The Trump Administration on Monday set the stage for a lease sale in the Arctic National Wildlife Refuge in the coming months, but industry observers and Alaska leaders say oil won’t flow for years.
Drilling in the sensitive coastal plain faces strong resistance, questions about future demand for oil and vows from large banks not to invest in the region, they said.
But some said that while litigation could slow the lease sale, the promise of a large discovery in a little-explored land land, where oil has been found at the surface, means drilling is certain.
Rep. Don Young, R-Alaska, who has fought for development in ANWR for generations, said that with litigation from conservation groups likely, he doesn’t think there’s enough time to hold a lease sale this year.
But it will be held next year, he said.
Like Prudhoe Bay, where drilling was also controversial before it began, oil production from the refuge will eventually create significant jobs and revenue for Alaska and the U.S., Young said in an interview.
Led by Alaska’s congressional delegation, Congress in 2017 approved legislation calling for two lease sales by late 2024, at least 400,000 acres apiece in the coastal plain of the 19-million-acre refuge in northern Alaska.
On Monday, Interior Secretary David Bernhardt finalized a more than two-year environmental review that analyzed potential drilling in the refuge, signing a record of decision that puts all available land, or 1.6-million acres, on the table for possible leasing.
Congress mandated the lease sales, so they have to go forward, Benhardt said, in a meeting with reporters on Monday. The first lease sale will be held by late 2021, and the second by late 2024, he said.
“The question of whether or not there will be a program in ANWR has really been answered,” he said. “The issue now is how do we go about it, and how durable that is.”
He said his agency has met the “gold standard” for a plan, with stipulations that will allow leasing to move ahead safely while protecting the environment, he said.
The plan includes key protections for subsistence hunters and fish and wildlife, including for polar bears and the prized Porcupine caribou herd, the decision says.
Critics on Monday vowed legal action.
“The Trump administration’s so-called review process for their shameless sell-off of the Arctic Refuge has been a sham from the start,” said Lena Moffitt, with the Sierra Club. “We’ll see them in court.”
The Bureau of Land Management, overseeing the lease sale, said a next step will be a call for nominations, giving people a chance to suggest what areas of the coastal plain should be offered up for bidding by oil companies.
That would be followed by a detailed statement of a lease sale, showing specifically, what tracts are up for lease. The lease sale could take place 30 days after the statement is issued.
The decision is a “milestone” that comes after several decades of effort by Alaska leaders to open ANWR to drilling, Sen. Lisa Murkowski said.
“The record of decision means basically we have a real program here,” she said. “Every now and again we can use a shot of good news and this is a shot of good news for the state.”
Murkowski said the decision will be legally defensible, with timing restrictions on activity to protect wildlife, and strong limits on surface use in much of the coastal plain.
“How they have laid it out has been very methodical and very purposeful,” she said.
Sen. Dan Sullivan, said it’s difficult to know how quickly a lease sale will be held, so a call for nominations may not happen immediately.
Oil companies that might bid on a lease sale will need time to review the decision.
He also expects a swift court challenge from conservation groups, he said.
“There’s always risks with litigation, but we wrote this with very strong directives from Congress,” Sullivan said. “So when Congress is unequivocal about lease sales, courts don’t have a lot of leeway to second guess” those decisions, he said.
Once a lease sale is held, there’s a question of how many companies will submit bids, observers say.
Several major banks have announced in recent months they will pull back from supporting Arctic oil and gas projects, including Wells Fargo & Co. and Morgan Stanley specifically saying they will not directly finance new investment in the refuge.
Members of Alaska’s delegation have raised concerns that the banks’ policies are discriminatory, leading to scrutiny of the banks by the federal Office of the Comptroller of the Currency.
Mark Myers, former director of the U.S. Geological Survey and Alaska Natural Resources commissioner, said those and other challenges could reduce or prevent bidding by some oil companies.
But companies will still show up for a sale, in part because the refuge shares geological similarities with new, large discoveries in Alaska to the west, such as ConocoPhillips’ Willow prospect that the Trump administration recently advanced.
“There could be big discoveries (in ANWR), and the last authoritative assessment by the USGS shows significant geological potential,” he said.
Making development more favorable is a relatively new oil pipeline just west of the refuge’s border, part of ExxonMobil’s Point Thomson, Myers said. That will provide infrastructure to get the oil to market.
Larry Persily, the former federal coordinator for Alaska gasline projects, said that with the growth of renewable energy and other factors, he doesn’t expect oil demand to rise significantly enough to support oil production in ANWR even for two decades.
“If I have to bet, I’d bet against oil flowing from ANWR in the 2030s,” he said. “There are a lot of obstacles to overcome.”
Kara Moriarty, head of the Alaska Oil and Gas Association that represents the industry, said oil companies have long supported a lease sale in the region. But the actual interest won’t be known until the bids are opened.
Moriarty said oil production won’t occur in the refuge for 10 to 15 years.
Companies will need multiple exploration seasons to prove up the oil and to update studies of the refuge done decades ago, she said. Receiving government permitting will take 6 or so years, followed by a lengthy construction period, she said.
The Energy Information Administration said last year that oil production from the refuge’s coastal plain could produce close to 1 million barrels daily, she said
She said demand for oil will grow, making the refuge a valuable resource for the future.
“This is a potential giant, and it’s something that could help meet demand 15 years from now,” she said.