Even if the White House succeeds in clearing those hurdles, it’ll still face the cold reality of the market: funding for Arctic drilling is becoming harder and harder to find. Both oil companies and banks have decided they can no longer tolerate the risk of drilling in one of the fastest-warming places on the globe. Ben Cushing, who leads the nonprofit Sierra Club’s financial advocacy campaign, put the problem simply: “Smart money is staying away from this kind of development in the Arctic.”
Most of today’s likely bidders would need outside financing to actually get anything out of their Arctic leases. But banks are increasingly worried about damage to their public image from backing drilling in the reserve, which 70% of American voters oppose, according to the Yale Program on Climate Change Communication. Underscoring that perceived risk: Institutions associated with Energy Transfer LP’s controversial Dakota Access oil pipeline lost $4.4 billion in account closures and divestments in 2017, research from the University of Colorado Boulder shows.
Activists, Native Alaskans, and more recently large shareholders have worked to persuade lenders they were jeopardizing the climate, their investments, and their reputation by underwriting Arctic drilling. Five major U.S. banks—Goldman Sachs Group Inc., JP Morgan Chase & Co., Wells Fargo & Co., Citigroup, and Morgan Stanley—have already ruled out financing oil and gas projects in the Arctic refuge, leaving Bank of America Corp. the only major holdout. Last week, many of the same activists who worked on the banks issued a similar warning to the world’s top insurers.
“The options are dwindling as banks shy away from the Arctic,” said Kathy Hipple, an analyst at the Institute for Energy Economics and Financial Analysis. “Not only because of ESG reasons,” she added, referring to environmental, social, and governance standards for investing, “but because it’s a high-cost, high-risk business.” (...)
The administration’s ability to mount a sale at all—much less formally issue the leases—before Trump leaves office is also in considerable doubt. Because of various requirements and mandatory waiting periods, the earliest auction date is likely Jan. 19, the day before Biden will be inaugurated. That would leave the Interior Department just one day to vet the high bidders and issue the leases, a process that typically takes two months.
Given the current economic environment, the regulatory uncertainty, and the steep public opposition to Arctic drilling, it’s not clear which oil companies would even show up for an auction. Those once viewed as potential bidders for Arctic acreage have slashed spending this year as the coronavirus pandemic eroded crude demand and prices. And any investment in Arctic oil rights could become a stranded asset, untouchable in a warming world shifting away from fossil fuels.
Any buyers would still need to apply for and receive a slew of additional government licenses to begin searching for crude, from drilling approvals to animal harassment authorizations, rights of way, and pollution permits. There’s no reason to believe Biden’s Interior Department would OK any of them. “If leases are sold and issued before a new administration comes in, then every permit becomes a barrier,” said Matt Lee-Ashley, a former deputy chief of staff at the Interior Department under President Barack Obama.
by Jennifer A. Dlouhy, Bloomberg | Read more:
Image: Getty
[ed. Or smart money could be placing articles like this one.]
