Energy

Alaska state-owned corporation approves spending up to $20 million on oil leases in Arctic National Wildlife Refuge

Alaska’s state-owned economic development corporation on Wednesday agreed to spend up to $20 million to buy leases in the Arctic National Wildlife Refuge’s coastal plain in an effort to support future oil exploration and drilling there.

The seven-member board of the Alaska Industrial Development and Export Authority unanimously granted the corporation’s director permission to bid following 90 minutes of public comments, a two-hour private meeting and a final 30-minute public session.

The proposal faced broad public opposition, including complaints that the measure was being rushed through with little public review two days before Christmas. But several board members, in describing their support for the measure, said money from oil that flows from the refuge can support much-needed jobs in Alaska and pay for renewable energy projects that opponents of the investment have said they preferred.

“Alaskans are in need of hope and opportunity and job and money to pay for education and health services in our state,” said Anna MacKinnon, a board member and former state senator.

Board member Albert Fogle said development in the refuge will reduce pollution worldwide, since oil production in the refuge will reduce the need for oil production in countries with less stringent environmental requirements.

The amount of oil in the refuge is unknown because the federal government has allowed only a single well to be drilled there, in the mid-1980s. Companies involved in the effort, including BP, have closely guarded the well data, though a New York Times investigation last year suggested the well was not a success.

But supporters of drilling say oil has seeped to the surface in some areas of the coastal plain and add that a single well doesn’t condemn the 1 million or so acres that are being offered in the Jan. 6 lease sale.

More than three dozen speakers opposed the measure Wednesday afternoon. Two favored it, including former Gov. Frank Murkowski. It also drew more than 300 emailed comments.

Some speakers said the state was tossing away its limited cash on a risky effort that should belong to the private sector, if such interest exists. Others said it could lead to an increase in planet-warming carbon emissions that have threatened Alaska communities, if the state investment leads to increased oil production.

Many speakers complained the board had given the public only two days of notice during the holidays, in what they described as an apparent attempt to quietly rush it through.

AIDEA chairman Dana Pruhs said the proposal meets legal requirements, and its short notice was based on the state’s limited time to act before the Dec. 31 bidding deadline. The Trump administration just this month announced the plans for the Jan. 6 bid opening, which will be video streamed.

The idea of a state investment in the 19-million-acre refuge materialized quickly after two former governors, Bill Walker and Murkowski, wrote columns in the Anchorage Daily News this month urging the state to bid on ANWR leases.

The state-owned corporation published a notice of the meeting on Friday without saying what it would cover. On Monday, it first published the text of the resolution, allowing limited time for public debate before the meeting.

Some speakers on Wednesday said the state’s plan raises questions about whether private industry will do much bidding in the lease sale.

Oil drilling in the refuge faces numerous headwinds, including multiple lawsuits from Alaska Native and conservation groups and 15 states, opposition from President-elect Joe Biden, major banks who say they won’t finance new Arctic oil projects, and relatively low oil prices that may not support costly development in northern Alaska.

Industry interest in the leases won’t be known until the Trump administration opens the bids on Jan. 6, said Kara Moriarty, president of the Alaska Oil and Gas Association, in an interview on Wednesday.

She said that oil and gas firms keep their bidding plans private, including from her.

“I don’t think (the state’s action) necessarily signals there isn’t any private interest, because I doubt companies are talking to the state, just like they aren’t talking to each other,” she said.

Oil wouldn’t be produced in the refuge for at least a dozen years, so companies that might be interested in leasing can look past today’s political challenges and oil prices, she said.

“You don’t know the interest until the lease sale is held,” she said.

Under the proposal, AIDEA would make minimum bids on many of the available 22 tracts, at a cost of around $1 million for each tract, to preserve drilling rights as a backstop if no one else submits a bid. It could sublease the land to companies that would actually drill, depending on the outcome of legal battles and seismic surveys that scout for oil.

The proposal is not an order to bid but leaves the final decision up to AIDEA’s director, Alan Weitzner, who proposed the measure to the board.

Murkowski, the first speaker who appeared at the board’s invitation, was allowed to exceed the two minutes other speakers were granted. Murkowski said state-owned leases in ANWR could be an “extraordinary opportunity” that eventually pays off for the state.

Alaska leaders have sought to open the refuge to drilling for decades, but it wasn’t until 2017 that a Republican-led Congress and President Donald Trump approved it. Murkowski’s daughter, Republican U.S. Sen. Lisa Murkowski, wrote the language for the measure, which calls for two lease sales by Dec. 22, 2024.

The Congressional Budget Office has estimated the lease sales will produce $1.8 billion in revenue to be shared by the Alaska and federal governments, but critics of the sale, including Taxpayers for Common Sense, have said the actual income will be a tiny fraction of that estimate.

Drilling in the refuge has been the victim of a national conservation movement, Frank Murkowski said at the meeting.

“The environmentalists have looked at us as a big business,” he said. “They’re raking in a tremendous amount of support, because of impressions that are made are made upon Alaska — whether it’s a sacred place or whatever.”

Several speakers took offense at Murkowski’s words about the sacredness of the refuge, including Jody Potts, a former village public safety officer and tribal member of the Gwich’in people who have hunted caribou in the refuge for ages.

“We are adamantly opposed to development in this area,” she said. “I really don’t appreciate Gov. Murkowski making light of the sacred land for our people.”

Karlin Itchoak, state director for The Wilderness Society in Alaska, said the state agency is taking a huge risk knowing that Biden is expected to fight drilling in the refuge.

“This is wildly inappropriate, fiscally irresponsible and legally suspect,” Itchoak said.

Former University of Alaska Anchorage professor Rick Steiner said at the meeting that the board’s decision betrays free-market principles and could be illegal since Congress intends for federal leases to be sold to companies, not state governments. If the leases have commercial value, the private sector should determine that through the upcoming lease sale, he said.

In an interview on Wednesday, Steiner said he believes the state-owned corporation was politically pushed to get involved.

“My guess is that there’s some profound embarrassment about the potential for very little industry interest in these leases,” Steiner said.

He said Alaska’s political establishment has “hung their hat” on opening the Arctic refuge to oil and gas leasing since 1980.

“Ever since then, this has been the holy grail for Alaska’s future for a number of the political folks in the state,” he said. “And here we are today, the first lease sales are open right now. There may be no bidders except the state itself at a very low minimum bid. So that’s, that’s pretty paltry. Obviously, this is not our future, and we need to realize that sooner than later.”

Industry officials and observers said in interviews on Wednesday that state ownership of the leases could be a worthwhile investment for the state.

John Hendrix, the former chief oil and gas adviser to Walker, said he’s worried private companies are shying away from bidding on ANWR leases because major banks have said they won’t support financing for it amid pressure from conservation groups.

If that’s the case, the state’s bidding on leases will be crucial for economic development in Alaska.

“So it’d be nice if the state stepped in to help companies that are being victimized,” he said. “They could work as a partner with others to help explore the leases.”

Mark Myers, a former Alaska oil and gas director and ex-Natural Resources commissioner under Walker, said the potential investment is not unlike other investments the state agency makes. The state takes up-front risk, but it could pay off if a large discovery is made, especially if the state retains at least some ownership of the leases.

“The risks are there, but the potential is there,” he said.

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