Donald Trump’s desire to open up environmentally sensitive areas of Alaska to oil and gas drilling is not being met with the same interest from at least one oil company: BP, which just said it is is exiting the state.
At issue is the Arctic National Wildlife Refuge, or ANWR — long the focal point between industrialists and environmentalists and long off-limits to any type of production. The Arctic region is not just a breeding ground for wildlife but also for political discord, especially while the nation transitioned from the Obama administration to the Trump administration. While it may appear that oil and gas developers are thirsting for access to the ANWR, BP’s departure suggest otherwise — not just because it is bad PR but also because it may backfire, economically.
“If BP thought it could have squeezed a nickel out of drilling in the Arctic Refuge, it wouldn’t have hesitated to annihilate it,” says Senator Ed Markey, D-Massachusetts, in a tweet. “Their exit is further evidence that there is absolutely no reason to turn the Refuge over to the oil and gas industry. All risk, no reward.”
Tucked deep inside the 2017 tax bill was a provision to allow drilling in certain sections of the ANWR. The Trump administration says that it will conduct the first lease sales after it completes a mandatory environmental impact statement, which should happen by year-end. Once a lease is sold, the lessee must then apply for a drilling permit.
Needless-to-say, those environmental findings will get challenged by opposition groups in court. But even more importantly, a federal judge said in March that such drilling was premature — that Trump had no authority to nullify an earlier Obama era executive order that had precluded any development of ANWR and especially in the sensitive Beaufort and Chukchi seas. That judicial ruling coincided with another one by a federal court in Wyoming that said that any environmental impact statement must have data showing the amount of greenhouse gases that would be released if drilling did occur.
“The environmental assessment acknowledges that oil and gas drilling on leased parcels will emit greenhouse gases (GHG), and they describe the sources of those emissions, but they do not attempt to quantify and project the GHG emissions likely to result from a given lease sale,” writes Rudolph Contreras, in March ruling pertaining to Wyoming. “The Court agrees that the Bureau of Land Management’s leasing stage analyses of GHG emissions were inadequate ….”
The U.S. Fish and Wildlife Service, which is part of the U.S. Department of Interior, disagrees with the Trump administration’s positions on ANWR: It says that the Interior’s Bureau of Land Management fails to consider the impact on the environment and on wildlife.
Legally, the debate over whether to lift the ban on drilling in the Arctic region centers on the reading of the 1953 Outer Continental Shelves Land Act. The same moratorium also applies to waters off the Atlantic from Maine to Virginia. As for ANWR, the areas in question are 1.6 million acres — home to exotic wildlife that includes caribou and polar bears.
The U.S.-controlled portion of the Arctic is believed to hold 27 billion barrels of oil and 132 trillion cubic feet of natural gas. The Minerals Management Service has said that altogether, 86 billion barrels of recoverable oil and 420 trillion cubic feet of recoverable natural gas lies within the U.S. areas of the Gulf of Mexico, Arctic Ocean and Atlantic Ocean.
In some corners, though, that region may turn out to be a bust. Consider that BP has left the state, which had drilled some wells in the 1980s that are reported to have come up empty. Albeit, those testing sites were a random sample and not necessarily indicative of the what resources lie beneath the total area.
A New York Times expose, however, underscored the premise that the Arctic is mostly risks with few rewards, finding a retired lawyer who worked on the deal who said a test well was “worthless.” Beyond that, the region is fraught with frigid temperatures and tough terrain that makes logistics a nightmare, not to mention addressing any potential oil spills.
At the same time, the price of oil and natural gas is now relatively low at $55 a barrel and $2.25 per million Btus, respectively. Considering that the United States is already the world’s biggest oil and gas developer, the economics may not add up and more supply would only suppress those prices.
Alaskans, though, may want the added oil and gas. That’s because they have built the Alaskan Transnational Pipeline and that system needs to keep pumping those resources through to remain viable. Moreover, if the region is a rich vein of oil and gas, it could — one day — be worth billions.
“Alaskans can now look forward to our best opportunity to refill the Trans-Alaska Pipeline System, thousands of jobs that will pay better wages, and potentially $60 billion in royalties for our state alone," Senator Lisa Murkowski R-Alaska, said after the passage of the 2017 tax bill.
It’s unclear if the Trump administration can actually move forward with leasing parts of ANWR for potential development in light of the rulings by the federal courts. And if the White House’s pending environmental assessment is legally challenged — as is expected — it will muddy the waters even more. And economically, there is no recent seismic data to detect just how much oil and gas is there and whether the benefits would outweigh the costs.
But Trump wants to strike while the political climate is hot — while he is still in office and before he might be replaced. Under any set of circumstances, any attempt to allow drilling in this region is a political landmine that only serves to harden the troops on each side.
Date: Sep 4, 2019