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Alaska Auctions Taiwan-Sized Area of Arctic for Oil Drilling (1)

Oct. 20, 2022, 10:00 AMUpdated: Oct. 20, 2022, 12:55 PM

A roughly Taiwan-sized area of Alaska’s Arctic will be auctioned for oil and gas development on Thursday through Nov. 3 in one of the country’s largest oil and gas lease sales.

The sale could lead to a massive expansion of the fossil fuel industry’s footprint in an environmentally sensitive region that is warming up to four times faster than the rest of North America amid a changing climate.

Alaska is offering all unleased state-owned land on the Arctic North Slope to oil drillers this week, said Marta Mueller, leasing lead for the Alaska Division of Oil and Gas.

The leasing will occur on nearly 8 million acres of Alaska state land and waters between the Arctic National Wildlife Refuge and the National Petroleum Reserve-Alaska north of America’s largest complex of national parks and wilderness areas. Of those, about 900,000 acres will be in Alaska’s Beaufort Sea.

Alaska finalized a plan this year to auction all its state land to oil drillers once annually through 2026. Oil industry royalties are forecasted to be the Alaska state government’s largest source of revenue for 2022.

‘This Is Real’

The Arctic refuge and the petroleum reserve are among the most contested federal lands in the US, where large proposed oil developments such as ConocoPhillips’ Willow project are being stalled by the Biden administration as it considers drilling’s environmental impacts.

“Rapid climate change is already placing stress on Arctic ecosystems via permafrost thaw, vegetation shifts, hydrologic change, and erosion,” said Nancy Fresco, a professor at the International Arctic Research Center at the University of Alaska-Fairbanks. “Large-scale development in the far north piles on additional stresses.”

But energy companies have fewer land use restrictions and more regulatory stability on state land, and after finding large deposits of oil, they’re investing billions in the region, said Jon Katchen, a partner at Holland & Hart LLP in Anchorage.

“Areas that got overlooked or were considered not prospective” are getting more interest from energy companies, Katchen said. “This is real, this new play.”

If even a large percentage of state land and waters up for auction this week are leased, it will be a significant expansion of the fossil fuels industry in the state.

About 1.9 million acres of Alaska’s North Slope are currently under lease by oil and gas companies, in addition to about 400,000 acres of the Beaufort Sea, according to state data.

The state has never sold more than 657,000 acres in any annual lease sale, Mueller said.

By comparison, the Interior Department in 2020—the last full year of the Trump administration—sold about 567,000 acres of federal land in oil and gas lease sales nationwide, according to data from auction site EnergyNet.

Need for Federal Protection

Alaska’s unfettered leasing on state land “underscores why it’s critical for the federal government to lead the effort to reduce emissions from federal land such as the Arctic refuge and the NPR-A, and better protect the fragile Arctic ecosystem in doing so,” said Patrick Lavin, Alaska policy adviser for Defenders of Wildlife.

But Alaska Gov. Mike Dunleavy (R) said in a statement that state officials are frustrated the federal government is limiting oil drilling on federal lands, so the state is committed to making land it controls available to oil companies.

Dunleavy criticized climate scientists and activists who warn that expanded drilling in the Arctic will fragment sensitive wildlife habitat and expedite the global warming that is quickly thawing the region.

“If you don’t access oil in Alaska, they want you to believe that takes care of climate change, that takes care of carbon in the air,” Dunleavy said in a September interview with Bloomberg Law. “You’re just pushing it overseas.”

The state doesn’t really have a leasing strategy other than offering everything it has up for sale, said Victoria Clark, executive director of Trustees for Alaska, an environmental group.

“Oil is not going to fund the state forever, and the state needs to get more strategic and proactive about how we need to meet the future given the climate crisis,” she said.

(Adds comments from Nancy Fresco in the seventh paragraph. )

To contact the reporter on this story: Bobby Magill at bmagill@bloombergindustry.com

To contact the editor responsible for this story: Chuck McCutcheon at cmccutcheon@bloombergindustry.com