Tuesday, January 5, 2021

Petroleum Companies Avoid Efforts to Drill the Arctic Wildlife Refuge

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The New York Times recently reported that oil companies are not bidding on leases to drill in the Arctic Wildlife Refuge. As one of the last harmful acts of the Trump administration announced in November, the refuge was opened to bids for drilling late last year. However, as the article points out, there are few takers and it looks like the State of Alaska is going to be the main bidder. 

There are two main reasons that companies are not bidding. First, it doesn't make sense economically. It is expensive to drill in the arctic because of the remote conditions and the difficult terrain and weather. The expense is not warranted at this moment when there is an abundance of oil on the market and prices are relatively flat. Renewable sources of energy are gaining momentum and it is looking more and more like oil is going the way of the dinosaurs. Second, drilling the in the Arctic Wildlife Refuge is a reputation killer for any company that seeks to do business in this area. It is the last untouched wilderness in the United States and any type of damage to the area will be noted by consumers and will certainly draw attention internationally. The oil industry is already under heavy pressure due to a variety of climate change related lawsuits and a move to drill the Arctic does not make repetitional sense given that any type of action in the region will impact the fragile ecosystems.

Alaska, by bidding the on the rights to drill, is hoping that interest will improve in the coming years and that they will have a return on their investment by reselling the leases. In the mean time, it seems as if the refuge will remain a refuge given that oil companies are avoiding the sale like the plague.