Oil & Gas Special Section
What’s
Going On in
ANWR?
By Tasha Anderson
troutnut | iStock
What’s Going On in ANWR?
By Tasha Anderson
troutnut | iStock
C

onsidering how far away the Alaska National Wildlife Refuge (ANWR) is from almost anything, maybe it makes sense that the road to any development there has proved long—and convoluted and full of protest signs.

It’s a highly contested area in which, to date, not much has really happened. For many, that’s the point: The Wilderness Society, an organization with the stated mission “to protect America’s wild places” has asserted that it is “committed to ensuring that drill rigs never touch ground within the Arctic Refuge and that, eventually, the entire refuge will be permanently protected.”

This is the continuation of a sentiment of “preserving Alaska” that’s been kicked around since before statehood. For example, in 1929 Bob Marshall, a forester, visited the area and subsequently published an article in which he vehemently defended wilderness preservation—the ANWR area in particular.

Much discussion and many essays later, the National Park Service recommended in 1954 that “undisturbed lands” in the Northeast region of the state be preserved “for their wildlife, wilderness, recreation, scientific, and cultural values.”

In 1960 the 8.9 million-acre Arctic National Wildlife Range was established; it was expanded and evolved over the decades until 1988, when Congress added a final 325,000 acres to the area, creating the 19.3 million-acre ANWR we’re all arguing about today.

Though we’re not arguing about all of it. During the ongoing evolution, Section 1002 of ANICLA excluded the eponymous 1002 Area from a “wilderness” designation and instead required a comprehensive study of the area’s resources—including fish, wildlife, and petroleum resources—and the effect on the area if those petroleum resources were to be developed. At the same time, Section 1003 of ANICLA stated that “production of oil and gas from the Arctic National Wildlife Refuge is prohibited and no leasing or other development leading to production of oil and gas from the [Refuge] shall be undertaken until authorized by an act of Congress.”

That happened in 2017.

[The] lease sale was a historic event and decades in the making… While the results may not have been as robust as we might have expected, industry still supports future access to this area.”
Kara Moriarty, President/CEO, Alaska Oil and Gas Association
A Lease Sale
The Tax Cuts and Jobs Act of 2017 included a provision that opened the 1002 Area to oil and gas exploration and drilling. The act passed the US Senate and House of Representatives and was signed into law by then-President Donald Trump on December 22, 2017.

Two years later a final EIS was published for the 1002 Area, and a ROD approving a leasing program was signed by then-Secretary of the Interior David Bernhard.

On December 7, 2020, an official notice of sale for leases in ANWR was published to the Federal Register with a Detailed Statement of Sale with information about the process and requirements on bidding for the thirty-two tracts available.

Bids needed to be submitted between 8 a.m. on December 21, 2020 and 4 p.m. on December 31, 2020; Alaska would close out 2020 anticipating the results of a long-sought, long-fought first industry entry into ANWR.

“Our community had been waiting since the Alaska Native Claims Settlement Act to realize the economic freedoms promised to us as indigenous people. My community of Kaktovik is the only village located within the Coastal Plain area of the Arctic National Wildlife Refuge, and we have long been supporters of oil and gas exploration in the area.”
Matthew Rexford, President, Kaktovik Iñupiat Corporation
They were underwhelming.

The lease sale results were released on January 6. Of the thirty-two tracts offered in the lease sale, only eleven garnered any bids at all. In total, thirteen bids were submitted: eleven by the Alaska Industrial Development Export Authority (AIDEA), one by Knik Arm Services, and one by Regenerate Alaska. Overall, 552,802 acres of the 1.56 million-acre 1002 Area were successfully bid on on for a total of $14.4 million.

In January in response to the bid results, Alaska Oil and Gas Association President and CEO Kara Moriarty said, “[The] lease sale was a historic event and decades in the making… While the results may not have been as robust as we might have expected, industry still supports future access to this area. 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.”

Part of the ongoing regulatory uncertainly Moriarty refers to was yet another proposed change to Alaska’s oil and gas tax structure. In 2020, as in most years, the Alaska oil and gas industry was faced with potential new legislation, this time in the form of Ballot Measure 1, which would have increased taxes on Alaska’s largest oilfields (at the time: Kuparuk, Alpine, and Prudhoe Bay).

The ballot was defeated. ExxonMobil, ConocoPhillips, BP Alaska, and Hilcorp collectively invested $19.6 million in the campaign; one wonders what they might have done with the money otherwise.

While it’s plausible such funds would have been invested in Alaska oil and gas exploration or production in more actually productive ways, it’s also very possible that Alaska’s largest oil entities still wouldn’t have invested in ANWR.

For one, what’s there is at best uncertain. In the February 2018 article Analysis of Projected Crude Oil Production in the Arctic National Wildlife Refuge, EIA Senior Operations Research Analyst Dana Van Wagener states, “Little direct knowledge is available on the petroleum geology of the ANWR region. The USGS oil resource estimates are based largely on the oil productivity of geologic formations that existed in the neighboring state lands in Alaska as of 1998 and two-dimensional seismic data that had been collected by a petroleum industry consortium in 1984 and 1985.”

According to the same article, only one well has been drilled on the Coastal Plain, and since it was drilled by a private entity, the results remain confidential.

But with what information is available, USGS estimates there are 5.7 billion to 16 billion barrels of technically recoverable crude oil in ANWR amongst thirty-seven to sixty-four oilfields.

That is not an insignificant amount of potential; however, that’s based on assumptions—the assumptions of experts, but still assumptions—and the highly contentious area is lacking any infrastructure whatsoever.

And ANWR is not the only potential place for development, even on the North Slope.

For example, ConocoPhillips Alaska is bullish about its Willow discovery, which holds an estimated 400 million to 750 million barrels of oil and is approximately 30 miles from the company’s Alpine Central Facility. ConocoPhillips anticipates it can produce 100,000 barrels of oil per day at peak production and will create hundreds of direct jobs and thousands of construction jobs. The company also anticipates investing approximately $2 billion to $3 billion in developing the site and as much again in drilling costs over multiple years. As of publication, ConocoPhillips Alaska is also waiting on the outcome of two pending lawsuits affecting development in an area it’s been working in for years.

A new project, in the opposite direction, with no infrastructure in place, and multitudes of people and organizations (and fifteen US states) already screaming angrily the entire time might seem higher risk—and it certainly wouldn’t cost less.

Clearly bidding on ANWR wasn’t the right move for Alaska’s largest oil and gas explorers and producers because they didn’t; however, that’s not an indication that ANWR is lacking any potential or that opening the 1002 Area is inherently damaging.

Though it definitely has obstacles.

Changing Administrations
One is the swinging pendulum of federal support of oil and gas development in general. The Tax Cuts and Jobs Act of 2017 was passed through a Senate and House of Representatives and signed by a president that all leaned toward supporting oil and gas development. The composition of all of those offices has changed since.

The Bureau of Land Management signed and issued nine leases in ANWR on January 19, the day before President Joe Biden’s inauguration. The timing doesn’t seem accidental.

But it’s done, and the end result is that at present AIDEA holds seven leases (according to AIDEA: “AIDEA chose to finalize leases on seven of the nine tracts it was awarded because we view these as the tracts that best preserve access to the 1002 Area’s large resource potential while limiting the footprint for responsible development.), Knik Arm Services holds one, and Regenerate Alaska holds one. The nine leases cover a collective 437,804 acres.

What are they going to do with them? So far, they haven’t really said. AIDEA’s official “what’s next” statement is: “AIDEA’s future steps will be to undertake an update to the geological surveys and initiate the planning work necessary to responsibly conduct early phase exploration activities.” The organization has also stated its intention to work with private capital investors in the “responsible development of these leases.”

But can they develop them? According to a US Department of the Interior Fact Sheet, Biden’s executive order “pauses” new oil and gas leasing on federal lands and offshore waters “concurrent with a comprehensive review of the federal oil and gas program.”

It continues to say: “The targeted pause does not impact existing operations or permits for valid, existing leases, which are continuing to be reviewed and approved. The order does not restrict energy activities on private or state lands, or lands that the United States holds in trust or restricted status for Tribes or individual Indians.”

Where’s that put the lease holders in ANWR? Effectively, the leases are valid, but any progress for permitting, exploration, or development is on hold for an unknown period of time as the Biden Administration, State of Alaska, and untold numbers of other interested parties contest the future of the 1002 Area through executive orders, legislation, and courtrooms.

Private Exploration
One such interested party is Kaktovik Iñupiat Corporation (KIC), the ANCSA corporation for the Native village of Kaktovik, which received 92,000 acres of surface lands within the Coastal Plain of ANWR through ANCSA. As a private landowner, exploration on its own lands in theory isn’t restricted by the issued executive order.

Instead, KIC hit another roadblock. In August 2020 the corporation applied for an Incidental Harassment Authorization (IHA); this is a permitting process in which an organization indicates how its exploration efforts may “take” an animal. Under the Marine Mammal Protection Act, take is defined as harassing, hunting, capturing, killing or an attempt to harass, hunt, capture, or kill any marine mammal. The term “harassing” is rather broad and can include disturbing the animals through vibrations or noise.

In KIC’s case, polar bears, defined as marine mammals, make their dens in the Coastal Plain of ANWR. In order to ensure their seismic data collection wouldn’t disturb the bears, KIC was required to conduct aerial surveys of the area to identify any polar bear dens; however, the aerial survey itself can count as a polar bear take.

A concern expressed by many who oppose opening ANWR for development is that the Porcupine Caribou herd’s calving grounds are at the Porcupine River coastal region located in ANWR; the animals migrate 1,500 miles annually between their calving grounds and the Richardson Mountains in the Yukon and the southern Brooks Range in Alaska.

FredrikSvartdahl | iStock

A concern expressed by many who oppose opening ANWR for development is that the Porcupine Caribou herd’s calving grounds are at the Porcupine River coastal region located in ANWR; the animals migrate 1,500 miles annually between their calving grounds and the Richardson Mountains in the Yukon and the southern Brooks Range in Alaska.

FredrikSvartdahl | iStock

view of herd of Porcupine Caribou
“KIC specifically inquired with [US Fish and Wildlife Service] as to whether or not the aerial surveys could begin prior to issuance of the IHA permit, and we were told no. We offered to fly higher with our aircraft; we offered to reduce noise levels; and we offered to accommodate any other potential impacts. The answer was consistently no,” said KIC President Matthew Rexford in a February release. “Our problem was that we couldn’t conduct the aerial surveys without the IHA authorization from the [US Fish and Wildlife Service], but we also couldn’t get permitted for seismic by that same agency without conducting them. They held all the cards, and then we saw a lot of delays and excuses from them.”

The press release was issued in response to a decision from the US Fish and Wildlife Service issued in February that KIC’s IHA was no longer actionable—according to a US Department of the Interior spokeswoman, KIC failed to complete necessary aerial surveys by the deadline of February 13.

According to KIC Chairman Nathan Gordon Sr., “It was the agency that ran the time out, not KIC. They said the seismic activity was predicated on completion of the den detection surveys, but then they wouldn’t approve the aerial den detecting work to begin. It was never authorized to commence in the first place, and they just kicked the can down the road.”

Because of the decision, KIC was unable to perform any seismic in the 2020/2021 winter season.

“Our community had been waiting since the Alaska Native Claims Settlement Act (ANCSA) to realize the economic freedoms promised to us as indigenous people. My community of Kaktovik is the only village located within the Coastal Plain area of the Arctic National Wildlife Refuge, and we have long been supporters of oil and gas exploration in the area,” said Rexford in March. “It wasn’t until the 2017 Tax Cuts and Jobs Act that we were finally able to realize our vision of providing the local jobs and business contemplated by ANCSA only to find ourselves again threatened under the Biden Administration.”

What’s Next?
Who knows.

In some ways what’s happening in ANWR is a reflection of a general uncertainty of and for the oil and gas industry worldwide and particularly in Alaska.

Some of that uncertainty is the result of Alaskans’ ongoing questioning of tax and credit structures, which is often egged on by fiscal uncertainty at a state, community, and personal level. But if Alaska’s economy crashed because of an overreliance on oil revenue, how does taxing oil more (or less, or just differently) provide long-term security? Our ouroboros of oil issues will never be resolved through any amount of adjustments to the tax structure.

Instead, let’s move forward without envisioning the oil and gas industry as an emergency bank or painting it as an evil villain: let it be regulated, supervised, and allowed to function.

And what about ANWR, specifically? As of publication it’s at a standstill. It remains how it’s always been: undeveloped and full of potential.