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Trump auctions drilling rights to Arctic National Wildlife Refuge

Move comes after major energy companies passed on drilling in a fragile habitat critical for threatened polar bears

The Trump administration auctioned off oil and gas leases in Alaska's Arctic National Wildlife Refuge. (Mason Cummings/The Wilderness Society)

Trump administration officials auctioned off oil and gas leases in Alaska’s Arctic National Wildlife Refuge on Wednesday, capping Republicans’ decades-long quest to drill in one of the nation’s most vast unspoiled wild places. The move marks one of the most significant environmental rollbacks the president has accomplished in his term.

But with lackluster oil prices and an increasing number of banks saying they would not finance Arctic energy projects, major oil companies did not try to buy the leases. That left the state agency, Alaska Industrial Development and Export Authority, as the main bidder. The agency put up all but two of the winning bids, which went to a couple of small energy firms.

The sale of 11 tracts on just over 550,000 acres netted $14.4 million, a tiny fraction of what Republicans initially predicted it would yield. Only two of the bids were competitive, so nearly all of the land sold for the minimum price of $25 an acre.

Interior Deputy Secretary Kate MacGregor, who stood before a camera and read the bids out loud as she pulled them out of manila folders, announced at the start of the sale, “Today is truly historic.” Noting that many people had spent years working to open the refuge up to drilling, she said, “Thank you for your grit and for your determination.”

While a 2017 law compels the government to auction another several hundred thousand acres by the end of 2024, the incoming administration may be able to overturn that requirement now that Democrats have won control of the Senate in the wake of Tuesday’s runoff elections in Georgia.

A coalition of environmental and conservation groups tried to block the sale on the grounds that the administration had cut corners in crafting the leasing program, but U.S. District Judge Sharon Gleason denied their request for a preliminary injunction Tuesday evening.

The Interior Department’s Bureau of Land Management will offer drilling rights to most of the refuge’s nearly 1.6 million-acre coastal plain, which attracts hundreds of thousands of migrating caribou and waterfowl each year and provides critical habitat for the Southern Beaufort Sea’s remaining polar bears. As sea ice on the Arctic Ocean abutting the refuge shrinks, the bears — threatened with extinction due to climate change — have been forced to spend more time on land. Federal scientists estimate that a third of the bears’ maternal dens lie within the area the administration has opened up for energy development.

The refuge has become a rallying point for Republicans and environmentalists alike, who have fought for 40 years over whether to tap into the fossil fuels lying beneath it. The government estimates there could be 7.7 billion barrels of recoverable oil on the coastal plain, though seismic surveys have not been conducted since the 1980s. The BLM is in the process of letting the Kaktovik Iñupiat Corporation conduct seismic tests there this winter.

The sale marks the culmination of President Trump’s push to expand oil and gas drilling across the country, including in some of its most ecologically sensitive areas. On Monday, the BLM opened up an additional 7 million acres for leasing on the National Petroleum Reserve-Alaska, home to a critical calving area for tens of thousands of caribou and migratory feeding ground for hundreds of thousands of birds.

Trump officials predict that extracting oil from the relatively pristine refuge, which supports 270 species, will require as many as four airstrips and major well pads, 175 miles of roads, vertical supports for pipelines, a seawater treatment plant and a barge landing and storage site. Drilling operations could last for nearly a half-century.

A number of Alaska Native officials — including those in Kaktovik, which lies within the refuge’s boundaries and has surface land rights next to the coastal plain — back energy development on the refuge. The Arctic Slope Regional Corporation, which holds 92,000 acres of subsurface mineral rights, has also backed drilling there.

In a federal court hearing Monday, where several environmental groups unsuccessfully sought a preliminary injunction to halt the lease sale, Tyson Kade — a lawyer for the North Slope Borough and Kaktovik — argued that such a move would cost Alaska Natives living in the region jobs and revenue. “The Court should consider the interests of the people who actually live on the North Slope and the coastal plain,” he said.

But the Gwich’in people, who have relied for centuries on the Porcupine caribou herd that migrates each year through the refuge, have joined with conservationists in opposing any drilling there.

Last month the BLM withdrew nearly 475,000 acres from the auction, citing public concerns about drilling’s impact on the caribou herd.

Gleason ruled Tuesday the auction could go forward because the Gwich’in and other plaintiffs — including the National Audubon Society and Natural Resources Defense Council “have not established that they are likely to suffer imminent irreparable harm” since drilling is not expected to commence immediately.

“In their push to sell off our lands to the fossil fuel industry, the Trump administration has engaged in a corrupt process and disrespected and dismissed the Indigenous people,” said Bernadette Demientieff, executive director of the Gwich’in Steering Committee. “We will continue to fight this illegal sale in court, and we call on President-elect Biden to act immediately to protect our lands from destructive drilling once and for all.”

Opponents have also launched a public campaign to deter major financial institutions and energy firms from investing in such a project. America’s six largest banks and Canada’s five biggest banks have all pledged not to back energy exploration on the refuge.

When asked recently whether Royal Dutch Shell planned to bid, the company’s chief executive Ben van Beurden said “Oh, no, no, no.” Shell bought leases in the Chukchi Sea off the northwest coast of Alaska in 2008 and spent more than $7 billion only to drill a dry hole in 2015.

“We believe that the oil and gas upstream part is a foundational piece of business for us, but we’re going to be very selective on where we want to create value,” van Beurden said. “And I can tell you at the North Slope or offshore Alaska, it’s not going to be part of that.”

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One major bank said it had asked clients with assets in the region whether they planned to bid and they said absolutely not, according to the bank’s spokesman, who spoke on the condition of anonymity to protect business relationships.

Other potential bidders chose not to make offers. They included companies such as Hilcorp, which last year bought up all of BP’s properties in Alaska’s North Slope; Oil Search, an exploration company focused largely on Alaska; and Conoco Phillips, a sizable oil company that has made some discoveries on National Petroleum Reserve Alaska, west of the refuge.

But BLM Alaska Director Chad Padgett called the auction “very successful,” adding that it was not surprising there wasn’t more interest. “It’s an area that’s unknown.”

Anxiety about the possibility that no one would bid on the leases in the refuge prompted former governors Bill Walker and Frank Murkowski to write op-eds urging the state to place bids on the leases so that the state could sell or give the leases to oil companies to keep development moving. On Dec. 23, despite calls to spend the money elsewhere, the AIDEA board voted to spend up to $20 million, enough to buy 800,000 acres at the $25 rock bottom minimum price.

While Congress projected in the Tax Cuts and Jobs Act 2017 that the lease program would raise $1.8 billion in revenue for the federal government, officials now say it will raise half that, and it could be even less. Justice Department lawyer Paul Turcke estimated Monday the sale would generate “many millions of dollars” split evenly between Alaska and the federal government.

There has been little competition for leases on the National Petroleum Reserve-Alaska, where companies have operated for years. More than 90 percent of the leases sold since 2012 received just a single bid. In eight of the past nine years, there was not a single competitive bid on the reserve.

President-elect Joe Biden has indicated he opposes any development on the refuge: On Tuesday, a senior transition official who spoke on the condition of anonymity because he has yet to take office said of the auction: “It is just a sham, and a poke in the eye.”

It remains unclear how much Biden can restrict drilling given the legal mandate to hold another auction by the end of 2024, though Democrats may be able to overturn this provision now that they have won both of Georgia’s Senate seats.

Drew Caputo, Earthjustice’s vice president of litigation for lands, wildlife and oceans, noted that the Bureau of Land Management is supposed to hold quarterly auctions on its lands but can defer them repeatedly.

“The 2017 tax law is way more prescriptive than BLM rules that cover oil and gas lease sales,” Caputo said, adding Biden will have “a binding obligation” to conduct a lease sale on the refuge by the end of his first term “unless the law is changed before then. That mandate is not an excuse for other legal violations, like inadequate environmental analysis.”

There are four separate lawsuits challenging the administration’s environmental analysis of the proposed drilling program.

Frank Macchiarola, senior vice president of policy, economics and regulatory affairs for the American Petroleum Institute, said in an email that the environmental review at issue “confirmed the potential to develop the area safely, and any company that chooses to invest will be held to the world’s highest environmental standards.”

“Our members are laser-focused on continuing safe and environmentally sound energy production, and we will work with the Biden administration to support policies that balance U.S. energy leadership,” Macchiarola said.