The Trump administration’s unprecedented auction of Arctic drilling rights Wednesday netted just $14.4 million from three bidders, with major oil companies steering clear of the sale.
Amid low crude prices, fears about a backlash from the public and the prospect of regulatory uncertainty, just two oil companies placed bids on leases in the Arctic National Wildlife Refuge’s coastal plain: Knik Arm Services LLC and Regenerate Alaska Inc. They were joined by the Alaska Industrial Development and Export Authority, a state-owned economic development corporation that last month approved spending $20 million on coastal plain leases but has never spearheaded an oil exploration project.
Bids were provisionally delivered on 11 leases spanning about 553,000 acres (223,791 hectares), the Bureau of Land Management said.
“It is my hope that if and when commercial quantities of oil are discovered on any of these leases, that this action will make history for generations to come,” yielding well-paying jobs, royalty payments and new sources of crude, said Deputy Interior Secretary Kate MacGregor.
Participants ponied up hundreds of thousands of dollars to nab leases they may never get to use, given President-elect Joe Biden’s vow to permanently protect the refuge. Though Biden has little power to revoke leases once they are issued, the incoming administration has wider discretion to block permits essential to mounting any activity on the tracts.
“Today’s lease sale was the logical conclusion to this completely flawed effort: a massive failure,” said Jenny Rowland-Shea, a senior policy analyst for public lands at the Center for American Progress. “The Trump administration has managed to rip off taxpayers, ignore the rights and voices of the Gwich’in and threaten polar bears and caribou, all to hand the coastal plain over to a couple of wildcatters and a state-owned corporation with no ability to drill.”
The Arctic refuge in northeast Alaska was once seen as prime territory for oil development, given the potential of massive conventional crude reserves that could flow for decades. But companies once viewed as potential bidders for Arctic acreage have slashed spending this year as the coronavirus pandemic eroded crude demand and prices.
Environmentalists and native Alaskans, including Gwich’in people who consider the area sacred, also had warned oil companies they would face public recrimination for pursuing coastal plain drilling rights. They have mounted legal challenges to the Interior Department’s auction, which are still pending, arguing that industrial oil development would threaten one of America’s last truly wild places as well as the calving caribou, migratory birds and Arctic foxes that rely on it.
Congress mandated two coastal plain oil auctions by Dec. 22, 2024, as a way to pay for the 2017 tax cuts, based on expectations that the lease sales and oil development would yield more than $2 billion in revenues over a decade.
Bidders in Wednesday’s sale were required to offer at least $25 per acre. With tracts ranging in size from 23,446 to 59,410 acres (9,488 to 24,042 hectares), the smallest possible winning bid is $586,150.
The Bureau of Land Management had not yet recapped final results by mid afternoon Wednesday. But Knik registered a $1.6 million bid for one tract, Regenerate Alaska pledged $771,000 for one tract, and the Alaska Industrial Development and Export Authority spent $12 million for the rest of the territory.
Although the state-owned company has financed small oil projects in Alaska, it has never sought to acquire its own drilling rights, and the Bureau of Land Management has previously disqualified bids by entities with no intent to develop their leases.
The leases themselves don’t authorize drilling; separate permits are required. And even the auction results won’t be final immediately. Winning bids must be vetted in a government review process that typically takes months, though Trump administration officials are racing to formally issue the leases before Biden is sworn in Jan. 20.
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