State tops bids in first ANWR lease sale
The State of Alaska is officially in the oil business.
The Alaska Industrial Development and Export Authority dominated bidding and won roughly a half-million acres across nine tracts in the long-awaited, oft-debated first Arctic National Wildlife Refuge coastal plain lease sale bid opening on Jan. 6.
According to an initial tally of the bids opened by Deputy Interior Secretary Kate MacGregor via a video live stream, the sale netted $14.4 million in 11 winning bids, with approximately $12 million of that attributable to the state-owned development bank, which bid on at least 11 tracts. A lone bid for another tract from an unknown bidder was deemed incomplete by Bureau of Land Management officials.
Half of the bid revenue will go to the State of Alaska per language in the 2017 Tax Cut and Jobs Act that mandated the sale.
Small Texas-based explorer Regenerate Alaska LLC outbid AIDEA for Tract 29 on the far western edge of the coastal plain with a bid of approximately $778,000. Regenerate also owns several leases on state lands adjacent to the area.
Anchorage-based Knik Arm Services LLC outbid AIDEA for Tract 25 in the western portion of the coastal plain with a $1.6 million bid.
No oil majors bid on ANWR coastal plain leases. BP and Chevron long held data from the only well drilled into the coastal plain, the 1986 KIC well, and the data BP owned was transferred to Hilcorp under the sale completed in 2019.
The AIDEA board of directors authorized management to spend up to $20 million from its roughly $1.3 billion Revolving Fund on ANWR coastal plain lease bids in late December on the premise that if minimum bids were submitted the pro-development corporation could ensure some acreage in the refuge was secured when it was made available — given the political and legal efforts against the sales — and eventually transfer the rights to an operating company.
AIDEA Executive Director Alan Weitzner alluded to that in a statement issued shortly after the bid opening.
“By acquiring these tracts, Alaska preserves the right to responsibly develop its natural resources. This will create new, good-paying jobs on the North Slope and generate revenue for the local economies of Alaska’s Arctic and the state’s general fund,” Weitzner said.
An AIDEA spokeswoman did not immediately respond to questions about how authority officials chose to bid on the tracts they did.
In all, the sale generated 16 bids over 12 tracts covering 552,000 acres, according to MacGregor, who called it a “momentous” and “historic” occasion before opening the bids.
BLM offered 22 tracts covering approximately 1.1 million acres up for bidding.
The oil and gas that will hopefully be developed from the coastal plain will benefit the economies of the nearby Village of Kaktovik, the State of Alaska and the nation as a whole, MacGregor said.
“To all of those who have played a role in making today possible and happen, thank you for your grit and determination,” she said.
The bidding fell far short of expectations for some who supported the four-decade effort to lease the 1.5 million-acre coastal plain for oil exploration.
The Congressional Budget Office estimated the current sale and an expected future sale, combined with annual lease rents would collectively net the federal government $1.1 billion by 2027 when the tax bill was being debated in November 2017, with that much also going to the State of Alaska. Other estimates at the time were for as much as $1.8 billion in federal revenue.
Conservation groups noticed the sale largely transferred state money to the federal government — half of which will go back to the state treasury.
Alaska Wilderness League Executive Director Adam Kolton called the sale an “epic failure” for the Trump administration and Alaska’s congressional delegation in a prepared statement.
“After years of promising a revenue and jobs bonanza they ended up throwing a party for themselves, with the state being one of the only bidders. We have long known that the American people don’t want drilling in the Arctic Refuge, the Gwich’in people don’t want it, and now we know the oil industry doesn’t want it either,” Kolton said.
A coalition of conservation organizations had their attempt to stop the lease sale in court through a preliminary injunction rejected in a late Tuesday ruling by U.S. District Court of Alaska Judge Sharon Gleason; however, three lawsuits objecting to the Trump administration’s handling of the environmental review that preceded the sale are ongoing.
BLM Alaska Director Chad Padgett said in a follow-up press briefing that the sale was a success, with more than half of the available acreage receiving bids.
He emphasized, as other administration officials have, that leasing does not authorize drilling or any other on-the-ground activity. Additional permits are needed for exploration work such as conducting seismic surveys.
“It reflects an interest in further development of Alaska’s energy resources,” Padgett said of the sealed bid auction.
In regards to the unique participation of a state-owned entity, BLM officials said AIDEA corporate status generally qualifies as a valid lessee and they do not foresee problems working with the state development bank because it is run much like a traditional business.
Industry representatives consistently said in the lead-up to the sale that it was unclear what the results would be given the political tensions involved and vague prospectivity of the area.
Alaska Oil and Gas Association CEO Kara Moriarty said in a post-sale statement that AIDEA’s participation helps reduce future uncertainty about the availability of acreage to explore on the coastal plain; she also acknowledged the activity level in the sale.
“While the results may not have been as robust as we might have expected, industry still supports future access to this area,” Moriarty said.
“Today’s sale reflects the brutal economic realities the oil and gas industry continues to face after the unprecedented events of 2020, coupled with ongoing regulatory uncertainty.”
The U.S. Geological Survey officially has a mean oil estimate for the coastal plain of approximately 10 billion barrels of recoverable oil, but that is based on fairly little on-the-ground research particularly given the size of the area and much of what has been done was conducted with 1980s technologies.
President-elect Joe Biden opposes oil development of the coastal plain and many congressional Democrats have vowed to overturn the rider to the tax bill if they can take control of the Senate over the next four years.
Elwood Brehmer can be reached at [email protected].