The sale of Arctic refuge oil leases draws meager bidding — mostly from an Alaska state agency

The sale drew just $14.4 million, with a state development agency, AIDEA, winning nine of the 11 completed bids.

By Yereth Rosen - January 6, 2021
The state of Alaska is set to bid on oil and gas leases in the Arctic National Wildlife Refuge. (Hillebrand / U.S. Fish and Wildlife Service)

A much-vaunted and highly controversial lease sale auctioning off drilling rights in Alaska’s Arctic National Wildlife Refuge drew a meager $14.4 million on Wednesday, with an Alaska state agency submitting most of the bids.

Eleven tracts received complete bids, and the Alaska Industrial Development and Export Authority was the apparent high bidder on nine of those, with a total of $12 million in high bids.

No major oil companies submitted bids in the lease sale. Two bids were deemed incomplete. The only other bids submitted in the lease sale were from Regenerate Alaska Inc., a subsidiary of the small independent 88 Energy Ltd., and a company called Knik Arm Services LLC.

Kate MacGregor, the deputy Interior secretary who read the bids, called the lease sale “truly historic.”

“Today’s sale is not only the fulfillment of our statutory direction from the Tax Cuts and Jobs Act, but it is the commitment of the Trump administration to create fresh tracks for Alaska and for our nation to fulfill the goal of U.S. energy security for decades to come. And when it comes to arctic national security today’s sale will further demonstrate the United States will have a long-term economic presence,” MacGregor said in her comments before opening reading the bids.

The bidding fell far short of the $1.8 billion that the Congressional Budget Office in 2019  estimated would be generated by two rounds of lease sales and the $4 billion to $6 billion that a pro-development group, Arctic Power, touted in 2013 as the potential receipts from oil lease sales.

MacGregor, in her opening remarks, downplayed the importance of bid amounts offered.

“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,” she said in her opening comments. “While bonus bids are so great to have, the long-term royalties of production will have a positive impact on the state budget, all Alaskans and the federal treasury, that the oil throughput will once again reinvigorate the trans-Alaska pipeline.”

Environmentalists countered that the lease sale results were an embarrassment to drilling supporters.

“This lease sale was an epic failure for the Trump administration and the Alaska congressional delegation. After years of promising a revenue and jobs bonanza, they ended up throwing a party for themselves, with the state being one of the only bidders. We have long known that the American people don’t want drilling in the Arctic Refuge, the Gwich’in people don’t want it, and now we know the oil industry doesn’t want it either,” Adam Kolton, executive director of the Alaska Wilderness League, said in a statement.

“The American people will not turn a blind eye to the liquidation of this national treasure. President-elect Biden, who ran on an ambitious climate agenda and on a promise to protect the Arctic Refuge, must take strong action on day one to put the brakes on this calamity,” Kolton said.

Any development that actually occurs on those leases would have to overcome several hurdles.

The bids must be reviewed before being awarded, leaving that administrative task to the incoming Biden administration, which opposed ANWR oil development.

Even if the leases are awarded, AIDEA, a state-owned development authority, is not an oil company and would have to find oil-drilling contractors to do the work.

The AIDEA bids were intended as a sort of backstop to ensure that ANWR leases got some bids in case no oil companies stepped up, authority board members said at their Dec. 23 emergency meeting. “It protects 40 years of everybody’s efforts to open up the coastal plain of ANWR,” board chairman Dana Pruhs said at that meeting,

Major oil companies have expressed disinterest in ANWR exploration and even the Arctic Slope Regional Corp., an Alaska Native corporation with oil operations and one of the most prominent organizations campaigning for ANWR development, declined to bid. Major banks in the U.S. and elsewhere have new policies that preclude lending for refuge oil development, and some major insurance companies recently announced similar policies.

[Alaska agency devotes $20 million to bid in controversial Arctic refuge lease sale]

Four lawsuits challenging the entire development program remain active. Though a federal judge late Tuesday declined to issue an injunction delaying Wednesday’s sale, she noted that the cases could be resolved before any on-the-ground work starts.

Despite the low winning bids, BLM officials in Alaska deemed Wednesday’s sale a success.

“That we had the participation that we had was a success,” said BLM Alaska State Director Chad Padgett said in a news conference that followed the bid opening.

“I’m excited that we’re going to be able to work closely with a state entity, and we’ll see what happens down the road.”

Kevin Pendergast, BLM’s deputy state director for resources, said that merely holding the sale was a mark of success.

“We followed a defensible and robust NEPA (National Environmental Protection Act) process to get to this point,” Pendergast said in the news conference. The BLM overcame “a number of hurdles and gotten to the point where we’re able to execute the first-ever lease sale, had a number of bidders showing interest in competing in that. So all of those things are a success from our perspective.”

Padgett and Pendergrast incorrectly asserted that Tuesday’s court order upheld the environmental review process that led to the lease sale. That order was limited to the question of whether a preliminary injunction or temporary restraining order should be issued. Decisions on the merits of the legal complaints are yet to come.

U.S. District Court Judge Sharon Gleason, in her order denying the injunction, noted that BLM’s most optimistic and aggressive scenario envisions exploration occurring within two years of the lease sale, and that those on-the-ground activities would require further environmental review.

“These facts lower the likelihood that any such activities would occur in the immediate future before the Court issues a ruling on the merits,” she said in her order.

“However, should BLM approve ground-disturbing activities at the Coastal Plain before the Court determines the merits of Plaintiffs’ challenges, Plaintiffs may seek preliminary injunctive relief related to those activities,” Gleason added.

The organizations opposing ANWR development vowed to continue their fight.

“This administration’s insistence on holding this lease sale in the final weeks of its term is a desperate act of violence toward Indigenous ways of life,” Bernadette Demientieff, executive director of the Gwich’in Steering Committee, said in a statement.

“The Gwich’in Nation has fought this process every step of the way. No amount of money is worth more than our way of life, and we will continue to stand up against anyone who attempts to harm the calving grounds, as our ancestors did for generations before us. We have the strength of generations of love and prayer supporting us, and that is far stronger than this administration’s greed. We will not back down.”