An oil and gas lease sale in Alaska may indicate a shift in energy firms' priorities

DWANE BROWN, HOST:

A federal oil and gas lease sale in Alaska, held just before the New Year, got a lot of pushback from environmental groups. But in the end, the sale was kind of a dud. Sabine Poux with member station KDLL in Kenai, Alaska, has been following this story. She joins us now to talk about what the results say about the energy industry overall. Sabine, thanks for being here.

SABINE POUX, BYLINE: Hey, thanks for having me.

BROWN: First tell us, why is oil and gas development in this part of the Gulf of Alaska that borders Anchorage and Kenai Peninsula so controversial?

POUX: Yeah, well, Cook Inlet is home to salmon and an endangered species of beluga whale. And it's a really important ground for fishing in Alaska. It's also the state's oldest producing oil and gas field. And some say the discoveries there in the 1950s actually paved the way for Alaska to become a state in the first place. The federal government has held lease sales in the inlet since the '70s, when the field was at its peak.

BROWN: There was a lot of buildup at the end of last year when the sale came up. What happened?

POUX: Well, in the end, not much. The Department of the Interior offered up a million acres, but just one oil and gas company actually bid, on a few thousand acres for nearly $64,000. And that wasn't a huge surprise. Hilcorp Alaska has been the only bidder in sales there for a while, and oil and gas production in the inlet has historically stayed within state waters anyway. Those are the waters that are closer inland. So it was highly unlikely that there was going to be any new discovery there.

BROWN: What does this sale say about the future of oil leases in Alaska?

POUX: Well, in some ways, Alaska's pretty unique. It's always been expensive to produce oil and gas here. And the bigger companies left the inlet a long time ago. But the hesitancy to invest in new projects isn't specific to Alaska, according to Mark Squillace. He's a professor of natural resource law at the University of Colorado, Boulder. And he says offshore development is expensive, and it's time intensive, and that might be worth it in the short term for some companies since the war in Ukraine has so drastically increased energy demand and raised prices. But Squillace says development is a long game, and companies might be doubtful their investments will stand the test of time as renewables become more and more popular - no matter who's in office.

MARK SQUILLACE: Even if the Democrats were to lose the White House in 2024, I think it's going to be very difficult to change the direction that the country is going in now in terms of moving toward a more sustainable kind of energy environment.

POUX: Squillace expects that uncertainty to discourage new investment in the lower 48 too, like in the Gulf of Mexico. Companies there are having to drill deeper to get to the oil and gas, which means it's more expensive to do so. And they might decide it's just not worth it.

BROWN: Sabine, didn't the Biden administration say they were going to walk back this issue of oil and gas leases? If that's the case, why do they continue to come up for sale?

POUX: Yeah, they did. And they actually tried to cancel this sale multiple times, but it became a bit of a political football in Washington, D.C. Last session, Senators Joe Manchin of West Virginia and Lisa Murkowski of Alaska - they made sure Congress couldn't pass a bill focused on renewable energy and climate without these sales included in it. And that's why the Biden administration couldn't cancel the Cook Inlet sale because it became part of what's known as the Inflation Reduction Act.

BROWN: Well, Sabine, with all that said, what happens next for the oil and gas lease in Cook Inlet?

POUX: Yeah, well, Hilcorp still has to jump through some hoops before it can actually look for oil and gas on that lease. And even then, it's unlikely they'll find anything noteworthy there at all. Still, these lease sales aren't going to stop anytime soon. Just don't hold your breath that there will be that many companies placing bids for fossil fuel leases in the inlet or anywhere else.

BROWN: Thanks, Sabine.

POUX: You're welcome.

BROWN: That's Sabine Poux with member station KDLL in Kenai, Alaska. Transcript provided by NPR, Copyright NPR.