By Timothy Puko
WASHINGTON -- The Trump administration approved an oil leasing
program for the Arctic National Wildlife Refuge on Monday, opening
up the pristine 19-million-acre wilderness to drilling for the
first time and making it difficult to unwind the decision should
Democrats recapture the White House in November.
Approving the program clears the way to auction oil leases
"right around the end of the year," Interior Secretary David
Bernhardt said in an interview. The decision caps more than 30
years of efforts by oil companies and Alaskan leaders to drill in
the refuge.
Environmentalists have raised concerns about the impact drilling
could have on the polar bears and caribou herds that live in the
remote refuge in northeast Alaska. Congress passed a mandate to
lease oil rights in part of the refuge in its tax overhaul in 2017,
when both the House and Senate were in Republican control.
Mr. Bernhardt said the drilling can be conducted in an
environmentally sound manner and that Congress has set details into
law that will help the plan withstand challenges from
environmentalists.
"Congress gave us a very clear directive here, and we have to
carry out that directive consistent with the directive that they
gave, and consistent with the procedural statutes," Mr. Bernhardt
said. "I have a remarkable degree of confidence that this can be
done in a way that is responsible, sustainable and environmentally
benign."
The refuge, often known by its acronym ANWR, is nearly the size
of South Carolina, nestled between the Arctic Ocean to the north
and Canada's Yukon to the east. Congress approved protections for
it in 1980, and its expansive tundra, mountains and coastal plain
are still nearly void of people and roads.
Investors question its value, however, as a source of oil,
especially in an era of lower crude prices and tepid demand. The
industry is glutted with supply world-wide, pushing companies of
all sizes to plan deep spending cuts.
The reserves in ANWR are uncertain and drilling there appears
unpopular with the public. Combined with the sheer expense of
entering Arctic wilderness for the first time, it might all chase
away several of the major companies that could afford such a
capital outlay.
Goldman Sachs Group Inc. and Wells Fargo & Co. are among
several banks to rule out funding for ANWR drilling specifically,
and more have broadly ruled out financing for Arctic
development.
BP PLC, a pioneer of Alaska oil, decided last year to sell all
of its assets in the state even with an ANWR auction pending --
only to see the deal temporarily delayed this spring while falling
oil prices caused major banks to balk at financing the buyer,
Hilcorp Energy Co.
Financiers are concerned about climate change and low oil
prices, and that is likely to keep oil companies from lining up to
drill in the refuge, said Quincy Krosby, chief market strategist at
Prudential Financial Inc., which manages more than $1 trillion in
assets.
"Investors, with the energy companies, they don't want a
backlash from university endowments, sovereign-wealth funds and so
on," Ms. Krosby said. "But, more importantly, I go back to the
economic fundamentals: Why do you have to go there for oil?...The
optics at this stage don't bode well for this sort of
endeavor."
Mr. Bernhardt reiterated the department's assertion that oil
drilling can be done in the coastal plain along the Arctic Ocean,
at the northern tip of the refuge, without spoiling the area. The
Interior Department says drilling pads, processing plants and roads
needed for drilling will take up just 0.01% of refuge's 19 million
acres.
Pipelines that hover over the ground, however, are largely not
counted toward that limit. Environmentalists contend the area
should remain in a wild state, and have held out hope that drilling
could be averted if Democrats gain the White House or attain a
majority in the Senate.
Oil development threatens wildlife and is likely to worsen
climate change, according to the Alaska Wilderness League, one of
the groups that has opposed opening the Arctic refuge to
drilling.
"Our climate is in crisis, oil prices are cratering, and major
banks are pulling out of Arctic financing right and left," Adam
Kolton, the group's executive director, said in a statement Monday.
"This rush to drill would culminate in a fire sale of our nation's
most iconic wilderness."
Congress gave the Interior Department until December 2021 to
sell oil leases. Doing so this year, locking the government into
contracts with companies, would make it harder to delay or undo the
plan for drilling in the refuge even if Democrats who oppose the
plan come into power, lawyers have said.
Mr. Bernhardt said all environmental laws were scrupulously
followed, but he also said the department moved quickly given
President Trump's support for boosting U.S. energy production.
"We take our direction from the president. The president has
been very robust on opening additional areas of federal lands, as
appropriate, to resource development," Mr. Bernhardt said. "We've
tried to hit his priorities as expeditiously as we can -- with
appropriate deliberation."
Kara Moriarty, leader of the Alaska Oil and Gas Association,
emphasized that drilling is limited to the coastal plain and said
production is likely 10 years to 15 years away even with a lease
sale this year.
"For Alaska, having continued oil and gas development for the
next 30, 40, 50 years is imperative to the state's economy," she
said. "And, yes, there's oil everywhere, but...we have the
strongest environmental regulations. I'd put them up against any
others in the world."
Alaska has been rocked in recent years by steep drops in both
production and exploration. A boom in shale drilling elsewhere has
drawn drillers to easier-to-reach and less environmentally
sensitive areas, and state leaders have urgently sought ways to
lure them back.
When the Interior Department's Bureau of Land Management
finished its environmental impact statement on the project last
year, Alaska's congressional delegation and other state leaders
urged the department to move forward quickly on leasing the refuge.
Sen. Lisa Murkowski (R., Alaska) said it would "strengthen our
economy, our energy security, and our long-term prosperity."
"This is a capstone moment in our decadeslong push," Ms.
Murkowski said in a statement. "New opportunity...is needed both
now, as Alaskans navigate incredibly challenging times, and well
into the future as we seek a lasting economic foundation for our
state."
Mr. Bernhardt said he believes companies with a long-term vision
will bid on the prospect, even with oil prices around a 15-year
low.
"Under [a] long-term scenario you're still looking at an
incredibly large, conventional onshore prospect that is far less
complex than many, " Mr. Bernhardt said. "And when you look at this
from a world-wide standpoint, I'm very confident there will be
people and entities who are very interested in this as an
attractive prospect."
His department's environmental impact statement said the
industry would have to develop new ways to find polar bears because
their testing systems had never been used in a place with so many
bear dens and pregnant females.
It said the potential for bear deaths and injuries "could be
high," though "the risks are generally well understood."
Write to Timothy Puko at tim.puko@wsj.com
(END) Dow Jones Newswires
August 17, 2020 14:42 ET (18:42 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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