The Biden administration promised this week to ink new protections against oil drilling in the Arctic in an apparent counter to approval of ConocoPhillips’ Willow oil project.
But will the administration’s plan help curb the industry’s future expansion in the National Petroleum Reserve-Alaska as the White House claims? And is it a winning political strategy for President Joe Biden?
Many observers are skeptical, and industry sees an oil revival for public lands in the far north.
“The decision is a milestone for Alaska’s upstream sector,” explained Mark Oberstoetter, upstream oil and gas analyst for Wood Mackenzie, pointing to several adjoining projects on nearby state and Alaska Native lands that together constitute enough oil to push Alaska back from the brink of significant decline. “A revival of North Slope production is now on.”
The administration may need to harness a 1976 law granting the Interior Department authority to protect the Arctic ecosystem and wildlife if it wants to counter that narrative, although it’s unclear how the law’s language might be interpreted to change the status quo, experts say. The administration may expand wetlands and river corridors that are already largely cut off from drilling, while also making the oil industry’s attempts to build out infrastructure more difficult by delaying approvals. It also has the option of refusing to hold lease auctions that would give companies further drilling rights.
Others argue the administration should limit new oil and gas activity from now on in the reserve on the grounds that Willow would release large amounts of greenhouse gases, exceeding the remaining carbon budget on federal lands in the Arctic.
But even a smorgasbord of new rules or administrative delays are not expected to keep the NPR-A from becoming a hot spot for oil and gas drilling on Alaska’s North Slope, representing a severe blow to conservation groups and some Alaska Native organizations that tried to block Willow on climate grounds.
“You can’t move forward with significant oil and gas development on the one hand and have protections that are meaningful on the other hand,” said Kristen Miller, executive director of the Alaska Wilderness League.
What is clear is that the Willow approval is a turning point for the Biden administration’s management of the federal oil program and is a major retreat from a campaign promise to end drilling on public lands.
It demonstrates a give-and-take approach that’s come to characterize the Biden era. Instead of blocking drilling, the administration is holding fewer and smaller lease sales. Where it can boost revenue, like increasing royalty rates and fees, it has. And stiffer rules on drillers are being leveraged to usher wells away from ecologically sensitive habitats, wildlife, wetlands and wild spaces.
For example, as part of the Willow approval, the administration ended offshore oil leasing in the Beaufort Sea, committed to blocking offshore oil pipelines from landing in the NPR-A and secured a deal with ConocoPhillips to relinquish 60,000 acres of its leases in the reserve in sensitive wetlands. A White House official called these efforts a “fire wall” to stave off future oil and gas expansion in the Arctic (Energywire, March 13).
Willow, meanwhile, will allow up to 199 wells to be drilled in the northeastern portion of the reserve, increasing the flow of oil from public lands into the 800-mile Trans-Alaska Pipeline System (TAPS) and helping stave off the steep decline of the North Slope’s oil fields.
It’s a dual strategy that is not bringing the administration many new allies, while also pushing away key segments of the president’s political base.
Willow supporter Sen. Dan Sullivan (R-Alaska), while pleased that the project was approved following a multiyear delay, called the prospect of new restrictions “infuriating” and a sign that “the fight to unleash American and Alaskan energy is far from over.”
The administration’s trade-offs, allowing oil development alongside new conservation measures, have angered climate and environmental activists, who say they are unforgivable concessions that allow projects like Willow to lock in oil drilling for years to come.
Even as Interior gets to work on new regulations in the NPR-A that are expected to be revealed in a matter of months, environmental groups like the Sierra Club, Earthjustice and the Trustees for Alaska have sued Interior in hopes a federal judge will block Willow on climate grounds (Energywire, March 15).
Rep. Jared Huffman (D-Calif.), who has proposed legislation to retire oil drilling on public lands, slammed the Willow project in a call with reporters Monday and urged the administration to go after the flow of oil from federal lands with as much gusto as it’s backed historic investments in clean energy and electric vehicles.
“If you’re not charting a new course on fossil fuel development, it seriously undermines the ability of those [clean energy and climate] investments in those reforms to make a difference,” he said. “It’s really simple, you just have to look at both sides of the ledger. And the supply side needs attention.”
For groups like the Alaska Native organization Voice of the Arctic Iñupiat that support Willow, the verdict is still being determined.
“The restrictions announced in the lead-up to the final decision on Willow were new to the process, and very last minute,” said Nagruk Harcharek, president of the group. “No meaningful details have yet been released, so we’ll take our time to study and evaluate those more formal proposals when the time is right.”
The meaning of ‘maximum protection’
Interior declined to provide details on what may be in its new regulations to protect the NPR-A beyond their scope and location.
Roughly 13 million acres of the NPR-A were named by Interior on Monday for the new protections, including Teshekpuk Lake, Utukok Uplands, Colville River, Kasegaluk Lagoon and Peard Bay Special Areas.
Those lands are already set aside to protect habitat for “grizzly and polar bears, caribou, and hundreds of thousands of migratory birds,” the department said in a press release Monday.
Interior’s approach appears to be an attempt to keep new oil development limited largely to Willow by building on a legacy of already-protected regions in the reserve — roughly half of it is off limits to new development under an Obama-era management plan inked in 2013.
Environmental groups say they expect the administration to leverage its authority under the Naval Petroleum Reserves Production Act of 1976 to exact stiffer protections.
The law, which allowed full commercial development of the nation’s oil and gas reserves, transferred management of the NPR-A from the Navy to Interior. Interior has authority to use “maximum protections” for the reserve’s fish, wildlife and habitat during oil and gas exploration under the law.
“From what I understand, they’re going to look at the definition of ‘maximum protections’ and try to really clarify what maximum protections means,” Miller said.
Matt Berman, an economics professor at the University of Alaska, Anchorage, noted that ConocoPhillips’ secured leases in the NPR-A for Willow in the mid-1990s and dislodging them would have cost the administration a difficult court battle. Biden’s strategy to keep oil companies from gaining new drilling ground in the reserve may block a scenario like Willow from happening in the future, he said.
There have been several discoveries of potential oil and gas reserves to rival even Willow’s reserves, but those areas are on a limited patch of the NPR-A so far. Currently only about 10 percent of the NPR-A is leased to oil developers, or about 2.45 million acres of the 24-million-acre reserve.
Aside from ConocoPhillips, no other leaseholders have proposed projects thus far, and Interior hasn’t held an auction for new rights since the Trump administration, according to department records. So even though the region is poised to be a drilling hot spot, it may only be so in a small percentage of the reserve.
But critics of the Biden administration’s apparent strategy — to contain oil and gas in the reserve to where drillers already have a stake — stress that lots of oil could be developed from those areas, on top of up to 600 million barrels of crude that could be tapped through Willow.
“We cannot drill our way to a sustainable future,” said Ben Jealous, executive director of the Sierra Club, in a call with reporters Monday. “It’s hard to see how this really adds up for President Biden. I’m concerned that his political calculations, and his climate calculations, may have made sense in the last century, however, they’re clearly not suited for the century that we’re in.”
‘Perverse incentives’
Within the Willow project, the Biden administration may still be able to exert pressure on the oil industry.
ClearView Energy Partners LLC said in a note this week that Interior has many tools to limit activity by making “drilling impracticable,” such as blocking oil and gas infrastructure needed to connect wells to existing oil and gas pipelines or cutting oil and gas out of future resource management plans altogether.
But those actions are not “durable,” because a future president can reverse course, the firm wrote.
That means more of an on-again, off-again regulatory environment that has plagued NPR-A for years.
The Trump administration spent much of its first and only term replacing the Obama administration’s 2013 management plan for the reserve to make most lands open to oil and gas developers.
That nod to the ambitions of ConocoPhillips and other companies to drill was short lived. The Biden administration reversed the Trump-era plan to the prior management approach, disappointing conservation groups who’d hoped Biden would make even more of the NPR-A off limits to oil and gas.
Joel Clement, an Interior official during the Obama administration who is now an Arctic initiative senior fellow at the Belfer Center for Science and International Affairs at Harvard’s Kennedy School, said the creation of the NPR-A created “perverse incentives” to manage the lands for oil and gas. To change that likely requires an act of Congress. The reserve historically was managed as a backup for national energy supply.
Berman, from the University of Alaska, Anchorage, said the uncertainty for the North Slope now is less about regulatory measures than the lingering legal battle over Willow.
“They’re all waiting for the courts, and that could take years,” he said. “In the meantime, ConocoPhillips is probably going to sit there and not really move that fast [on new projects].”
A 60% oil jump?
Despite the uncertainties, Willow alone represents a significant expansion of the North Slope’s oil output and analysts are expecting robust oil development. While the regulatory and legal trouble Willow faced may give some would-be developers in the NPR-A pause, ConocoPhillips’ appetite for additional projects beyond Willow is likely unchanged, said Oberstoetter with Wood Mackenzie.
“I’d expect they still plan to drill some NPR-A prospects in the future,” he said.
Additionally, there are other discoveries in the NPR-A that companies may want to advance, like the Peregrine discovery by the Australian firm 88 Energy Ltd.
That enduring interest, recharged by Willow’s success, is critical in helping reverse the trend of production decline for northern Alaska that would threaten the future operation of TAPS, the main artery connecting most of Alaska’s oil production to market.
A bellwether for Alaska’s oil and gas health, the pipeline that carried 2 million barrels a day at its height in the 1980s fell to roughly 430,000 barrels per day in 2022, according to Rystad Energy.
The pipeline begins to face operational risks when the oil flowing through it declines, with considerable investment required to keep it running under 350,000 barrels a day, according to the U.S. Energy Information Administration. That turning point seems even less likely in the wake of the Biden administration’s Willow decision.
According to Wood Mackenzie, with the approval of Willow and several other North Slope drilling programs coming online, the pipeline’s oil flow is expected to jump to 700,000 barrels per day by the end of the decade.
