These risk-taking companies gambled on Arctic refuge oil leases in the federal government’s first sale there

Two small companies, one from Australia and another from Alaska, submitted the only two private bids in the federal government’s first-ever lease sale for the Arctic National Wildlife Refuge on Wednesday, at an event largely considered a flop given it raised just $14 million as major oil companies stayed away.

Knik Arm Services, owned by Alaskan Mark Graber, offered the day’s highest bid at $1.6 million to win a 50,000-acre tract along the Arctic Ocean.

“I’m excited to be playing a role,” Graber said by phone from Texas on Wednesday. “It’s noble to try and be part of something big like this for Alaska that would benefit Alaskans. There will always be controversy when you are trying to do something big.”

Regenerate Alaska, a subsidiary of 88 Energy in West Perth, Australia, bid about $800,000 to win the smallest tract.

A state-owned development corporation, the Alaska Industrial Development and Export Authority, placed the only bids on nine other tracts, a safeguard in case no other bidders came forward during a challenging time for Arctic oil and gas investment.

The agency, which provides financing for Alaska projects including the small, proposed Mustang oil field on the North Slope, hopes to hold the 10-year leases to one day work with oil and gas explorers that might come forward.

‘Full of risk’ -- and opportunity

Over the decades, lots of small explorers have come and gone in Alaska. Some have leased land that became part of major discoveries.

That’s what Graber’s hoping for. An Alaska resident since 1982, Graber said he worked in real estate in Alaska for many years. He has invested in mineral and oil assets in Alaska and in Texas, where he lives part of the year.

He’s watched for four decades as Alaskan leaders tried to open the refuge to drilling, a step that didn’t become possible until a Republican-led Congress approved it in 2017.

He said 2020 was one of the industry’s worst years following the pandemic-driven price crash. “It’s absolutely the poorest time to do this sale,” he said.

But he’s afraid there won’t be another lease sale under President-elect Joe Biden, an opponent of ANWR drilling.

“It’s full of risk, but also full of large potential returns for me and the state of Alaska and all the U.S.,” he said. “We have pined for ANWR acreage mineral rights for 40 years.”

‘Not for the faint of heart’

The U.S Geological Survey has estimated the coastal plain could contain billions of barrels of oil. But conservation groups and many newly empowered Democrats in Washington, D.C., aim to prevent drilling in the refuge, home to threatened polar bears and the prized Porcupine caribou herd. Major banks have vowed not to finance projects there.

Companies that invest in ANWR face reputational risks and years of costly delay.

Naaweiyaa Tagaban, an organizer with Defend the Sacred Alaska, an indigenous-led group, said the entities that bid in the sale won’t have an easy path toward drilling. The federal government’s oil and gas program in the refuge faces four lawsuits to stop it.

“They should be put on notice that this is something that we’re not just going to let happen,” Tagaban said.

The group took its message directly to the AIDEA building in Anchorage after the sale. “Protect the Arctic Refuge,” a large video projection on the wall read.

Bill Armstrong, of tiny Armstrong Oil and Gas in Denver, discovered the large Pikka field on state land in Alaska in 2013, west of the refuge, attracting large companies to the state to explore similar prospects.

Armstrong on Thursday said he’s proud of the small companies for bidding.

“It’s not easy being a pioneer on the North Slope,” he said. “It’s not for the faint of heart.”

Armstrong said he didn’t bid Wednesday because he remains focused on other projects in Alaska totaling 1.4 million acres. He said the three bidders chose land on the western coastal plain with the highest potential for an oil and gas discovery.

“My plate is already full, so I already have as much as I can say grace over,” he said. “It was not a reflection of what I thought about ANWR.”

A political threat in D.C.

88 Energy already holds multiple opportunities across the North Slope. It’s hunting for overlooked prospects and emerging trends, its website says. It plans to drill at its Project Peregrine field in the National Petroleum Reserve-Alaska, west of the refuge, this year.

On Wednesday, 88 Energy snatched up 23,000 acres on the westernmost edge of the coastal plain. It sits beside other land 88 Energy holds outside the refuge, and alongside ExxonMobil’s Point Thompson oil field.

Graber and David Wall, head of 88 Energy, both said they selected tracts where there’s less risk to the environment, but also with strong potential for a discovery. Graber said his selection seemed to be in the “sweet spot” of the oil potential that the USGS assessed, back in 1998.

Wall said if the company can move forward with exploration and development, it will respect the Alaska Native culture and the environment, he said.

“We don’t want to do anything to upset anyone,” he said. “But we want to make money for ourselves, and the state and it’s people.”

Democrats that now control the executive and legislative branches in the capital might stop drilling in the refuge, Wall said.

If so, he’d expect repayment for the lease.

“They’d have to just give us our money back,” he said. “That to us is the worst-case scenario.”

‘Be part of something big’

Little is known about the refuge’s oil potential. Congress allowed only a single well to be drilled there in the 1980s. A two-dimensional seismic survey at the time could have overlooked large traps of oil.

The lack of information created a rare opportunity, Graber said. “We’re all on an even playing field. The oil companies had no more information than I could find on the Internet,” he said.

Graber said he hopes to hold the lease until a company can develop a field, with a deal that pays royalties to Knik Arm Services as oil flows.

He and other investors in Knik Arm Services wanted to bid on only one tract, he said. This is his first investment on the North Slope, home to some of North America’s largest oil fields, he said.

He said he’d like to work with AIDEA to explore for oil. “I want to cooperate with them and be part of something big,” he said.