An auction of drilling rights in the National Petroleum Reserve-Alaska broke records Wednesday, suggesting that the oil and gas industry is keenly interested in expanding in the U.S. Arctic.
Kevin Pendergast, Alaska director of the Bureau of Land Management, announced that the winning bids totaled nearly $164 million, half of which will go to the state of Alaska.
“This is the strongest sale we have ever had in the National Petroleum Reserve in Alaska, by nearly every measure,” he said on a livecast after all 430 bids were unsealed and read out loud.
The federal lease sale adds meat to the Trump administration’s framing of Alaska as an energy beast that just needs to be “unleashed” from prior conservation restrictions.
Eleven companies placed bids on more than 1.3 million acres in the western Arctic reserve. Much of the industry’s focus was on tracts near Willow, the ConocoPhillips project already underway.
As expected, ConocoPhillips was a big bidder, but other major and minor companies participated, too. The Spanish company Repsol won 42 leases, with partners that include energy giant Shell. At least half of its bids were more than $2 million.
Economist Brett Watson said the level of competition was novel.
“Many tracks received multiple bids,” said Watson, who works at the Institute of Social and Economic Research at the University of Alaska Anchorage. “That hasn't been true in a number of years in the NPR-A.”
Watson thinks the recent instability in the Middle East played a role but he cites other factors, too, like diminished interest in Lower 48 fields, as well as shifts in federal energy policy. Just a few years ago, Watson said, oil and gas companies were more tepid about investing.
“There was just a lot of uncertainty of what the trajectory of the energy transition was going to look like. U.S. automakers were making pretty aggressive plays into the electric vehicle space,” he said. “And we've seen U.S. auto start to pull back on some of those investments. Obviously, last year we saw the repeal of the electric vehicle tax credit in the United States.”
When petroleum demand seemed headed for decline, Watson wondered if Willow was going to be the last big project on the North Slope. He said that doesn’t seem so likely now.
It’ll be years before companies can make development decisions on their new leases. Steve Wackowski, president of the Alaska Oil and Gas Association, said that argues for keeping regulations stable.
“I think in general, it shows a healthy industry, because we need a long runway for development here in Alaska and stability to get to those long runway developments,” he said.
Environmental groups were especially disappointed to see Exxon and other companies bid on tracts bordering Teshekpuk Lake, which had been protected in prior administrations for its sensitivity and importance to caribou and other wildlife. A federal judge on Monday reinstated a conservation right of way for that area, so what happens to those leases is unclear.
Andy Moderow, policy director for Alaska Wilderness League, said the world will have to move away from fossil fuels and that more Arctic oil production isn’t a solution.
“I think these assets will be pretty risky,” he said. “Companies that bet big on long-term oil and gas are not going to be rewarded in today's world.”
