An eleventh-hour auction for drilling leases in the US Arctic has attracted three bidders across 50% of its available leases.
The three bidders completed 13 bids across 11 leases. Of these, 11 bids came from the Alaska Industrial Development and Export Authority (AIDEA), a state-run agency. The agency plans to partner with a drilling company to proceed with extraction.
The auction took place sooner than standard timelines would allow, as the Trump administration aimed to push through the auction before the end of its term.
The auction also attracted criticism as it would allow projects in the Arctic National Wildlife Refuge. A coalition of groups, including the Alaska Wilderness League and First Peoples Worldwide, said: “The Trump administration railroaded this lease sale through amid a global pandemic and economic recession, absent any real evidence that pursuing Arctic Refuge oil would provide any significant federal returns.
“This is a fire sale of some of the most valuable and ecologically significant wilderness remaining in North America.”
This area acts as a breeding ground for caribou and habitat for polar bears. Environmental groups Friends of the Earth, National Audubon Society, the Centre for Biological Diversity and Natural Resources Defence Council sought to block the sale by seeking an injunction. On Tuesday, District Judge Sharon Gleason ruled to allow the sale. A spokesperson from the Department of the Interior, overseeing the bureau allowing the sale, said the decision was “expected and unsurprising”.
The environmental opposition to arctic drilling has in turn led to a lack of financing. At the start of December, the Bank of America announced it would not fund drilling in the Arctic. This was the last large US bank to do so, meaning operators must seek funding elsewhere. Beside this, the high-cost, high-risk nature of Arctic projects hold little appeal in a low-price environment with readily accessible shale reserves.
The auction covered approximately 78,000 km², with 22 leases on offer. Of these, the successful bids on 11 of them have raised $14.4m. As only two leases had contesting bids, from Regenerate Alaska and Knik Arm Services. Most leases sold for the minimum price of $25 per acre.
By law, another Arctic sale must go ahead before 2024. A 2018 report from the Congressional Budget Office estimated that the two auctions would jointly raise $2.2bn over ten years, more than 100 times the amount raised on Wednesday.
The auction follows BP’s exit from arctic drilling in July last year. It sold its business in the area to Texas-based Hilcorp Energy Co as part of an effort to sell $10bn of assets. At the same time Russian producer Rosneft, 20% owned by BP , has started a $134bn drilling project in the Russian arctic, believed to hold 1.2 billion tons of oil.