In the Arctic Ocean, an Alaska Native corporation seeks to fill void left by Shell

Deadhorse, Alaska

Drilling on Alaska’s North Slope in Deadhorse. Photo: Mia Bennett

When Shell aborted its $7 billion Arctic drilling efforts in the Beaufort Sea in September 2015, environmentalists breathed a sigh of relief. The multinational corporation’s 28-vessel fleet, including its drillship and drill rig, quietly sailed south from Alaska towards warmer waters, avoiding any such catastrophes like the Kulluk’s grounding in 2013. Those opposed to drilling for oil in the Arctic Ocean felt even more encouraged when the U.S. and Canada jointly banned new leases for Arctic oil and gas drilling in December of last year. Expanded Arctic fossil fuel exploration, it was hoped in some circles, would be postponed indefinitely, at least in North America.

Yet little attention has been paid to what happened to Shell’s leases after the oil company quit Alaska. Just days before the moratorium was announced, 21 leases in a part of the Beaufort Sea Lease Area called Camden Bay were purchased in 2016 by a subsidiary of Arctic Slope Regional Corporation (ASRC), the wealthiest Native corporation in Alaska. At about precisely the same time that ASRC was criticizing Obama’s ban on further developments in the Outer Continental Shelf, the protests at Standing Rock against the Dakota Access Pipeline were exploding. If you thought that all indigenous peoples were uniformly opposed to oil drilling, think again.

According to a list provided by the Bureau of Ocean Energy Management, most of the leases purchased by ASRC Exploration are set to expire at the end of this year. Two are valid until summer 2019. In order to prevent the expiration of nearly all of the leases, as Alex DeMarban at Alaska Dispatch News writes, ASRC Exploration requested unitization of the offshore leases from the U.S. Bureau of Safety and Environmental Enforcement (BSEE). Unsurprisingly, under an administration that’s more pro-oil than the previous one, BSEE approved the unitization of 20 of the 21 units.

The benefits of unitization are that whatever happens in one lease now applies to all other 20 leases, since they’re now considered part of the same area. Petroleum News explains, “Unitization binds together a group of leases, which often have multiple owners, to encourage orderly and thorough exploration and production with minimal waste of dollars or resources.” For ASRC, this means if they find oil in one lease area, the rest of their leases stay active and exploration can continue.

The next challenge for ASRC will be to successfully obtain an extension of the leases from BSEE. Shell wasn’t able to do this earlier, but that was under the Obama administration. Under Trump, things could be different.

Ty Hardt, Senior Director of Communications at ASRC, wrote over email,

“As we mentioned when we first announced the acquisition of the leases in Camden Bay, while regulatory and permitting uncertainty eventually drove Shell out of Alaska, we know there is still tremendous potential in Alaska’s offshore. We also know responsible resource development translates into economic stability for our region, and every community across the North Slope of Alaska will benefit from responsible development.”=

Since its formation in 1971 under the Alaska Native Claims Settlement Act, ASRC has transformed into a major economic force in Alaska and beyond. In 2010, Forbes ranked it the 190th largest private company in the U.S., just behind Burger King, with revenues of $2.33 billion. The corporation represents the interests of some 13,000 Iñupiat shareholders, most of whom reside in seven villages scattered across Alaska’s North Slope. Every quarter, Iñupiat receive dividends from ASRC, whose value often reflects whether oil has been up or down.

ASRC’s active involvement in Arctic industrial development puts a spin on the usual narrative that’s woven of Arctic indigenous peoples being both victims of outside exploitation and staunch protectors of the environment. The regional corporation’s bread and butter has been oil field services for a long time, but it’s also been involved in mineral exploration for decades. In 1991, for instance, the Alaska legislature awarded $2 million to the company for coal exploration and feasibility studies in northern Alaska. Even back then, potential export markets were Asia and Europe via a “northern Arctic Ocean sea route,” as a 1992 report from the Alaska Department of Natural Resources referred to it. Since the late 2000s, ASRC’s interest in oil exploration has grown.

Apart from natural resource developmente, ASRC, like all Alaska Native corporations, is also able to expand rapidly in government services largely due to the 8(a) Business Development Program. This is intended to help businesses owned by people who have been historically disadvantaged to compete in the marketplace by allowing them to receive government contracts without having to compete with other bids. Unlike other companies classified under the 8(a) program, Alaska Native corporations have no upper limit on the size of government contracts they can receive. This exception has allowed some Native corporations, like ASRC, to grow so big that not only are they attempting to fill the shoes of Shell on the North Slope. They’re also doing things like hiring cyber security engineers in Saudi Arabia.

I asked Hardt, the ASRC communications director, what he would say to those who would argue that ASRC’s oil exploration might exacerbate Arctic climate change and jeopardize the well-being of future generations of Iñupiat shareholders. He responded,

“What jeopardizes future generations of Iñupiat on the North Slope is the threat of a failing economy and a diminishing number of opportunities for our people. We believe offshore exploration and development in the Alaskan Arctic can be done safely and successfully, which has proven to be the case in other regions, such as the Canadian and Russian Arctic.”

His words resonated with a conversation I had in March with Crawford Patkotak, Chairman of ASRC’s Board of Directors, at the Ukpeaġvik Iñupiat Corporation’s (UIC) Arctic Business Development Tour in Utqiaġvik (Barrow), Alaska last March. Patkotak stressed the need for self-driven development rather than government handouts for Alaska Natives. He noted,

“We had to remind Congress that [the Alaska Native Claims Settlement Act] wasn’t going to be a welfare bill. It was a rightful claim to not only continuously practice our traditional way of life, but having rights to resources that will improve and enhance the welfare of Iñupiat people. So over the years, seeing environmentalists, animal rights groups, that find ways to systematically strip our rights to develop our own resource – based on that whole theory of climate change…”

Anti-whaling and seal-clubbing protestors aside, one could argue that ASRC is simply a for-profit corporation that doesn’t really have the best interests of all its shareholders in mind. After all, Native corporations have had their fair share of scandals, from fraud and self-dealing within the Cape Fox Corporation to the dissolution of the 13th Regional Corporation after some pretty heinous corporate mismanagement. So maybe ASRC, in exploring for Arctic oil, is really just looking out for its wallet rather than its shareholders.

This is certainly a possibility, but Arctic oil is no easy game to play. Instead, ASRC could just stick to its tried and true practice of winning 8(a) contracts. But that doesn’t necessarily help to build an economic base for the future, which is what ASRC is trying to do in spurring Arctic oil extraction — even if the economics of it seem crazy at the moment. And beyond mere dollars and cents, the story here is also about protecting not only indigenous rights to traditional cultural practices, but protecting indigenous rights to develop. In some cases, the two are even intertwined. Economic development can generate the funds necessary to support traditional cultural practices that, for better or worse, might not be viable on their own anymore in an economy that has both subsistence and market practices. Making a sealskin boat for whaling, for instance, doesn’t come cheap. Sure, the sealskins and caribou intestine thread come from the land, but the wood has to be purchased, and later the motor and fuel, and so on and so forth.

sealskin boat Barrow Utqiaġvik

Women in Utqiaġvik working on the boat’s outer skin by stitching sealskin pieces together with caribou intestine thread. The men are working on the frame of the boat. Photo: Mia Bennett.

The words of an Elder I spoke to in Utqiaġvik reflected the determination of some Iñupiat to move forward with economic development. I asked Wesley Uġiaqtaq Aiken, a former whaling captain and World War II veteran, how he felt about oil and gas exploration. He mentioned the recent discovery of oil at Smith Bay on the North Slope and recalled how in days long past, Iñupiat used to haul seeping oil that had dried up on the bay’s surface to burn on shore. Looking to the future, Aiken remarked,

“I’m glad these young people are willing to go further out on the land – not the ocean. If they open so-called Alaska Native Wildlife Refuge – that one’s got natural gas out there. There must be something out there.”

He was hopeful, but also wary of outside intervention whether it was for or against oil drilling. Underscoring the importance of recognizing and upholding Native rights to the land and sea, the Elder reflected, “The Arctic Ocean is my beautiful garden – nobody messes around with it.”

Sunset-Barrow-Alaska

Looking out over the Arctic Ocean in Utqiaġvik (Barrow), Alaska. Photo: Mia Bennett

Drilling in Arctic Refuge to close deficit? Let’s be real.

The White House's Budget for 2018 proposes to open Area 1002 in the Alaska National Wildlife Refuge to oil and gas lease sales beginning in 2022/2023.

The White House’s Budget for 2018 proposes to open Area 1002 in the Alaska National Wildlife Refuge to oil and gas lease sales beginning in 2022/2023.

The White House’s budget will be delivered to Congress today. Called “A New Foundation for American Greatness,” the 62-page document proposes the coastal plain of the Arctic National Wildlife Refuge (ANWR) to drilling. Selling leases in Area 1002, as it’s known, would begin in 2022/2023, providing $900 million in revenue, which would help close the federal deficit. The budget estimates drawing in another $900 million from a second leasing round in 2026/2027. In total, the Trump budget proclaims in an associated document, called “Major Savings and Reforms,” that opening ANWR to drilling would reduce the federal deficit by $1.8 billion.

Major-Savings-Trump-Budget-Alaska-Arctic

The “Major Savings and Reforms” to be made by drilling in ANWR.

The White House proposes to share revenues “equally with the State of Alaska.” The $900 million or so that would come in the next ten years, however, will just be a drop in the bucket for a state that has faced year after year of severe budget deficits since the price of oil crashed in 2014. This year, the budget deficit was estimated to be $2.92 billion. If faced with a worst-case scenario where an approximately $3 billion budget deficit becomes the norm for the next ten years, $900 million looks like an even paltrier amount in comparison. Revenues and royalties could be generated once commercial drilling began in ANWR, but that would take years. In the meantime, Alaska could have been striving to develop alternative industries like wind and tidal energy rather than banking on potential profits from opening up an ecologically sensitive area to drilling.

Obama and Trump’s budgets compared

Budget

A comparison of Obama’s 2017 budget with Trump’s 2018 budget reveals that the former mentions climate change 36 times, while the latter only mentions it once.

As the potential opening of ANWR indicates, the replacement of Barack Obama with Donald Trump in the White House has caused federal priorities in the Arctic to shift dramatically. Comparing Obama’s final budget, for fiscal year 2017, with Trump’s 2018 budget further illustrates those contrasts.

The Obama budget highlighted topics like “Coastal Resilience,” explaining, “The Budget also provides the Denali Commission—an independent Federal agency created to facilitate technical assistance and economic development in Alaska—with $19 million, including $5 million to coordinate Federal, State, and tribal assistance to communities to develop and implement solutions to address the impacts of climate change.” The Obama budget also sought to invest $100 million across a number of additional agencies to deal with climate change while allocating $150 million for a Coast Guard icebreaker in the Arctic to tackle related problems.

Issues like improving American Indian and Alaska Native access to healthcare were also prioritized under the Obama budget. One line-item for 2017 estimated that standardizing the definition of who qualifies as American Indian and Alaska Native under the Affordable Care Act would increase the budget deficit by $520 million over the next decade. While the previous White House was spending money to try to improve healthcare for vulnerable and historically disadvantaged populations, the current White House wants to “save money” by cutting billions of dollars in funding to the Medicaid healthcare program for low-income individuals and food stamps.

Climate change or “other change”?

Another stark contrast is that the Obama 2017 budget mentioned climate change 36 times. The Trump budget mentions it zero times.

That should come as no surprise seeing that Secretary of State Rex Tillerson hardly dared utter the phrase while speaking at the Arctic Council Ministerial Meeting in Fairbanks earlier this month. Reading stiffly from a set of prepared remarks, Tillerson said, “And finally, the Council has strengthened resilience at the national and local levels in the face of environmental and other change.” When the nation’s top diplomat won’t even call a spade a spade, the prospects for agreement between the U.S. with the other Arctic Council member states, let alone the rest of the climate-concerned international community, are dim.

(For fun, you can compare Tillerson’s stilted six-minute remarks in Fairbanks with former Secretary of State John Kerry’s 23-minute off-the-cuff speech at Iqaluit two years prior:)

Fly me to the moon: Prudhoe Bay from above

Deadhorse, Alaska

Deadhorse, Alaska. Photo: Mia Bennett

Prudhoe Bay, Alaska. The place where polar bears butt heads with the petroleum industry – literally. “If a bear’s spotted, work’s usually called off for the day,” a man in Barrow, 200 miles to the west, told me. Oil workers try to scare away the bear – sometimes a polar bear, sometimes a grizzly – and condition it so that it doesn’t come back in search of food.


On my recent trip to Alaska, I didn’t have the chance to stop in bear-battled Prudhoe or nearby Deadhorse, which houses the airport, lodging, and store for the oil workers. Deadhorse is also the end of the Dalton Highway, which starts north of Fairbanks some 400-odd miles to the south. I did, however, get to fly in and out of Prudhoe Bay airport, which in winter appears to miraculously emerge out of the white tundra.

Anchorage-Alaska-Airlines

Ascending out of Anchorage over the Talkeetna Mountains.

Flying from Anchorage, our airplane soared over the Talkeetna Mountains and the Alaska Range. I dozed off soon after the snow-capped peaks transitioned into the relatively flat white plains of the Yukon-Tanana Uplands. When I woke up an hour later, the packed Alaska Airlines flight was descending into Deadhorse, laden with cargo for the winter construction season. The seats that would normally take up the front half of the airplane are replaced with a cargo hold on the airline’s 737-400 Combi planes. Winter is the big construction season in Prudhoe Bay because it’s the only time of year when the ground is solid and snow-covered. This permits driving on the tundra without permanently damaging it.

Deadhorse/Prudhoe Bay Airport, Alaska.

Sitting on the tarmac of the moon. Deadhorse/Prudhoe Bay Airport. Photo: Mia Bennett

I looked at the view from my window seat and felt like we were descending onto another planet. It was a clear day and the sun bounced off the spindly network of chrome-colored pipes that criss-cross the North Slope. Straight, unwavering pipelines cut across meandering frozen rivers. All of the infrastructure out here is built on manmade gravel pads, for nothing can sit directly on top of the shifting permafrost, which thaws and refreezes every year. In this part of the world, gravel is almost more valuable than oil. The tiny rocks we take for granted down south are in short supply up north. No construction or excavation can happen without gravel.

Prudhoe-Bay-Frozen-Rivers

Straight pipelines intersect with meandering rivers in Prudhoe Bay in winter. Photo: Mia Bennett

The gray gravel pads are all but invisible in winter, however, and instead, the hundreds of miles of pipelines seem to stretch magically across the landscape. It is beautiful in its own way. Human ingenuity (or idiocy, depending on your point of view) has transformed an area that was once primarily used for local subsistence by the Inupiat people into a export-oriented resource frontier by dredging up the ancient seabed underlying the North Slope.

Prudhoe Bay is North America’s largest oil field. The extent of this industrial moonscape blew me away. It measures some 213,543 acres, or approximately 15 by 40 miles. That’s more than double the size of New York City and still significantly larger than Los Angeles. We flew over the oil field for a good long while before the platforms and pipelines faded into the west. Out here in mid-winter, it was impossible to tell where the tundra turned into the ocean, for both were frozen solid.

Prudhoe-Bay-from-Above-2

Taking off again from Prudhoe Bay airport, headed east towards Barrow.

“In space we read time,” reflects German historian Karl Schlögel. Above Prudhoe Bay, I felt as if I was witnessing modernity in all its silver-plated excesses. The sight was all the more jarring having come from Anchorage, where I had wandered down the old main street and read about the bustling heydey of a past boom centered around the construction of the Alaska Railway. Faded murals and maps of the “Last Frontier” were the chief reminders of this wealthy era in the city’s history. Up in Prudhoe, what will this extreme edge of the rush for Alaska’s resources look like when the oil runs dry? Abandoned pipelines and platforms might then no longer epitomize a future-forward modernity, but rather a rusty past.

Anchorage-main-street-historical

The main drag in Anchorage, where curio shops have replaced saloons and even a Japanese restaurant that bustled during the construction of the Alaska Railway.