A win for the arctic but no time to celebrate

0
1120
An image of a land oil rig. Major corporations were offered land in the arctic but choose not to invest for economical reasons. Photo by Pixabay via Pexels.

On Jan. 6, 2020, the Trump administration held an auction that could have potentially leased 4 million acres of Alaska’s coastal plain, mortgaging the future of humanity in its battle to control climate change. Corporate development in the region would jeopardize the lives of millions of organisms and considerably elevate the risk of another devastating oil spill. Luckily, major corporations abstained from the opportunity to purchase developmental permits, resulting in a bidding pool of just three buyers and a total of eleven sold permits.  

The group of interested corporations included Alaska’s state-managed economic development corporation, which acquired nine of the sold leases, and two smaller limited liability companies that bought one each. Over half of the bidding propositions drew no offers and the auction accrued a net sale of $14.4 million on 11 tracts of land that cover about 600,000 acres of the 1.6m-acre coastal plain. The Trump administration originally predicted the leases would bring in approximately $900 million in revenue, which divided 50-50 between the state and federal government could compensate for the administration’s tax cuts on corporations and the wealthiest subset of the American population. 

As wholesome as it would be to say that it was love for animals and the environment that convinced major energy corporations not to invest in fossil fuel drilling and extraction operations, it was the economics that played the most pivotal role. Companies know that exploiting the Arctic for oil and coal is a catastrophically bad investment. The New York Times found that industrial intrusion into the region would only yield 3% of the Trump administration’s projected yields. This is due to rampant price volatility across all major fossil fuel markets. These violent market fluctuations have occurred due to regulatory policies being unable to curb market saturation, oil and coal’s energy efficiency peaking yet costing more to sustain production and other bureaucratic variables. The price of oil has already fallen 65% since its peak in 2008 and the spot price for coil dropped 39% in 2019 alone. The stark decrease in coal price represents the most substantial dropoff since 2007 and the downward trajectory has continued after a brief resurgence during the first quarter of 2020. With commodity values poised to plunge further, significant quantities of fossil fuel assets are set to be invalidated as sunk costs and will continue to subject dependent countries like the United States to higher levels of capital flight.  

An energy analysis from Rystad asserts the breakeven selling price would have to be a ludicrous $78 per barrel to have a remote possibility of breaking even on an arctic energy drilling investment. The current selling price as of Jan. 21, 2020 is only $52.24 per barrel. There is no economic motive to pursue such an expensive, destructive, time consuming nightmare of a project for such minimal return. Oil extracting giants like British Petroleum (BP) have already begun to liquefy their Alaskan holdings, including their 49% share in the Trans Alaska Pipeline, Prudhoe Bay oil field and non-operating interests in exploration leases. The combined value is estimated to be $5.6 billion and indicates that BP sees no future return in continuing operations in the region. 

Regardless of whether decisions were made due to legitimate economic concerns, legal complexities or to avoid surefire public backlash, the lack of corporate demand for Alaska’s energy assets was a monumental victory for environmentalists. The Trump Administration has already employed more than 125 rollbacks to gradually erode protective mechanisms that limit industrial pollution in favor of misguided capital ventures. Economic advancement to exploit untouched areas of the Arctic is just one example. The president’s stance on propagating the coal industry furthers the same issue. His support of coal miners continuing to work dangerous jobs for an industry that is on government subsidy life support is another example of why public education matters. People need to know about things that affect them personally.  

Conservative estimates of U.S. fossil fuel subsidies from the Environmental and Energy Study Institute are at approximately $20 billion per year, with 20% currently allocated to coal and 80% to natural gas and crude oil. The use of subsidized funds to engineer more efficient extraction methods is also set to increase carbon dioxide emissions by six billion tons cumulatively. According to their calculations as of 2018 shifting the entire energy economy to renewable energy is cheaper and more economically viable long-term than continuing fossil fuel use. Forbes reveals 42% of global coal capacity is currently unprofitable and the United States could save $78 billion by shutting down coal consuming power plants. To eliminate partisan bias and draw a conclusion from a comprehensive data set, the study analyzes statistics from states of both Democrat and Republican majority, as the two parties have conflicting stances on renewable energy adoption. The cost-benefit analysis of a clean energy switch in both historically red and blue states ultimately finds that investing in renewable energy is far cheaper than the operational cost of coal. This is because the price to build new wind and solar infrastructure has fallen below the cost of running existing coal-fired power plants in both red and blue states, making renewable energy the smarter short and long-term investment. 

President-elect Joe Biden gesturing to supporters. The election of Joe Biden signifies people care about achieving net-zero emissions. Photo taken Saturday, Nov. 7, 2020, in Wilmington, Del. (AP Photo/Andrew Harnik, Pool)

The last four years have seen the proliferation of people susceptible to low quality information. This has resulted in the election of populist leaders who mismanage political legislation to further their own re-election agendas. With a more informed public, leaders can be held accountable to enforce realistic far-sighted goals regarding the environment and all other facets of government policy. The election of Joe Biden signifies that the people care about adhering to science and responding with the necessary corrective protocols to direct the nation toward achieving economy-wide net-zero emissions by 2050. The world should be thankful the Arctic will remain a pristine wildlife sanctuary in the present, but remember there is far more work to be done to ensure that the planet remains hospitable for generations to come. The threat the Arctic faced should be a wake-up call. Sustainable economic drivers and protective policies must be implemented now.  

Leave a Reply