ANWR Drilling Leases – They Threw A Party And Nobody Came

On January 6, 2021, the first ever lease sale was held for drilling in ANWR (the Arctic National Wildlife Refuge) after 40+ years of fighting and haggling over oil and gas drilling in 1.6 million acres of pristine wilderness. The leases were authorized under President Trump’s 2017 Tax Cuts and Jobs Act. Drilling in ANWR has nothing to do with tax cuts (except for oil and gas companies) but the sales pitch was that it would create oil and gas jobs.

On Tuesday June 1, President Biden signed an executive order that suspended the      January 6 leases primarily based on apparent deficiencies in environmental review of the impact of the new leases. This may sound like the ordinary tit-for-tat we see in Washington but as is so often the case the tit-for-tat overlooks the actual reality.

On January 6, there were 13 leases up for bid. No major oil company – Exxon-Mobil, Shell, Chevron, Texaco, … even bothered to bid. Eleven of the 13 leases went to the Alaska Investment Development and Export Authority (AIDEA) a corporation owned by the state of Alaska. AIDEA apparently wants to control future drilling in ANWR through subleases. Rather than dealing with BLM, potential leases will be subleases under AIDEA, not leases from BLM. Under federal law, the state gets 50% of any lease payments, so 50% 9f every dollar of lease payments paid by AIDEA to BLM gets paid back to the state of Alaska.

The other two leases went to an Alaska based real estate investment firm and a subsidiary of an Australian oil company that has been “exploring” in the North Slope. None of the winning bidders appear to have the actual ability to conduct oil drilling activities in an environmentally sensitive area in the middle of nowhere in a harsh environment with very limited access.

The reality here isn’t politics – Trump pushing through the leases two weeks before he left office or Biden suspending the leases four months later. The reality is economics. Because of fracking, oil prices in the US have fallen to levels that won’t support drilling in places and conditions like ANWR so the “majors” aren’t interested. If the numbers don’t work, the numbers don’t work. Plain and simple, politics notwithstanding.

Michael Baumer

michael@baumerlaw.com

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by Michael Baumer