Oil & Gas Development in the Arctic National Wildlife Refuge is a Bad Deal for Taxpayers

Taxpayers have little to gain and much to lose if we recklessly pursue oil and gas development in the Arctic Refuge.

Oil and gas leasing in the Arctic Refuge will not fulfill the billion-dollar promise made to taxpayers. Instead, such leasing will burden taxpayers with future climate and environmental liabilities stemming from drilling in this remote and sensitive area.

Industry interest in exploring and developing oil and gas in the Arctic National Wildlife Refuge is limited. Of the more than one million acres offered during the first lease sale, only half received bids, and even fewer were ultimately sold.

Within two years, both private entities holding leases rescinded their claims, reducing the total revenue from the sale to a mere $13.4 million—less than three-quarters of one percent of the initial promise to taxpayers.

The Department of the Interior has now canceled the remaining leases in the Arctic Refuge due to significant flaws and legal shortcomings in the original analysis supporting the January 2021 lease sale.

It is time to permanently end federal oil and gas leasing in the Arctic National Wildfire Refuge

First Lease Sale Yields Abysmal Results

In 2017, broad changes to the federal tax code were implemented, including tax cuts totaling more than $1.8 trillion over ten years. To offset these costs, Congress opened the Arctic National Wildlife Refuge (ANWR), also known as the 1002 Area, to oil and gas leasing for the first time. While Congress projected $1 billion in new revenue from these leases, our analysis suggests this figure was unrealistic. Based on historical data, taxpayers could expect revenues ranging from $9 to $14 million, or less than 2% of projected revenues.

However, even our estimates were overly optimistic. In January 2021, the U.S. Department of Interior held the first auctions for oil and gas leases in the Arctic Refuge. Of the 22 parcels of land available, 11 received bids but only 9 parcels, covering 440,000 acres, eventually sold.

Little Industry Interest

In 2022, the only two private companies to bid in the auction—Regenerate Alaska and Knik Arms Service LLC—rescinded their leases. The federal share of the revenue thus dropped from $8.2 million to $6.7 million, less than three quarters of 1 percent of what was promised to taxpayers when leasing in ANWR was first authorized.

Further, other oil companies with leases on non-federal lands in the Arctic Refuge have shown little interest in the area. Chevron and Hilcorp abandoned their claims in 2021. Most recently, Exxon Mobil informed its investors that it has no plans for exploration activities in the Arctic Refuge. Moreover, several major U.S. and international banks—including Wells Fargo, Goldman Sachs, Morgan Stanley, Citibank, and Chase—as well as a growing number of insurance companies, have declared they will no longer finance oil operations in the Arctic Refuge.

The fiscal case for oil and gas leasing in the Arctic National Wildlife Refuge is weak. The risks are high, and the rewards are minimal for taxpayers if drilling continues in this ecologically sensitive region.

Recent Rescissions Terminate Remaining Leases

On September 6, the Department of the Interior announced the cancellation of the remaining seven oil and gas leases in the Arctic Refuge, pointing to serious flaws and legal deficiencies in the underlying analysis for the January 2021 lease sale. The leases were held by the Alaska Industrial Development and Export Authority (AIDEA), a public corporation of the State of Alaska, and represent the remaining leases from the initial auction in January 2021.

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