Lauded by its backers as a boon for the Alaskan economy and a critical path to energy independence, the recently approved Willow oil project is now facing two lawsuits, along with tough questions about just how much Alaskans or America as a whole will gain from the project.
Fears of a lawsuit galvanized the Biden administration’s approval of ConocoPhillips’ US$8-billion drilling project on the pristine northern reaches of Alaska’s North Slope, the New York Times reported, hours after the controversial decision was announced. “ConocoPhillips has held leases to the prospective drilling site for more than two decades, and administration attorneys argued that refusing a permit would trigger a lawsuit that could cost the government as much as $5 billion.”
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When a reporter later asked White House press secretary Karine Jean-Pierre whether President Biden had broken promises and undermined his own goals on climate change by greenlighting Willow, she confirmed the concern that the company owns the leases.
“The President kept his word, where he can by law,” Jean-Pierre responded. ConocoPhillips has decades-old leases granted by prior administrations, and they have lease rights “that can’t be ignored,” Jean-Pierre said, citing University of California Hastings law professor and former White House counsel, John Leshy. In an interview, Leshy said those lease rights were “a big finger on the scale in favour of development.”
In dodging ConocoPhillips’ legal team, however, the Biden administration now finds itself the defendant in two separate lawsuits challenging the Willow project.
Two environmental law firms, Trustees for Alaska and Earthjustice, have filed suits against the Department of Interior and its top officials, the Bureau of Land Management, and the United States Fish and Wildlife Service, among other federal agencies.
Trustees for Alaska is representing the Sovereign Iñupiat for a Living Arctic, the Alaska Wilderness League, the Northern Alaska Environmental Center, Environment America, the Wilderness Society, and the U.S. Sierra Club. Earthjustice is acting on behalf of the Center for Biological Diversity, Defenders of Wildlife, Friends of the Earth, Greenpeace U.S.,and the Natural Resources Defense Council.
Legal Challenges
“The complaints tie the project’s potential climate effects to the threatened species, including polar bears, that reside in the region where the Willow Project would be constructed,” reported CNN. Both lawsuits charge that Willow violates several federal laws, including the National Environmental Policy Act (NEPA) and the Endangered Species Act (ESA).
Earthjustice lawyers say the Endangered Species Act consultations undertaken prior to Willow’s approval “are unlawful, because they fail to consider the impact of carbon emissions on threatened species” like the polar bear.
Similarly, the Trustees of Alaska suit argues that the Fish and Wildlife Service’s determination that the project would jeopardize neither the “continued existence” of polar bears nor their habitat “failed to articulate a rational connection between the facts found and its no-jeopardy conclusion.”
The new lawsuit traverses familiar ground for Trustees of Alaska, which persuaded [pdf] a U.S. district court to void Trump-era permits for Willow in August 2021. They successfully argued then, as they’re trying to do now, that the prior consultations contravened NEPA and ESA.
Both groups are asking a judge for a preliminary injunction to halt the project, a request that has the plaintiffs as well as ConocoPhillips “racing against the clock,” reports CNN.
Under current permits, the oil company “must rely on ice roads to build Willow’s major infrastructure.” Those roads will cease to exist once the spring melt comes—a transformation that could be weeks away. Winning an injunction could mean delaying construction for another year.
“Within hours of the administration announcing its green light” for the project, ConocoPhillips was building ice roads inside the National Petroleum Reserve-Alaska, with plans to reach the site of a critical gravel mine within the week,” reports Bloomberg.
Willow No Windfall
As environment and climate justice defenders hit the courts, some are questioning just how much of a boon the Willow Project will prove for Alaska’s economy, and in helping the U.S. to greater energy independence.
“Willow is finally reapproved, and we can almost literally feel Alaska’s future brightening because of it,” said U.S. Sen. Lisa Murkowski (R), a one-time chair of the Senate Energy and Natural Resources Committee. “We are now on the cusp of creating thousands of new jobs, generating billions of dollars in new revenues, improving quality of life on the North Slope and across our state, and adding vital energy to TAPS [the trans-Alaska pipeline] to fuel the nation and the world.”
Alaska’s economy is heavily dependent on oil extraction. “Nearly 85% of the state budget comes from oil revenues,” writes Grist, in a review of the “dubious economic calculus” offered by backers of Willow. Such dependence looks to be an increasingly bad bet, with Alaska “currently pumping less than a quarter of the oil it was moving in the 1980s,” thanks in part to competition from the Permian Basin and to depleted reserves within the state.
“Alaskan oil production hit a 40-year-low in 2020,” Grist says, hence the intense lobbying effort by Alaska’s congressional delegation to get Willow approved. “At full capacity, it could increase total oil production in the state by more than a third.”
But turning on the Willow spigot cannot guarantee that good times will quickly return. The project will not become “cash flow positive” to the state for another 12 years, until fiscal year (FY) 2035, “with US$3.4 billion of net cash flow through 2043 and $5.4 billion through 2053,” found a recent analysis [pdf] by Alaska’s Department of Revenue. Willow is on federal land, so the only source of revenue for the state will be production taxes on the project itself, not royalties on the oil extracted.
By 2035, much less 2053, any realistic plan to rapidly reduce emissions to get climate change under control calls for much less fossil fuel production around the world, not more. The International Energy Agency, among many others, brought home that point in May, 2021, with a 1.5°C scenario that called for no new investment in coal, oil, or gas development.
Plus, a “carve-out” in the state’s tax law will allow ConocoPhillips “to write off its expenses for the project against the taxes the company pays on its other oil developments in the state,” Grist says.
“One analysis, conducted by the governor’s office in 2018, forecast that the state wouldn’t see a positive economic impact from the Willow project until 2026 and that the development would result in up to $1.6 billion in negative revenue through 2025—a 6% decrease to the state’s overall revenue.”
A 2020 citizen-led effort to reinstate a 2006 tax law that ensured deductions were directly connected to a single, particular field, a provision known as ring-fencing, failed in the face of heavy industry lobbying.
On the other hand, the U.S. federal government stands to gain a great deal more, and earlier, as the owner of the public lands being drilled. Willow is projected to become cash flow positive for Washington by FY 2030, with $5.9 billion of net cash flow through 2043 and $7.1 billion through 2053.
But ConocoPhillips stands to gain the most once the project becomes cash flow positive in FY 2031, with projections of “$10.3 billion of net cash flow through 2043 and $12.8 billion through 2053,” Grist writes.
Locally, projections show “$1.3 billion to the North Slope Borough through 2053, becoming cash flow positive as soon as the first property tax revenue is received in this model in FY 2024.”
Communities most affected by the development also stand to receive some $3.7 billion through 2053 via an “Impacted Communities Revenue” sharing agreement with the state.
No Ramp to Energy Independence
Willow backers also suggest the project will play an immediate and critical role in helping the U.S. towards energy independence. Echoing Murkowski’s claim that Willow could help “reduce our energy imports from some of the worst regimes in the world,” Democrat Mary Peltola, the first Alaska Native (as part Yup’ik) to be elected to Congress, said the project could “make us all safer in a world that has grown more unpredictable after Russia invaded Ukraine.”
But Willow won’t provide such cover any time soon.
“The project will not deliver its first barrels until 2028 or 2029, and it will take even longer for all three well pads that the Biden administration approved to start producing at full capacity,” Grist reports.
And even once the project is set to run full steam ahead, “it’s possible the global oil supply picture will look very different by then: Western countries may have access to new sources of oil, like recent offshore projects in places like Guyana, and where crude prices will be is anyone’s guess.”
The basics of oil chemistry will also prove a stumbling block.
“The chemistry of petroleum beneath Alaska’s North Slope is different from both light shale oil and the heavier oil that tends to come from places like Russia and Venezuela, so it will need to be blended with other oil in order to enter domestic refineries, which are mostly designed to refine specific types of crude,” Grist explains. That’s why “much of Willow’s oil wouldn’t replace imports from other countries.”
