These Days, the Smart Money Is Staying Away From Arctic Drilling
The Trump administration is racing against legal deadlines and a merciless regulatory calendar in its last-ditch effort to sell drilling rights in the Arctic National Wildlife Refuge before President-elect Joe Biden is sworn in at noon on Jan. 20.
Even if the White House succeeds in clearing those hurdles, itll 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 Clubs financial advocacy campaign, put the problem simply: Smart money is staying away from this kind of development in the Arctic.
Buying the leaseswhich could go for as little as $5 an acreis the cheap part of the oil exploration process. Every other stepfrom enlisting consultants to conduct required environmental studies to mounting industrial operations in a remote wilderness without existing infrastructureis hugely expensive. The break-even price for the oil that companies would extract could be as high as $80 per barrel, according to Rystad Energy, a level the market hasnt seen since October 2018.
Most of todays 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 LPs controversial Dakota Access oil pipeline lost $4.4 billion in account closures and divestments in 2017, research from the University of Colorado Boulder shows.
Read more: https://www.bloomberg.com/news/articles/2020-11-24/these-days-the-smart-money-is-staying-away-from-arctic-drilling