The Fuse

Biden Suspends Leases in ANWR, But Supports Other Arctic Drilling

by Nick Cunningham | June 04, 2021

The Biden administration suspended leases in the Arctic National Wildlife Refuge (ANWR), dimming prospects that the vast pristine expanse of protected area ever becomes a substantial source of oil and gas production.

The move could set off a protracted legal fight, leaving its status in limbo for years, but the oil and gas industry has only shown tepid interest in ANWR as the oil market goes through historic turmoil.

Suspended leases deal major blow to ANWR oil   

The Trump administration finalized a lease sale for drilling rights in ANWR during the lame duck session last fall, and held an auction in the waning days of the administration’s tenure. The auction was the culmination of several years of efforts, following legislation that authorized drilling in ANWR as part of the Trump tax cuts in 2017.

But the fight over ANWR goes back much further. Democrats and Republicans have been arguing over ANWR for decades. In that context, the early 2021 auction was a huge victory for the oil industry.

However, the lease sale was a dramatic bust. No oil majors showed up, and the state of Alaska itself was the main winner of most of the few leases that were successfully awarded. The irony is that after years of battling, the oil industry finally prevailed in the political battle at a time when almost no oil companies actually had an interest in taking a risk on drilling in ANWR. The oil market was suffering from incredible uncertainties related to the pandemic in the short-term, but the longer-term energy transition also undercuts interest in long-lived, large-scale risky oil projects.

But, as the Biden administration took over, it was clear that even the political victory secured during the Trump era was fleeting. As is the case over many high-profile politically controversial energy projects, the Washington pendulum swings back and forth every four years.

Hours after his inauguration in January, President Biden signed an executive order that placed a temporary moratorium on oil and gas activity in ANWR, citing deficiencies in the environmental review.

On June 1, the U.S. Department of Interior went further, suspending the leases awarded by the Trump administration, and said it would conduct a review of the ANWR lease program.

Alaska’s congressional delegation was livid, calling the move “outrageous,” but environmental groups and the Gwich’in Steering Committee, an Indigenous community long opposed to drilling in ANWR, welcomed the decision, and called for permanent protections.

Permanent federal protection is unlikely for the foreseeable future. The 2017 law authorizing drilling in ANWR specifically calls for two lease sales – one in 2021 and one in 2024. With a legislative statute on the books, the Biden administration may struggle to keep ANWR protected in any permanent way. Litigation could, in theory, force Interior to offer up leases.

At the same time, the global energy industry is in the midst of epochal change. Not only is the future of oil demand in doubt, but unrelenting pressure from governments and also from financial markets on the oil industry to slash emissions and refrain from new oil ventures leaves ANWR far down on the list in terms of competitiveness in an uncertain oil market. Major banks have announced decisions to cut off financing for new fossil fuel projects in the Arctic.

In other words, the Biden administration may not need to place ANWR in permanent protected status – many oil companies are going to stay away on their own. Suspending leases and forcing ANWR into a messy legal fight will likely stall the entire venture for years, at which point, the logic of drilling in a new frontier may make even less sense.

More Alaska drilling

The Biden administration’s suspensions of leases in ANWR stands in contrast to the President’s support for a separate oil project in another part of Arctic Alaska.

ConocoPhillips is moving forward with a large project in the National Petroleum Reserve Alaska (NPR-A), approved under President Trump. The Willow project will produce 100,000 barrels per day at peak production, but environmental groups sued to stop it. The issue is tied up in court, but at the end of May, the Biden administration’s Justice Department lent its support for the project, continuing a Trump-era position.

“As a senior member of the Senate Energy and Natural Resources Committee and former Committee chair, I have been aggressive in my advocacy for the Willow project,” Senator Lisa Murkowski (R-AK) said in a statement, praising the Biden administration. “I brought the significance of the project to President Biden’s attention and many other senior White House officials on the first day of the new administration.”

The project will require ConocoPhillips to install chillers to keep melting permafrost frozen, so that it can position equipment on top to safely drill. Few will miss the irony of an oil company going to such lengths in the face of warming permafrost to drill for oil that will exacerbate climate change.

The reactions from stakeholders were flipped from the ANWR decision – Republicans and industry welcomed the support from the Department of Justice, while environmental and some Indigenous groups decried it.

In fact, despite the high-profile decision to cancel the Keystone XL pipeline and the recent decision to suspend leases in ANWR, the Biden record is much more mixed than might seem. As the Wall Street Journal reports, some Republican senators from Western states are quietly relieved at the Biden administration’s record thus far, citing support for the Willow project and the Dakota Access pipeline, another contentious issue that Biden has thus far supported.

But that support does not extend to ANWR, where billions of barrels of Arctic oil and gas will likely be left in the ground.

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