Conservation News

Why the Arctic National Wildlife Refuge Oil Lease Sale Flopped

After years of demonstrations and congressional battles, the sale of oil drilling leases in the Arctic National Wildlife Refuge finally went ahead on January 6—and almost no one bit.

Last Wednesday, the Trump administration held the nation’s first oil-lease sale for northern Alaska’s Arctic National Wildlife Refuge (ANWR), a parting gift to lawmakers and fossil fuel industry executives that have sought to develop the region for decades. The surprise? The sale completely flopped, raising only $14.4 million of the expected $1.8 billion—0.8% of what it expected to garner—and leasing just 11 of the 22 tracts of land.

Not one major oil company submitted an offer to purchase the leases. Alaska’s state-owned economic development corporation AIDEA bought 9 of them, and two small companies each grabbed another parcel each. Half of the parcels didn’t draw a single bidder. In total, about 550,000 acres were bought of the one million acres for sale.

In short: the sale was a massive failure thanks to the divestment movement (more on that below) and a poor year for the industry. If you didn’t hear about it, you’re not alone: the auction took place on the same day that a mob of rioters stormed the Capitol.

ANWR is along the northern Alaskan coast and is the nation’s largest wildlife refuge, with over 19.6 million acres of habitat (roughly the size of South Carolina). It’s the calving grounds of the Porcupine caribou herd, the dens for the Beaufort Sea population of polar bears (with fewer than 900 individuals left), and provides habitat for wolves, musk oxen, and migratory birds. It’s also the food source for Gwich’in and Iñupiat communities that depend on caribou and consider the area sacred, though their opinions on drilling in the reserve have been divided.

Oil-friendly conservatives have pushed to drill ANWR for roughly 40 years, and Republicans successfully passed a mandate to drill the area with a rider in the 2017 Tax Cuts and Jobs Act written by Alaskan Senator Lisa Murkowski. President Trump referred to developing ANWR as one of his greatest accomplishments in office, but last Wednesday’s auction failed to live up to its promise. In fact, the sale failed to come close to the revenue that lawmakers anticipated would offset their massive tax cuts.

The sale’s poor performance was mainly due to large banks divesting from the project as well as low oil and gas prices from the pandemic-driven global recession.

The divestment movement seeks to pressure organizations to remove investments in the coal, oil and gas industries not just because they contribute to climate change, but because they are poor investments. In this case, cutting off the business of climate destruction at the source worked: When 5 major banks announced they would not finance extraction in ANWR, anticipation around the sale cooled significantly.

“Donald Trump is closing out his final days in office just as he spent the last four years: selling our communities and public lands to his corporate friends,” said Michael Brune, executive director of the Sierra Club, in a statement. “Drilling in the coastal plain of the Arctic Refuge would do irreversible harm to the hardworking communities that depend on it. President-Elect Biden must act immediately to reverse the damage done by this nefarious administration and enact permanent protections for the Arctic Refuge.”

Another contributor to ANWR’s failed lease sale was slowing demand and collapsing oil prices due in part to the pandemic, despite Trump’s pledge of billions of dollars in Covid relief to the fossil fuel industry. With low oil prices, low demand, and the massive expense inherent in developing extraction operations on the remote Alaskan coast, it just didn’t make financial sense for major oil companies to bid on the ANWR leases.

AIDEA could sell its ANWR leases to oil companies, but with Democrats taking control of the House, Senate, and White House next week, the future of those leases is uncertain. Environmental groups hope the ANWR leases will be slowed or reversed by the Biden Administration, who pledged to protect the refuge on the campaign trail, but it remains unclear exactly how the Biden Administration plans to address the leases. It could decline to issue permits or ask courts to delay the leases while they are reviewed.

Congress could protect ANWR by upending the drilling provision that was passed in the 2017 tax cut package, but it may be tough. In the Senate, Democrats only have a one-vote majority, and the new Chairman of the influential Senate Energy and Natural Resources Committee, Sen. Joe Manchin (D-WV), is the only Democrat to have voted (twice) in support of ANWR development. Things look different in the House of Representatives, however. Last year, Rep. Jared Huffman (D-CA) sponsored and passed the Arctic Cultural and Coastal Plain Protection Act, which would restore protections to ANWR. Rep. Huffman believes the legislation now has the votes to clear Congress after last week’s special election in Georgia.

While it remains unclear exactly how the incoming Biden administration and 117th Congress plan to address drilling in ANWR, if last Wednesday’s sale is a sign of times to come, we may not see much fossil fuel development in the refuge in the following years or decades.