alaska Wilderness League, said in a statement. “After years of promising a revenue and jobs bonanza they ended up throwing a party for themselves.”

Autumn Hanna, vice president of Taxpayers for Common Sense, a watchdog group in Washington, D.C., said that the way the lease sale was promoted as a major revenue generator “was always a far-fetched fantasy and these results prove it.”

The bidding by the state economic development corporation, the Alaska Industrial Development and Export Authority, had been authorized only last week, out of concerns that there might be no other bids. The authority’s board had given its executive director power to spend up to $20 million. Its winning bids totaled about $12 million, but because the state receives half of that back, its outlay will only be about $6 million.

There remain legal questions about the state jumping in to bid on leases that are typically bought by oil companies. The development corporation does not have the experience or expertise to actually undertake oil development in the refuge, and winning bids on leases elsewhere have sometimes been rejected because the bidder was deemed similarly unqualified.

But Mr. Padgett said that the situation “doesn’t present legal issues from our perspective.”

The Bureau of Land Management, he said, has a long history of cooperating with the state on leasing. “This is kind of an evolution of that.”

Of the two other winning bidders, one, Regenerate Alaska, is an affiliate of 88 Energy, an Australian oil company that has an interest in a drilling project on state-owned lands in northern Alaska. It bid successfully for a 23,000 acre tract on the western border of the refuge.

The other winning bidder, Knik Arm Services, was formed a year ago; information about it was not immediately available.

The results mean that two weeks before the Trump administration leaves power, its goal of opening the refuge to oil development is hardly certain. The Bureau of Land Management has to finalize the leases and the Department of Justice must conduct an antitrust review. Mr. Padgett said those activities had already begun. “We expect to be issuing acceptance notifications soon,” he said.

But if the leases are not finalized before Inauguration Day, they would be in jeopardy. President-elect Joseph R. Biden Jr. is opposed to drilling in the refuge. With new leadership, several federal agencies could reject the leases.

For decades the refuge, most of it virtually untouched wilderness, had remained off limits to oil development. But in 2017, a Republican-controlled Congress approved a plan to sell leases in 1.5 million acres along the Arctic coast, an area that is thought to overlie billions of barrels of oil.

Following final approval of the environmental impact statement last summer, plans for the sale moved ahead. Last month, the Bureau of Land Management removed about 500,000 acres from the sale out of concerns, it said, about disrupting caribou and other wildlife. That left about a million acres up for bid.

Environmental groups that have sued the Interior Department over the leasing plan had sought to halt the sale, but their motion for a preliminary injunction was denied by a federal judge on Tuesday. The lawsuit, and others seeking to end the leasing program, are still in progress, however.

In her ruling, Judge Sarah L. Gleason of Federal District Court in Anchorage sided with government lawyers who argued that the sale of leases would not of itself result in “imminent irreparable harm,” as the groups had claimed, since any on-the-ground activities in the refuge would have to be approved later.

It had been unclear whether oil companies had much interest in drilling for oil in the refuge, given the costs of operating in hostile Arctic conditions and the risk to their reputations that would come from drilling in such a pristine place. In response to pressure from environmental groups and some Alaska Native groups opposed to drilling, major U.S. banks had announced they would not finance oil development in the refuge.

The ruling by Judge Gleason on Tuesday also denied the environmental groups’ request to block a proposed seismic survey in the coastal plain, saying in effect that the issue was moot because the Bureau of Land Management has yet to make a decision on the project.

An Alaska Native group, the Kaktovik Inupiat Corporation, submitted a proposal in September for the survey, in which heavy trucks would cross the frozen, snow-covered tundra and use acoustic signals to determine the location and size of any oil and gas deposits. They proposed that the survey begin later this month.

Environmentalists said the trucks and other equipment, including portable living quarters for up to 180 workers, would cause lasting damage to the tundra, citing tracks that are still visible from the only other seismic work in the refuge, conducted in the 1980s. Scientists also said the survey work could disturb or injure wildlife, including maternal polar bears who make dens in the snow along the coastal plain in the winter, where they give birth to and nurse cubs.

The bureau issued an environmental assessment of the proposed survey and found that it would not cause significant damage. Separately, the United States Fish and Wildlife Service had found that the work would have “no more than a negligible impact” on the numbers of polar bears in the region. A decision on whether to allow the work to proceed is expected soon.

The lease sales are not the only effort by the Trump administration to open more of northern Alaska to oil development. On Monday, the Interior Department moved to remove protections against exploration and drilling for millions of acres in the National Petroleum Reserve in Alaska, which is well west of the wildlife refuge.

There already are drilling projects in the eastern part of the reserve, which was created in the 1920s and, at 23.6 million acres, is larger than the refuge. But a management plan prepared by the Obama administration had put about half of the acreage off limits for oil development.

Under Mr. Trump, the Interior Department developed a new management plan that reduced the area that was protected. The plan was finalized Monday; in all, about 18 million acres of the reserve are now available for oil development. But lawsuits filed by environmental groups against the plan remain pending.

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