Drilling boosters, opponents consider next steps after first Arctic refuge lease sale

Two silhouetted figures in the distance around some lakes with mountains in the background
Research biologists pause among the wetlands of the coastal plain, with the Brooks Range in the background. During the short field research season, the biologists live and work in this remote camp at the edge of the continent. (Lisa Hupp/USFWS)

Just two companies and a state corporation showed up to the first-ever oil and gas lease sale in the Arctic National Wildlife Refuge last week, after 40 years of debate.  

But still, about half a million acres of land did get picked up — nearly all of it by the state of Alaska itself.

So, what happens next? 

Here’s what we know.

State agency focused on getting leases finalized

The Alaska Industrial Development and Export Authority, entered the lease sale at the last minute as a backstop, in case no one else showed up to secure the rights to the land.

It wound up as the most aggressive of just three bidders. 

That means the state won 10-year oil leases for nine pieces of land by submitting the minimum offer that the federal government would accept: $25 an acre. 

“We are very happy that we were able to win some of the tracts in this case,” Alan Weitzner, AIDEA’s executive director, said in an interview Thursday. 

“We would have preferred to see a more competitive bid put in place,” he said. “But I do think that there was a lot of uncertainty related to it.”

RELATED: Arctic refuge lease sale goes bust, as major oil companies skip out

Drilling for oil in the refuge faces an aggressive opposition campaign. It’s also expensive, and questions surround the future of oil demand — as well as how much crude is actually trapped under the refuge’s coastal plain.

Weitzner said he hopes the state’s decision to step in removes at least some of the uncertainty the oil industry might have about drilling in the refuge.

AIDEA has never held a federal oil lease before, and doesn’t own drilling equipment. It will likely have to partner with the industry to explore for oil and develop the land. 

Weitzner said he didn’t have specifics on Thursday about who AIDEA might partner with, what the partnerships might look like or when it might try to start the work. 

“It’s too early to say and give that information of what our definitive plan is going forward,” he said.

RELATED: Alaska’s state development corporation approved to spend up to $20M on ANWR oil leases

“We do have a very strong interest in ensuring that the state has tangible benefits that come from this development,” he said. “And we have have distinct interest to ensure that it is done in a responsible manner.”

For now, Weitzner said he’s working with the federal Bureau of Land Management to get the paperwork done to finalize the leases.

Usually, the process takes about two months, but it’s expected the Trump administration will rush to get it done before leaving office Jan. 20.

A map of northern Alaska is separated into tracts showing the different oil leases up for bid.
A map from the Bureau of Land Management shows the results of the first-ever oil lease sale in Alaska’s Arctic National Wildlife Refuge. Half of the tracts received no bids at all. (Bureau of Land Management)

In total, AIDEA spent about $12 million on leases that cover about 480,000 acres of federal land in the refuge. Half of that cash will go back to the state. It splits the revenues with the federal government. AIDEA must also pay rent on the land each year.

Two smaller companies see opportunity to enter Arctic refuge early

Knik Arm Services is one of two small companies that each picked up a single oil lease.

Mark Graber manages Knik Arm Services, and in an interview from Texas, he said the payoff is potentially huge if the U.S. Geological Survey’s estimates of the amount of oil beneath the refuge are correct.

“I’m an investor,” said Graber, who described himself as a “snowbird” splitting time between Texas and Alaska. “I go where I think a fair investment might offer a decent return for the risk.”

Graber said he’s putting up a “good deal” of his own money to purchase the lease, along with other “funders” he declined to name. He said he thinks he understands why major oil companies didn’t show up to the lease sale. 

“Because it’s controversial,” he said. “They knew Alaska was going to bid on it. So, they knew that they’d have a chance to pick it up later.”

RELATED: Here’s what you need to know about the Arctic National Wildlife Refuge’s first-ever oil lease sale

He argues that it won’t be a problem to develop the land without harming wildlife. Knik Arm Services wouldn’t drill itself, but would work with other companies to explore for oil “when the time is ripe,” he said.

Graber said this isn’t the first time he has made investments during a down market.

“We always bought real estate during the real estate crash of ‘89,” he said. “We’ve always tried to facilitate a weak market by taking the gamble and taking a risk. Sometimes it works. Sometimes it doesn’t.”

The other small company that won a lease is Regenerate Alaska, a subsidiary of Australia-based 88 Energy. 

The slice of land it picked, on the refuge’s western edge, is near a state-owned parcel the company already leases, and next to ExxonMobil’s Point Thomson field.

David Wall, chief executive of 88 Energy, told the Anchorage Daily News he saw it as a “soft entry” into the refuge. He said he doesn’t want to upset anyone, but wants to “make money for ourselves, and the state and its people.”

Drilling opponents say they’re not done fighting

Meanwhile, Indigenous and environmental groups that have long fought drilling in the refuge say they’re not giving up.

“We are going to do everything in our power to prevent the leases from being issued before Inauguration Day,” said Karlin Itchoak, Alaska state director for The Wilderness Society. “And we’re going to do everything we can to prevent oil and gas development from ever happening on the coastal plain of the Arctic Refuge.”

Itchoak said he couldn’t talk specifics about how the groups could block leases from getting issued “because we don’t want to show our hand.” 

a group of people standing with a sign that reads "sacred lands not for sale; stop arctic oil extraction"
Defend the Sacred AK, a group opposed to oil development in the Arctic National Wildlife Refuge, stands in front of the Anchorage BLM office on Jan. 6, 2021, the day of the first-ever oil lease sale for the Refuge. (Jeff Chen/Alaska Public Media)

Some have raised questions about the legality of the state of Alaska jumping into the lease sale. The Bureau of Land Management said Wednesday that it doesn’t see any legal issues.

Leaders of the Gwich’in Steering Committee said they met Friday with Weitzner, AIDEA director, and urged him to reconsider leasing the refuge. The Gwich’in subsist on caribou born in the Arctic refuge’s coastal plain, the area put up for sale by the Trump administration.

“We let them know that our way of life is not negotiable, and that we wanted to know how they intend to include Indigenous voices, and protect Indigenous ways of life and values,” Bernadette Demientieff, the Gwich’in Steering Committee’s executive director, said in a prepared statement. 

Itchoak said drilling opponents just need to halt any progress until Inauguration Day, because they expect support from the next administration. 

President-elect Joe Biden and his appointee to lead the Interior Department, U.S. Rep. Deb Haaland, D-New Mexico, have both said they oppose drilling in the refuge.

“We’re hopeful that if we can hold off the issuance of the leases by or before the inauguration, that will be a positive outcome for protecting the refuge for the long term,” said Itchoak.

Biden has not said what his exact plans are for the coastal plain, but it’s possible he could try to buy back the oil leases or hold up the permits that companies need to search for oil and develop the land.

The Wilderness Society and other groups are also in court fighting against the oil leasing program for the refuge.

There are four lawsuits working their way through the federal court system that, effectively, ask a judge to cancel the leases, arguing they’re based on a rushed and legally-flawed plan. 

The federal government disagrees, and said it followed the law.

Alaska Public Media’s Nat Herz contributed to this story. 

Reach reporter Tegan Hanlon at thanlon@alaskapublic.org or 907-550-8447.

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