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(Bloomberg) -- Oil companies declined to bid in a US government auction for drilling rights in the Arctic National Wildlife Refuge, as industry interest wanes in a region that’s rich with crude but difficult to develop. The Interior Department said it received no bids for the auction mandated by Congress before those offers were set to be unsealed Friday. It marked the second time in four years an auction of oil and gas leases in the refuge’s 1.
6-million-acre coastal plain flopped, coming after a 2021 sale held under President-elect Donald Trump drew just 11 high bids, most of which were lodged by an Alaska economic development corporation. Ultimately, all of the leases sold in that 2021 auction were forfeited, with two relinquished and seven others canceled by Interior. The industry’s no-show this week underscores the legal, social and economic challenges of drilling in the Coastal Plain, despite US Geological Survey estimates the region might hold between 4.
3 billion and 11.8 billion barrels of technically recoverable crude. “The lack of interest from oil companies in development in the Arctic National Wildlife Refuge reflects what we and they have known all along: There are some places too special and sacred to put at risk with oil and gas drilling,” said Laura Daniel-Davis, the acting deputy Interior secretary.
Also See: Alaska Governor Sees ‘Certainty’ for Oil, Gas Under Trump Congress in 2017 mandated two coastal plain oil auctions by late 2024 as a way to pay for the Trump-era tax cuts, based on arguments the sales and oil development would yield more than $2 billion in government revenue over a decade. But the lackluster industry interest in the resulting sales has “exposed the false promises made in the Tax Act,” Daniel-Davis said. The failed sale also sets up a challenge for the incoming president.
Trump has vowed to “drill, baby, drill” and unleash domestic energy production — even at the cost of oil company returns — but it’s not clear that the industry will go along. “We’re going to be drilling soon,” Trump said during a news conference Tuesday. “We’re going to be opening up ANWR.
We’re going to be doing all sorts of things that nobody ever thought was even possible.” Environmentalists and native Alaskans, including Gwich’in people who consider the area sacred, have warned oil companies would face intense public scrutiny for pursuing coastal-plain drilling rights. They argue new oil and gas development in the refuge would imperil a pristine wilderness with arctic foxes, polar bears and caribou herds.
“Gwich’in people have always known that oil and gas drilling in the refuge was not only a violation of our human rights as indigenous people, but that it is unpopular and simply a bad business decision,” said Raeann Garnett, the first tribal chief of the Native Village of Venetie Tribal Government. Yet oil industry representatives and Alaska officials complained the lease sale’s structure discouraged bidding from the start. In announcing the auction last month, the US Bureau of Land Management highlighted how the available acreage offered just the “minimum acres required,” with tracts concentrated in the coastal plain’s northwest corner.
The auction also came with restrictions on surface occupancy and seismic exploration that could deter interest. The Alaska Industrial Development and Export Authority, which secured leases during the 2021 auction, and the state of Alaska have have challenged this week’s sale in federal court. The auction is “illegal and broken,” said Randy Ruaro, executive director of the Alaska development authority.
“The terms and conditions imposed by the the Department of Interior are so strict and onerous that you cannot economically produce oil there.” Ruaro called for a new auction, complaining the Biden administration’s sale flouted congressional requirements for the Interior Department to facilitate leasing, exploration, development, production and transportation of oil and gas from the refuge. The idea of tapping the 19-million acre refuge for its potential oil bounty has tantalized Washington for decades.
Oil industry allies and advocates have long championed lease sales in ANWR as a way to boost production on Alaska’s North Slope and supply more crude to the Trans Alaska Pipeline System that provides a vital conduit for crude. Yet companies that lay their eyes on the region would come up against more than just reputational risks. Developing the area would require they overcome costly logistical challenges, navigate intense permitting requirements and deal with opposition from environmental groups, analysts have warned.
The high costs and challenges of Arctic oil development — most vividly demonstrated by Shell Plc’s struggles to mount exploratory drilling in the Chukchi Sea more than a decade ago — led energy companies to forfeit drilling rights in US Arctic waters north of Alaska too, despite the potentially 27-billion-barrel bounty. --With assistance from Ari Natter and Bobby Magill. (Updates with sale design details and comments from 10th paragraph.
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