When Congress passed President Donald Trump’s tax reform package in 2017, with provisions to open the Arctic National Wildlife Refuge to oil drilling, Alaska’s congressional delegation said the decision would change the future of the state for the better.
“This is a watershed moment for Alaska and all of America,” Republican U.S. Senator Lisa Murkowski said in a statement at the time. Murkowski authored the section of the bill opening up the safe haven and hailed the impending arrival of “thousands of better-paying jobs,” up to $60 billion in oil royalties for the state of Alaska, and “a new hope for growth and prosperity”.
The decision to open the refuge did indeed shape the future of Alaska, but not in the way its proponents predicted.
With leases suspended by the Biden administration and a federal lawsuit still pending for environmental reviews, all private companies that have leased refuge land for oil development have now backward of their offers, leaving an Alaska state agency as the sole tenant. The last company with drilling rights in the refuge, Knik Arm Services, relinquished his lease in Augustits owner declaring that it was time to move on to “better opportunities”.
Amid the global economy’s transition away from oil and the long timeline for any future development, the exodus of the refuge industry makes it unlikely that Alaska will gain any significant near-term benefits from the opening of the region, which came after a decades-long political push. .
But even more important is the backlash against Alaska’s broader oil industry outside the haven, which has been sparked by the push to drill inside. Now, it’s not just the refuge that’s increasingly out of reach of big cats: it’s the entire Alaskan portion of the Arctic, the site of nearly every existing and hoped-for industry in the state.
This result stems from a successful campaign by green groups to cut off oil companies’ access to loans and insurance for development in the haven. The effort succeeded not only in convincing major banks and insurers to exclude funding for these developments; it also caused many of them to give up markets anywhere in the Arctic.
[Geologist whose 2013 discovery ‘revolutionized’ North Slope oil exploration lays plans to drill again this winter]
Activists say Congress’ decision to open the haven has given them a powerful organizing tool to fight development beyond its borders – even in areas closer to existing infrastructure, like the National Petroleum Reserve. Alaska.
“By forcing the safe haven, in particular, into the spotlight, it has also forced investors and financial institutions to look closely at not just the characteristics of the safe haven that make it a really risky and bad investment, but the same characteristics that apply to the Arctic more broadly,” said Ben Cushing, a Sierra Club organizer. “And I think that’s why you saw a lot of financial institutions adopting policies that weren’t just for safe haven, in particular.”
There is still promising news for the industry coming from the Alaskan oil patch, with big projects on the horizon. Federal permit reform aimed at accelerating green energy infrastructure could also have the effect of smoothing oil development approvals.
But with companies fleeing the Arctic National Wildlife Refuge and previously abandoning prospects in federal waters off Alaska, it’s clear that the playing field for the state’s oil industry — and the environmental groups that fight against new projects – has shrunk sharply in recent years. Both parties are now focused on one area: projects in and around Alaska’s National Petroleum Reserve.
Banks and insurers exclude projects
Support from banks and insurance companies for oil projects in the Arctic was not a major lever for green groups before Congress’ decision in 2017 to open the refuge. But with the financial industry increasingly focusing on sustainability and the environment, and new public awareness of oil development in Alaska, the campaign has begun to gain traction.
In 2020, as the Trump administration completed environmental reviews of the refuge drilling program, an array of major banks – including Morgan Stanley, Citigroup and Bank of America – announced they would refuse to lend money to projects all over the Arctic. Major insurers like Allianz have also made similar commitments.
Access to finance is more important for slightly smaller “independent” companies, like Armstrong Oil and Gas, which Alaskan policymakers have long tried to lure to the state. These promises make less of a difference to big oil companies like ConocoPhillips and ExxonMobil, which can launch new projects without relying as much on banks for large loans.
Commitments from banks and insurers have made it harder and more expensive for small businesses to secure financing for oil development in Alaska, industry players said in interviews – a dynamic that puts projects at a disadvantage of the state compared to those in other parts of the United States and the world.
The industry’s mixed interest in drilling in the refuge was evident long before the companies’ recent decisions to waive their leases; there were clear signs of the sale of the lease itself.
Half of the parcels offered by the federal government did not elicit any bids and only two small companies bought acreage. No major oil company – or even a medium-sized independent company – took part.
Murkowski, in a phone interview, acknowledged that industry interest in projects in the Arctic refuge is “perhaps waning somewhat.”
But she wouldn’t admit that her work to open the refuge fueled the wider anti-Arctic backlash and a successful campaign by conservation groups. The Alaska congressional delegation, she added, needed to seize the opportunity it had with a Republican president and GOP control over Congress.
“We have been pushing this rock uphill for 40 years. And so making sure that we could finally get this into law – timing was important,” she said. “It’s not like we can hold back and say, ‘We’re going to wait for prices to improve.’ We had to seize the moment.”
Alaska’s post-refuge future
Even without drilling into the refuge just yet, there’s still plenty of action in the Alaskan oil play. Since the industry’s original big find at Prudhoe Bay, development has gradually spread west to the National Petroleum Reserve, named for its oil potential but also prized by conservation groups. and native residents for its fish and wildlife.
[Alaska congressional delegation pushes for quick approval of big North Slope drilling project]
In August, the Australian company Santos and the Spanish company Repsol announced that they had made the final decision to build the $2.6 billion Pikka project on state land near the National Petroleum Reserve, which which could increase the daily flow of oil through the Trans-Alaska Pipeline by 15. % in its only initial phase.
And the Willow development proposed by ConocoPhillips, which sits inside the oil reserve, could produce twice as much oil as the Pikka project.
But Willow — and the legal and political fight that has erupted over her approval — has become a symbol of the post-refuge future for Alaska’s oil industry.
As companies see new potential in the previously ignored rock formations of the oil reserve, they have simultaneously abandoned more remote and riskier projects in Alaska’s unproven basins. These include in the refuge as well as in the waters off the Chukchi Sea, where Shell drilled for oil in a costly and ultimately unsuccessful venture nearly a decade ago that saw aggressive opposition from groups conservation.
And with no risk of imminent development in the refuge and offshore, these groups can now put all their advocacy into their fight against more conventional land-based projects like Willow.
The Biden administration had to redraft the environmental assessments for this project after environmental groups won a lawsuit challenging them. And just a few weeks ago, the Sierra Club, Friends of the Earth and Greenpeace filed a federal complaint to block another development in the reserve, Peregrine, which had hitherto received little attention from activists.
There is still plenty of oil, however, beneath the tundra of Alaska’s North Slope, and state politicians continue to push for its production.
His two U.S. senators have made Willow a top priority, and the Biden administration, despite its climate agenda, ignored requests slow down the development approval process.
Leaders and policymakers also note that Alaska could see more interest amid the recent surge in global oil prices. And they say there is potential for faster government approval of oil developments resulting from federal permit reform — even if this reform aims to accelerate renewable energy projects.
“This resource is underground; it’s not like it evaporates. He will be there for us for the future of Alaska,” Murkowski said. “And I think the faster we can work to access those resources and do it in a safe, responsible and accountable way, the better it is for us. And you know my speech: I think it’s better for the country in the long run.
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