Opinions

OPINION: State shouldn’t be buying Arctic oil leases

I once put the safety cap on a can of bear spray upside down, a mistake I won’t make twice. Such lessons come, obviously, through experience; don’t throw money at fixing a piece of junk, or never buy a car without looking under the hood. I am worried Alaska is not learning these lessons.

The Alaska Industrial Development and Export Authority’s board of directors just approved spending up to $20 million of Alaska’s money on Arctic National Wildlife Refuge leases, before the Bureau of Land Management has even announced what will actually be up for lease. This means we Alaskans are on the hook for a bill before AIDEA even knows what our money will buy. AIDEA already tried this in 2021 and lost big.

Congress passed a law in 2017 requiring the federal government to include portions of the Arctic National Wildlife Refuge in two lease sales by the end of 2024. The initial bill projected $1.8 billion in revenue from these sales. That’s not quite how things are working out: The first lease sale (offered in 2021) came up empty. No major oil company participated, generating less than 1% of expected revenue. AIDEA spent $12 million on leases itself. This investment proved even worse when the leases were later canceled due to deficiencies in the Trump-era leasing program. AIDEA has since spent millions more fighting in the courts. So, what did we ultimately get from the first Refuge lease sale? A multimillion-dollar bill, no results, and tied up funds that could have gone to emerging businesses, sustainable energy and Alaska’s next generation.

But maybe I am being unfair. After all, approving funds for the lease sale could just be responsible budgeting, right? The problem here is that little information and a poor track record makes this a bad investment, while the downsides threaten not just our money, but land, water, communities, and economy.

The Arctic National Wildlife Refuge includes more than a million acres of coastal plain, home to some 200 species of birds that migrate to all 50 states, nearly a quarter of a million caribou, polar bears, tundra plants, wild rivers and, yes, millions of barrels of oil. How much? AIDEA will say there are 7.6 billion barrels of oil estimated in the Coastal plain (between 4.3 billion and 11.8 billion, according to the U.S. Geological Survey). That’s a lot of oil, but says nothing about how costly it would be to recover. Chevron and BP hold confidential data from the only test wells to ever be drilled. Neither company showed up for the Refuge lease sale the first time around. BP sold out of Alaska, while Chevron and Hilcorp ate a $10 million loss just to get out of private land leases in the Refuge. Sounds to me like we are risking a classic to buy a lemon.

The free market has deemed Refuge leases worthless at best, and exceedingly costly at worst.

So, a state-owned corporation using state money has lost millions of dollars, continues to spend good money after bad on legal fees, and still hasn’t produced a single drop of oil from the Refuge. Lottery tickets aren’t a retirement plan. It is surprising to me, then, that the AIDEA board would commit another $20 million dollars to the second Refuge lease sale, scheduled to be offered in December. The board approval for this came after a last-minute meeting with limited public comment or notice. Investing in the lease sale follows AIDEA’s 39 years of business, 26 projects losing $5 billion in state money. Half of those projects have failed to produce any permanent jobs.

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Or as they say, insanity is doing the same thing twice and expecting different results.

While no oil jobs have come out of AIDEA’s Arctic leasing project for Alaskans, it does employ a number of out-of-state lawyers. AIDEA has not recouped money from its 2021 lease sale, but has already signed onto seven open ended legal contracts for up to $985,000 of state money. In fact, AIDEA considered yet another resolution this past week, which if passed would give the AIDEA executive director a blank check to hire as many lawyers as desired. It also included litigation expenses as a possible use of the $20 million it approved for Arctic Refuge spending. Including litigation costs of this magnitude in a lease purchase commitment makes it clear that AIDEA knows full well the likely problems down the road facing their new foray into Arctic oil. This does not feel like a good-faith attempt to pursue economic development to me, but another lottery ticket at the expense of land, wildlife, and Alaska’s future.

So let’s recap:

1) We don’t know what will be included in the upcoming Arctic National Wildlife Refuge lease sale.

2) There is no public evidence that massive amounts of oil exist, or that any oil reserves that do exist would be economically recoverable from the Refuge, let alone the unknown lease tracts.

3) Lease sales offer open opportunities to development companies in the oil business; they were not interested in the first sale at all.

4) Past state investment in Refuge leases has lost Alaska money.

So, why are we doing this?

Market shifts away from developing the refuge is not a reason to prop up an outdated idea. Another $20 million of state money is a drop in the bucket toward the lease sale revenue goal of $1.8 billion and feels more like a hopeful gamble than an informed investment.

I can’t help but wonder if AIDEA has genuine intent to develop Arctic Refuge oil, or if they are instead playing politics with Alaska’s money. The Refuge has become a mascot for Alaska’s oil future. It’s also home to the largest caribou migration in the Arctic, critical habitat across an intact ecosystem set aside for wildlife. This all happening against the backdrop of an increasingly obvious need to move away from fossil fuels. Doubling down on the economic driver of the past, is a roll the dice for the future we can’t afford. We should be investing into economic resilience and diversification: small businesses, communities, and the resources needed to support renewable energy growth. This lease sale is the latest chapter in a conservation battle going back fifty years. And that’s the thing with any conservation battle. They are never over, just postponed. We have a good idea of what’s at risk, but are left with only political guesses about what we might gain.

Here’s the thing: whether or not you think we should develop oil reserves in the Arctic Refuge is an entirely different question from whether a state-run company should spend millions of our money in the service of a political agenda. The public good is not served by pushing through outdated projects that industry has already rejected at the expense of what makes our state great: it’s not under the land, but the land itself.

Let’s not make the same mistake twice.

Alexander Lee is associate professor of philosophy at Alaska Pacific University.

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