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Grim Prospects for Drilling on Arctic Leases Despite Trump Push

Jan. 21, 2021, 10:31 AM

Donald Trump pushed through controversial oil leases in Alaska’s Arctic National Wildlife Refuge as one of his last acts as president—but legal observers say the chance that oil development actually proceeds there is slim.

President Joe Biden has a menu of legal and administrative options at his disposal to curb drilling in the refuge, which is a vast environmentally sensitive region of northeast Alaska that for decades has been a battleground over oil and gas development.

Biden imposed a moratorium on leasing activities within the refuge going forward. But the oil and gas leases that the Trump administration issued on Tuesday remain in effect.

“As I read it, Interior needs to pause all activities in connection with the leases for the duration of the moratorium,” including any seismic surveying needed for oil exploration on the refuge, said John Leshy, a law professor at the University of California, Hastings and former Interior solicitor in the Clinton administration.

The leases are legally binding and can’t be canceled through a presidential order, at least not without buying out the lease holders, said Mark Squillace, a natural resources law professor at the University of Colorado-Boulder. Congress mandated leasing in the refuge in the 2017 tax overhaul.

First Step

But leases are just the first step. The new administration still has discretion over issuing drilling permits and conducting environmental impact reviews, potentially stymieing future oil drilling, Squillace said.

And, he said, “If drilling permits are approved, their approval would likely be subject to new litigation"—if a court doesn’t toss out the leases first.

Environmental groups also say they’re considering possible state and federal legal action to ensure the leases are never developed, in addition to ongoing litigation against the leases.

“Between actions that the executive branch has under President Biden and the court case, there are a lot of ways the leases could be invalidated and protections restored,” said Adam Kolton, executive director of the Alaska Wilderness League.

Three Court Challenges

The group in August joined a federal lawsuit challenging the legal underpinnings of leasing in the refuge, one of a trio of challenges to the leases in federal courts.

The August lawsuit, which included 12 other environmental groups and the Gwich’in Steering Committee, a local Alaska tribal group, claimed that leasing in the refuge violated the National Environmental Policy Act and several other laws, including the statute that created the Arctic refuge.

Another lawsuit in September in federal district court in Alaska came from a coalition of 15 states, led by Washington, that claim the Bureau of Land Management violated NEPA and four other laws for failing to fully consider the environmental consequences of leasing. A separate September lawsuit, from three Alaska tribal governments, is challenging leasing in the refuge on similar grounds.

The land bureau didn’t immediately respond to requests for comment Wednesday.

State Questions

Despite the legal action, the Bureau of Land Management issued leases within the refuge this week following a Jan. 6 lease sale. The leases went to two small companies and state-run Alaska Industrial Development and Export Authority, or AIDEA.

Even with a temporary halt to leasing activity, the leases raise legal and policy questions for the new administration, and possibly Alaska state officials, Alaska Wilderness League’s Kolton said.

“Is it appropriate for states to bid on and retain tracts in lease sales like this, and then go out on their own to make deals with the industry, circumventing the normal ways in which public lands are managed and leases are held by the BLM?” Kolton asked.

Issuing oil and gas leases to AIDEA may run afoul of federal mineral leasing laws, offering a possible new avenue for groups to mount a legal challenge, said Veri di Suvero, executive director of the Alaska Public Interest Research Group in Anchorage.

“Federal mineral leases, pursuant to the Minerals Leasing Act of 1920, are intended to be leased to private parties—not state or public agencies,” di Suvero said.

Drilling Prospects Grim

With refuge leases in hand, AIDEA is preserving Alaska’s ability to explore for oil and reap the economic benefits, AIDEA communications director E. Colleen Bryan said.

“Our intention is to partner with private capital investors to develop the leases,” she said.

Even if the state is successful in pushing ahead with oil development, it could be years before the land bureau could issue a permit to drill on the refuge, University of California’s Leshy said.

“It’ll be interesting to see if the state, the principal lessee, wants to speed that up by seeking permission to conduct activities on the lease in the near future,” Leshy said. “The state is not really in the drilling business, so I’d assume it’d take some time for them to negotiate a contract with someone to do that work.”

Pat Parenteau, an environmental law professor at Vermont Law School, was even more blunt on the chances.

“I don’t think we are going to see any drilling,” Parenteau said. “AIDEA is not an oil company with the capability of actually conducting the exploration or production. It bought the leases on spec with the intent to transfer them to a real oil company, and I haven’t seen any evidence that there one willing and able to exploit the coastal plain.”

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

To contact the editor responsible for this story: Anna Yukhananov at ayukhananov@bloombergindustry.com

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