Sale Attracts a Rare Taker of Arctic Exploration Leases. It may be the only one.
The state of Alaska can step in and purchase leases in the hope of reassigning them later, with a deadline looming and poor interest from oil companies. That was seen by some observers as a long shot.
After the Trump administration's three-year drive to open the Arctic National Wildlife Refuge in Alaska to oil exploration, an initiative that resulted in a scramble to sell leases before the White House changes hands, the state of Alaska itself could eventually be the only taker.
There is little sign on Thursday that oil companies are interested in buying drilling rights under challenging conditions, to extract more expensive fossil fuels for a planet that is gradually trying to wean itself off them, with the deadline for submitting bids for 10-year leases on tracts covering more than one million acres of refuge.
Last week, a state-owned economic development company voted to approve bids of up to $20 million for some of the leases in the face of uncertainty. It's an exceptional opportunity," Frank Murkowski, the elder statesman of Alaska politics, told the Alaska Industrial Development and Export Authority's board of directors at a pre-voting meeting."
There are legal concerns, including whether the planning authority qualifies as a bidder, surrounding the action. And environmental organizations, several Alaska Native groups and others are seeking an injunction to stop lease sales directly in the Federal District Court, claiming that they are part of the Interior Department's fundamentally flawed process that, among other things, played down scientific findings about potential harm to the shelter.
But if the development authority proceeds, it establishes the likelihood that the state can find itself the sole owner of leases when the sealed offers are opened on Jan. 6. That will leave it to hope that interest in fracking in the refuge would pick up at some stage over the next decade and it can sublease tracts to someone else.
The outcome of the sale will also be a curious end to the drive by the Trump administration to allow fracking in the shelter, which is estimated to exceed billions of barrels of oil, although that thinking is largely based on decades-old evidence. President Trump said that one of the most critical of his attempts to increase domestic oil production was to open a refuge for oil companies.
The refuge is one of the last great expanses of nearly untouched land in the United States, home to roaming caribou, polar bears and migrating waterfowl, approximately the size of South Carolina. For a long time, Alaskan officials and several Republican legislators have tried to legalize fracking there, citing the employment and income it would produce. But the refuge has been secured for decades, mostly by congressional Democrats.
That changed in 2017 when Republicans forced through a tax bill under the control of both houses of Congress, enabling leases of up to 1.5 million acres of refuge along the coast to be leased. Following an environmental review, the Interior Department approved a sale this summer, proposals for which were accelerated following the election defeat of Mr. Trump. Joseph R. Biden Jr., president-elect, opposes fracking in the refuge.
This month, the Bureau of Land Management, the sales handling agency of the Interior Department, withdrew about half a million acres from the bid, citing concerns about disrupting calving areas for caribou and disturbing other wildlife. That leaves around a million acres, with a minimum bid of $25 an acre, accessible across 22 tracts.
Lesli Ellis-Wouters, a spokeswoman for the bureau in Alaska, refused to say whether any bids had been issued only a few days before the deadline. "That data is deemed confidential until tenders are opened," she said.
A trade organization, the Alaska Oil and Gas Association, has long said that businesses are avoiding tipping their hands on their plans.
Pavel Molchanov, an energy analyst with financial services company Raymond James, said that companies are highly unlikely to bid, given the cost of oil exploration and drilling in the Arctic, the possible harm to their reputations from working on environmentally valued property, the increasing movement among major banks to refuse to finance shelter drilling, and the depressed condition of the shelter
"Drilling in a shelter is almost the last thing any oil company wants to do right now," Mr. Molchanov said. "But even before Covid, the industry's appetite for this was sparse."
Mr. Murkowski, a former governor and U.S. senator and the father of one of the state's current senators, Lisa Murkowski, acknowledged common fears in an opinion article in the Anchorage Daily News before the meeting of the economic development authority that there will be no bidders for leases. "Alaska will look like the proverbial paper tiger after all our efforts, hope and aspirations," he wrote.
Through bidding, Mr. Murkowski said the state would act as a backstop, and he argued that Alaska had experience in oil leasing, but that expertise is in selling state-owned land leases, not buying federal land leases.
He also pointed out that since lease revenue is shared evenly between the federal and state governments, the state would get a special deal if its bids were competitive. You're going to get back half your income," he told the Board of Authority." Only the military, he said, "can buy a discount of 50 percent."
In favor of the proposal, Mr. Murkowski was one of only a handful of speakers. Most commentators said the refuge should be left alone and that elsewhere, such as for Covid's relief, the state should spend its capital.
Suzanne Bostrom, a staff attorney with Trustees for Alaska, a public-interest non-profit law firm representing organizations seeking to block sales, said the decision by the authority to approve "smacks of real desperation" bids.
She said there were "very serious questions" about whether the authority could "without oversight, spend state resources."
She said, "The legislature is supposed to make those types of choices."
Should the court allow the lease sale to proceed, it is expected that the new Biden administration will move to refuse them. Questions regarding the legitimacy of state ownership could give the new leadership another avenue to do so.
The sales were described in the tax bill as a way to collect $900 million for the federal treasury over 10 years to help offset more than a trillion dollars in tax cuts. But outside analysts have long disputed the number. An study by The New York Times last year indicated that the actual figure would be around $45 million.
And with sales looming, the government's future financial windfall looks much smaller, said Autumn Hanna, vice president of a non-partisan group in Washington, D.C., Taxpayers for Common Sense.
"We still feel strongly that taxpayers' lease sales will fall dramatically short," Ms. Hanna said. "We don't think there is any proof of interest in the industry and that there could be any real competitive bidding."
The group said that its most recent analysis showed that from the lease sales, the federal treasury could earn as little as $15 million.