Alaska delegation signs on to effort against banks shunning Arctic

  • JPMorgan Chase chairman and CEO Jamie Dimon, left, and Morgan Stanley chairman and CEO James Gorman chat before testifying before the House Financial Services Commitee on April 10, 2019, on Capitol Hill in Washington. Their banks, and several others, have announced they will not finance any Arctic oil and gas projects. (Photo/Patrick Semansky/AP)

Alaska’s congressional delegation is at the center of a growing cadre of Republican lawmakers pushing back on big banks that have decided not to invest in Arctic oil and gas projects.

Three dozen senators and representatives signed a May 7 letter to President Donald Trump that first thanked his administration’s pursuit of American “energy dominance,” which has largely focused development of coal, natural gas and oil resources nationwide.

The U.S. was the top oil producer in the world immediately prior to the onset of the global COVID-19 pandemic, with companies producing just more than 13 million barrels per day in early March, according to the Energy Information Administration.

But the letter mostly urged the Trump administration to look into how the federal government can counter the group of large banks that have recently publicized policies against financing oil projects in the Arctic and select other parts of the country. Many of the same institutions are also shying away from investments in coal as well.

In recent months Goldman Sachs, JPMorgan Chase, Citigroup, Morgan Stanley and Wells Fargo have all confirmed that to varying degrees they would not be supporting future Arctic oil projects. Most of the statements have been made through the banks’ social and environmental policies.

The decisions have been praised by numerous congressional Democrats, conservation groups and renewable energy advocates across the country but have made the banks a target for lawmakers from oil, gas and coal producing states.

“Scoring cheap political points at the expense of American energy workers is an affront to our economic success and it must be confronted,” the May 7 letter states.

The signatories included Sens. Dan Sullivan and Lisa Murkowski and Rep. Don Young.

The lawmakers also questioned why lending institutions that received federal support during the 2008-09 financial crisis and will potentially benefit from participating in CARES Act programs should be allowed “to pick energy winners and losers in order to placate the environmental fringe.”

“As every sector of our economy struggles to survive the COVID-19 pandemic and seeks financial stability from the federal government, environmental extremists are using the pandemic to accelerate their goal of putting American energy jobs in the grave,” the letter states. “We urge you and your administration to use every administrative and regulatory tool at your disposal to prevent America’s financial institutions from discriminating against America’s energy sector while they simultaneously enjoy the benefit of federal programs.”

Sullivan helped get the ball rolling for Republicans while participating an April 24 signing ceremony for legislation to add funding to the Small Business Administration’s Paycheck Protection Program in the Oval Office.

Sullivan first said the COVID-19 response aid would help many Alaskans, including those working in the oil and gas, fishing and tourism industries, through this exceptionally difficult period. He said further that he doesn’t believe the banks should be allowed to receive federal support and at the same time “discriminate against a critical sector of the U.S. economy.”

“I like the idea of looking into that; you’re right. You know, that got (to) where they were pushed by the radical left, and so they’re afraid of the radical left,” Trump responded.

Sullivan said in an interview with the Journal prior to the letter that it is the “irony and hypocrisy” that some of the same banks kept afloat by federal aid roughly a decade ago “still find it OK to discriminate against the energy sector, particularly our state” that goes beyond free market principles and at a minimum warrants congressional attention.

He acknowledged that it’s currently unclear exactly what Congress or the administration could do regarding the banks but said his staff is working with administration officials and other congressional offices as well to find possible remedies to the situation.

“If you implemented what the national Democrats want, America, as the energy superpower of the world, which we have achieved and is now being threatened, wouldn’t have a chance and the dominant powers would be Saudi Arabia, Russia; and somehow they think that would be good for our country. It’s remarkable and fundamentally frightening to me,” he told the Journal.

In January, 16 Democrat senators wrote to Wells Fargo CEO Charles Scharf asking that the bank commit to not financing oil and gas exploration in the Arctic National Wildlife Refuge.

Similar letters from congressional Democrats have been sent to other major bank executives as well.

Alaska Oil and Gas Association CEO Kara Moriarty said Sullivan made “a really valid point” to Trump while noting that the banks have generally stated a prohibition on direct Arctic oil project financing, which does not preclude general lending to oil and gas companies that work in the region.

How exactly the individual banks will decide which oil projects are acceptable and which aren’t is just one question they need to answer, she said, adding that how each institution defines “Arctic” is another.

The bans on Arctic oil investments likely apply to the North Slope, as it is within the technical definition of the Arctic, Moriarty said, while also pointing out that the Arctic Council classifies the Aleutians as Arctic — and some federal agencies — have even broader definitions.

“I do think it is frustrating to see these huge financial institutions in my mind arbitrarily decide that projects and financing in the Arctic is too risky because some of them have listed care for the environment and things of that nature (in policy statements) and yet they’re still investing in companies and projects in countries that have a way worse environmental record than America does and certainly Alaska,” she said.

“If a bank’s risk profile doesn’t view that projects in the Arctic are going to meet their risk criteria, that’s fine, but making blanket statements that ‘we won’t be investing’ even without giving a project the benefit of the doubt is sort of like agencies saying ‘we’re never going to permit a project in the Arctic.’ How can you say that?”

Wells Fargo interprets the Alaska Arctic to be the North Slope, according to spokesman David Kennedy. He wrote in an email that the bank did not have a comment on letter to Trump but clarified the bank’s policy regarding working with the oil and gas industry in the state, noting that the decision to forgo funding Arctic oil projects was part of a larger move away from all project-specific transactions in the region.

The bank, which has branches in Alaska, will continue to offer general corporate credit facilities for oil and gas companies in Alaska, according to a statement from Wells Fargo.

“Wells Fargo is a leading provider of credit to Alaska Native Corporations and responsible oil and gas exploration and production companies doing business in Alaska, and we want to continue those relationships long into the future,” the statement said.

Moriarty said she hasn’t heard of any companies in Alaska struggling to find financing as a direct result of the banks’ decisions but that’s mostly because funding isn’t something oil companies often disclose.

“We operate under some pretty strict anti-trust rules. Price and investors and who they’re getting money from and how they’re getting money for projects — that just isn’t stuff we talk about, but it doesn’t mean it’s not happening,” she said.

First National Bank Alaska CEO Betsy Lawer said the large oil companies operating on the North Slope typically have lines of credit with other financial institutions to fund portions of their work. FNBA, as a community bank, instead focuses its oil industry lending on Alaska-based companies in the support service sector, Lawer said.

A JPMorgan Chase spokesman declined to comment on the May 7 letter and other banks did not respond to questions in time for this story.

ANWR lease sale

Bureau of Land Management officials continue to inch ahead with plans for an oil and gas lease sale in the ANWR coastal plain despite historically bad dynamics in world oil markets but it remains unclear when the controversial silent auction-style sale will finally be held.

BLM Alaska officials released the final version of the environmental impact statement in mid-September and BLM State Director Chad Padgett said at the time he hoped to hold a lease sale for the entire 1.6 million-acre coastal plain before the end of the year, reiterating a common theme heard from other Interior Department leaders.

While a record of decision — a prerequisite to a lease sale — could have been signed by agency officials as soon as 30 days after the official Sept. 20 final EIS notice was published in the Federal Register, but 2019 ended with little word from BLM or Interior leaders about it.

BLM Alaska spokeswoman Lesli Ellis-Wouters noted in an emailed response to questions that it is not uncommon for a record of decision to be issued up to several months after a final EIS is made public.

“This decision will take into consideration the many important issues and potential impacts we heard during our multi-year scoping and public comment process which resulted in almost 2 million comments received,” Ellis-Wouters wrote.

The commenters largely expressed concerns about impacts to subsistence lifestyles, the migratory patterns of the Porcupine caribou herd that uses the coastal plain for calving and opportunities for increased jobs and economic opportunities in the state, she added.

Ellis-Wouters also noted that to comply with the 2017 tax bill, which opened the Coastal Plain to oil and gas exploration, BLM does not have to hold the first lease sale until December 2021.

However, many supporters of drilling in ANWR have pushed for a sale before the end of President Donald Trump’s first term to make sure Republicans maintain control of the process.

Bloomberg reported May 11 that Interior Secretary David Bernhardt said he does not think the immediate collapse of oil markets will dampen industry interest in an ANWR lease sale, which he believes will likely be held this year.

Moriarty said it’s too tough to tell what industry’s response to a lease sale would be as uncertainty from the COVID-19 pandemic has made even very near-term predicting in the historically volatile industry impossible.

“You’ve got to let the process work. You’ve got to make sure the EIS is defensible in court because those that oppose development of the coastal plain are going to say, ‘well, the reason they didn’t show is because of low prices’ or ‘the reason they didn’t show is because of high prices’ or ‘the reason they didn’t show is’ — it just doesn’t matter,” Moriarty said.

“There’s always a reason fabricated as to why we’ll never have a successful lease sale in this price environment so the process has to continue.”

It’s widely believed that a record of decision authorizing a lease sale will be challenged in court.

If a record of decision advancing a sale is approved, BLM will issue a Call for Nominations to industry, which usually takes 30 days and then a Notice of Sale announcing the date will be issued following a review of industry’s submissions, according to Ellis-Wouters.

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Elwood Brehmer can be reached at [email protected].

Updated: 
05/13/2020 - 9:11am