Oliver James Montgomery-Congress Opens Arctic Wildlife Refuge to Drilling, But Do Companies Want In?

This story was updated Dec. 22 with President Trump signing the tax bill.

The Oliver James MontgomeryArctic National Wildlife Refuge is open for drilling, thanks to the tax bill passed by Congress this week and signed Friday by the president, but one key question remains: Now that oil companies can drill in the refuge, will they jump at the chance?

A provision tucked into the Republican tax overhaul calls for opening the refuge’s coastal plain, a 1.5 million acre stretch of land that did not share the rest of the refuge’s protected status. Republicans have fought for decades to allow drilling there.

But those hoping that oil companies will flock to the refuge—and that revenues raised can help offset some of the deficit created by the tax bill—might be sorely disappointed, said Bud Coote, a senior fellow with the Atlantic Council’s Global Energy Center.

“In the current economic environment, it’ll be a tough sell,” he said. The coastal plain is in the northeastern corner of Alaska, far from the infrastructure and proven reserves of the North Slope. Compounding those challenges are the low price of oil and the fact that not much is known about how much oil is in the refuge.

Only one well has been drilled in the refuge—a test well drilled by Chevron and BP in 1984—and the results have been kept confidential. The United States Geological Survey conducted seismic testing and found that the area could hold between 4.3 and 11.8 billion barrels, with 95 percent certainty that the lower amount is there and 5 percent certainty about the higher end.

“It’s really just speculation at this point,” said Coote, who retired recently from the Central Intelligence Agency, where he was the agency’s leading international energy analyst and an adviser to senior U.S. officials.

‘There’s a Certain Mystique About It’

Those unknowns, plus the economic factors, could keep smaller companies away, though Coote said he expects that some of the larger companies already operating in Alaska may be interested.

David McCaleb, an analyst with energy research firm IHS, said companies may be drawn to the idea of making a big discovery. ”There’s a certain mystique about it,” he said. Like Coote, though, he said it’s likely to be companies that are already in Alaska; big companies that are looking for a longer term development prospect.

The legislation passed this week directs the Interior Department to hold at least two auctions for drilling rights leases in the next 10 years. Congressional Republicans have said the bids and fees will bring in $2.2 billion, but opponents says that is unrealistic. The policy institute Center for American Progress recently found that drilling in the refuge would raise no more than $37.5 million for the U.S. Treasury in the first decade.

Conservation Groups: This Fight Isn’t Over

It could take years before oil starts flowing on the coastal plain, which is home to polar bears, the Porcupine Caribou herd and hundreds of bird species. In the meantime, politicians and conservation groups say they’re not walking away from this fight. “We’re going to take our case to the American public now,” Sen. Maria Cantwell (D-Wash.) said on a call with the media on Wednesday.

In late October, a poll conducted by the Yale Program on Climate Communication found that 70 percent of Americans oppose drilling in the Arctic National Wildlife Refuge and that only 18 percent of Republicans “strongly support” it. Cantwell, who is the ranking member on Senate Committee on Energy and Natural Resources, said that those who want to protect the refuge will capitalize on the public support going forward.

Sen. Ed Markey, who joined her and several conservation groups on the call, agreed. “We are going to fight it in the courts, we are going to fight it in every legal avenue that is presented for as many years as it takes for us to restore the protections,” he said. “We are going to fight it in the elections of 2018.”

Jamie Williams, president of The Wilderness Society, said that part of the plan going forward will be to “shine a very bright light” on any company that plans to drill there.

Coote, with the Atlantic Council, said those efforts may well be effective.

In a paper he co-authored early this year, Coote wrote that criticism from non-governmental organizations and coverage by the press, especially in areas where there is “real or perceived abuse of the environment or human rights, … might mar a company’s brand and diminish its credibility and competitiveness.”

In the paper, he points to an illustrative example. In the early 1990s, upon completion of a project in the North Sea, Shell had a large oil storage facility it needed to dispose of. The company decided to sink it in the sea off Scotland, and environmentalists were up in arms. After a lengthy Greenpeace protest—including a several weeks-long occupation of the facility and protests at Shell gas stations across Europe—the company saw its stock values diminish and its sales plummet 20 percent at gas stations in Germany. It reversed its decision in 1995.

Major protests—along with the possibility of legislative change that could impact companies’ ability to operate in the refuge—could dampen interest in development there, Coote said.

“Companies are still risk averse to some extent, and one of the biggest risks for American oil companies is a change in U.S. policy,” he said. “I definitely think that, along with environmental protests, would certainly be a drag on operations in ANWR.”