- In May, the Biden administration canceled three major oil and gas auctions in the Cook Inlet.
- This week, the Interior Department announced the planned auction of more than 958,000 acres in Alaska’s Cook Inlet.
- It seems uncertain whether the Cook Inlet leases included in the December 30th auction will ever actually result in drilling.
- Environmental groups: drilling in the allotted waters would harm a number of species.
It seems like the Inflation Reduction Act does just about everything – everything, that is, but curbing inflation. In order to pass the Act the Biden administration had to appeal to a broad base of supporters, from staunch climate advocates to hardcore coal country representatives. In particular, the Act had to appeal to holdout West Virginia Senator Joe Manchin. Though Manchin is a democrat he represents a constituency that depends on fossil fuels for their livelihoods and prioritizes coal country jobs over climate measures. So while the Act includes huge incentives for clean technologies, it also promised a massive oil and gas drilling auction. Now, the time has come for the federal government to make good on that promise. This week, the Interior Department announced the planned auction of more than 958,000 acres – an area larger than the entire state of Rhode Island – in Alaska’s Cook Inlet next month. The sale includes a stretch of federal waters starting around Kalgin Island all the way to Augustine Island in the south. Department estimates say that the area being auctioned has the potential to produce nearly 200 million barrels of crude and 300 billion cubic feet of natural gas over the lifetime of the lease sales.
Set to be held on December 30, the lease sale is actually the renewal of one of several previously canceled auctions. In May, the Biden administration canceled three major oil and gas auctions in the Cook Inlet ("due to lack of industry interest in leasing in the area") and the Gulf of Mexico (due to "conflicting court rulings"). Such leases have been the subject of serious legal battles, with some rulings forcing cancellations due to insufficient consideration of the auctions’ impact on climate change, and other rulings ordering the resumption of such auctions.
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While citing “lack of industry interest in leasing in the area" as a reason to cancel Cook Inlet auctions might be a convenient simplification of a larger context of political and geopolitical complications, there is also a core truth to the federal government’s statements. A controversial sale of oil and gas leases in the Arctic National Wildlife Refuge under the Trump administration fell far short of its revenue goals.
After huge publicity leading up to the highly contested sale, the auction was a dud. Not one major energy company made a bid. The government sold only half of the tracts on offer – 11 tracts of 22 – and the vast majority of the winning bids were submitted by a development corporation owned by the state of Alaska. That corporation, The Alaska Industrial Development and Export Authority, bought their 400,000 acres at the minimum bid, and has never drilled a well in its history. According to reporting from the Anchorage Daily News, the results of the sale were a “bad start” to reach anticipated revenues. “It had estimated the lease sales would bring in $1.8 billion over a decade, to be split between the Alaska and federal governments,” the report stated. “The money raised [in the auction] fell far short.”
The message seems to be that while oil and gas leases still hold major political sway, they have lost their luster in the eyes of the private sector. An opinion piece written for the Houston Chronicle at the time of last year’s “failed auction,” argued that the shocking lack of interest from anyone other than a state-owned economic development corporation signaled that the oil itself was no longer needed, but oil jobs are desperately missed.
That may no longer be the case. The context could not be more different this time around. Last year energy demand was low and reports of peak oil were high in the wake of global Covid-19 quarantines. This year, we’re in the midst of a “global energy crisis of unprecedented depth and complexity,” in the words of the International Energy Agency (IEA). The huge cutback of Russian oil and gas on the global market has left a huge vacuum and governments and consumers alike are paying the price, while Big Oil receives the windfall.
While there may be some fresh incentive for new oil and gas drilling, however, Big Oil doesn’t think that this fossil fuel renaissance is here to stay. In fact, OPEC is anticipating major decreases in demand in the coming year(s) and has responded with major production cuts to buoy oil prices. Indeed, even now it seems uncertain whether the Cook Inlet leases included in the December 30th auction will ever actually result in drilling. Already, the announcement of the sale has drawn vocal scorn from environmental groups. One such group, the Center for Biological Diversity, told Bloomberg that drilling in the allotted waters would harm a number of species, including the Cook Inlet beluga whale, one of the most endangered whale populations in the world.
It’s up in the air the way that the lease will play out, and the results will be very telling about private sector attitudes over which way the winds are blowing for Big Oil.
By Haley Zaremba for Oilprice.com
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Haley Zaremba
Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…
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