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Majority of U.S. Public Against Drilling ANWR; Oil Experts Think Economics Are 'Suspect'

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By Andy Rowell

Republicans may be celebrating their great tax rip off they sneaked through last Friday night, which included the hugely disputed proposal of drilling of the Arctic National Wildlife Refuge (ANWR), but opening up America's last true wilderness to oil exploitation is still far from certain.


Firstly, drilling in ANWR is deeply unpopular with the American public; secondly, it still has to get past the House, where some Republicans are opposed to opening up ANWR; thirdly, even oil industry consultants think drilling now is not economically sensible and fourthly any development will be fought tooth and nail in the courts.

All this means that any drilling is not going to happen any time soon. It is worth remembering that pro-drilling Republicans have tried more than 50 times to drill in ANWR already and they have failed.

Firstly, the American public are vehemently against the idea.

Monday, Yale University's Program on Climate Change Communication released a new survey that found that 70 percent of voters oppose drilling in the refuge. Those strongly opposed outnumber those who strongly support the policy by more than 4 to 1. Despite the gleeful scenes late on Friday night by the Republican leadership, a mere 18 percent of Republican voters "strongly support" the policy.

Secondly, the first hurdle any bill would have to overcome would be the House.

Before the Senate vote, 12 Congressional Republicans sent a letter to the leaders of both houses of Congress, objecting the provision which would allow ANWR.

They wrote, in part: "Since the Refuge was originally set aside for the protection in 1960 by President Dwight Eisenhower, Republicans, Democrats and Independents alike have stood together to protect this unparalleled landscape."

They continued: "For decades, Congress has voted to prohibit oil and gas development in the refuge, with the overwhelming support of the American public. Support for this protection remains strong today. After years of debate, the Arctic refuge stands as a symbol of our nation's strong and enduring natural legacy."

If Congress opened up the area to drilling, they warn, "the likelihood that lawsuits would accompany any development is high."

Since the vote, some Republicans have gone public. Miami Rep. Carlos Curbelo is one of those who signed the letter and who is co-founder of the Climate Solutions Caucus, a bi-partisan group working to address climate change.

His spokesperson, Joanna Rodriguez, said in a statement that "Congressman Curbelo strongly believes the tax proposal is not the appropriate venue for addressing ANWR. He made that clear to House and Senate Leadership last week and will continue to work with his colleagues on both sides of the aisle on legislation that focuses on reforming our tax code and giving South Florida families the chance to keep more of their hard-earned paychecks, not a debate about Arctic drilling."

If all the Republican members of the House who are members of the Caucus vote against the ANWR provision, then the bill is dead.

As the Miami Herald noted: "The caucus includes 31 House Republicans, enough members to vote down a tax bill, since the GOP can only afford 22 No votes if all Democrats vote against the bill."

Curbelo may already be feeling the pressure. Monday, the Herald reported that "a group of protesters from the Sunrise Movement, a climate change advocacy group, staged a protest in Curbelo's office urging him to vote against a tax bill that 'sells out the Arctic.'"

Sunrise Co-Founder Evan Web told the paper: "If Representative Curbelo, the founder of the Climate Solutions Caucus, is serious about stopping climate change, protecting the vulnerable people of his district in South Florida, and protecting the Arctic from drilling, he'll vote 'no' on this Big Oil bailout of a tax bill."

Thirdly, we come down to simple economics.

The bottom line is the oil price is too low and Arctic drilling too risky for any company to rush in now and the foreseeable future.

Outside magazine noted: "The strongest argument against drilling might be the numbers, because while Republicans have always wanted to drill in the refuge, doing so today makes about as little economic sense as it has in ANWR's 57-year history."

Big Oil always talks about ANWR being the "holy grail" of Arctic drilling that will bring untold riches, but the reality is likely to be very different. In October, a Center for American Progress analysis found that offering oil and gas leases in ANWR is likely to yield no more than $37.5 million in revenue for the U.S. Treasury over the next 10 years: short of the $1 billion to $1.8 billion that drilling proponents claim could be raised.

And then we come to the oil price. According to financial analysts who follow the energy industry, the average oil price at which drilling projects in the Arctic can break even is in the high seventies per barrel, much higher than the current average oil price of $57 per barrel.

The investment bankers, the ones likely to bankroll any drilling, think it's a bad idea. Speaking earlier in the year, Goldman Sachs commodity expert, Michele Della Vigna, said "We think there is almost no rationale for Arctic exploration. Immensely complex, expensive projects like the Arctic we think can move too high on the cost curve to be economically doable."

Even oil consultants question ANWR drilling too. "Any discoveries in ANWR would face significant obstacles before reaching first oil," argued Alison Wolters, an analyst at the energy research firm, Wood Mackenzie. "Oil companies would have to decide if they think the opportunity is worth the potential delays and a lot of legal wrangling and back and forth with regulators."

Jennifer Presley, the senior editor, Drilling Hart Energy, an oil and gas consultancy also recently outlined how: "Doing anything in Alaska requires very deep pockets, and we're not talking about $6 gallons of milk or $4 loaves of bread. With oil markets settling out at about $50/bbl oil prices and breakevens hovering at or below $50/bbl, is now the best time to consider opening even a tiny sliver of ANWR for exploration and drilling when oil can be had for far cheaper prices in places closer to home like the Bakken Shale or Permian Basin."

She added that "I find the current timing for such an opening suspect."

Fourthly, as I pointed out Monday, the industry will be challenged every step of the way by scientists, environmentalists and First Nations.

Before the vote, 37 leading Arctic wildlife scientists sent a letter opposing drilling on the coastal plain Sen. Lisa Murkowski and Sen. Maria Cantwell, the Chair and Ranking Member respectively of the Senate Committee on Energy and Natural Resources.

The letter stated: "Based on our experience in the Arctic, we oppose oil exploration, development and production in the Arctic Refuge. Such activity would be incompatible with the purposes for which the refuge was established, including "to conserve fish and wildlife populations and habitats in their natural diversity."

There is no doubt that, as the 12 Republicans outlined above, if drilling makes it through the House it will be challenged in the courts.

After the Senate vote, one of the co-signers, David Yarnold, called the provision to open up ANWR "simply shameful."

Yarnold, who is also the president and CEO of the National Audubon Society, added "The Arctic refuge isn't a bank—drilling there won't pay for the tax cuts the Senate just passed. The American people don't support drilling in the Arctic and it's up to the House to reject this flawed bill."

And if the House passes the bill, expect a whole host of lawyers to be very busy.

Reposted with permission from our media associate Oil Change International.

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Ola Elvestrun, Norway's environment minister, announced Thursday that it is freezing its contributions to the Amazon Fund, and will no longer be transferring €300 million ($33.2 million) to Brazil. In a press release, the Norwegian embassy in Brazil stated:

Given the present circumstances, Norway does not have either the legal or the technical basis for making its annual contribution to the Amazon Fund.

Brazilian President Jair Bolsonaro reacted with sarcasm to Norway's decision, which had been widely expected. After an official event, he commented: "Isn't Norway the country that kills whales at the North Pole? Doesn't it also produce oil? It has no basis for telling us what to do. It should give the money to Angela Merkel [the German Chancellor] to reforest Germany."

According to its website, the Amazon Fund is a "REDD+ mechanism created to raise donations for non-reimbursable investments in efforts to prevent, monitor and combat deforestation, as well as to promote the preservation and sustainable use in the Brazilian Amazon." The bulk of funding comes from Norway and Germany.

The annual transfer of funds from developed world donors to the Amazon Fund depends on a report from the Fund's technical committee. This committee meets after the National Institute of Space Research, which gathers official Amazon deforestation data, publishes its annual report with the definitive figures for deforestation in the previous year.

But this year the Amazon Fund's technical committee, along with its steering committee, COFA, were abolished by the Bolsonaro government on 11 April as part of a sweeping move to dissolve some 600 bodies, most of which had NGO involvement. The Bolsonaro government views NGO work in Brazil as a conspiracy to undermine Brazil's sovereignty.

The Brazilian government then demanded far-reaching changes in the way the fund is managed, as documented in a previous article. As a result, the Amazon Fund's technical committee has been unable to meet; Norway says it therefore cannot continue making donations without a favorable report from the committee.

Archer Daniels Midland soy silos in Mato Grosso along the BR-163 highway, where Amazon rainforest has largely been replaced by soy destined for the EU, UK, China and other international markets.

Thaís Borges.

An Uncertain Future

The Amazon Fund was announced during the 2007 United Nations Climate Change Conference in Bali, during a period when environmentalists were alarmed at the rocketing rate of deforestation in the Brazilian Amazon. It was created as a way of encouraging Brazil to continue bringing down the rate of forest conversion to pastures and croplands.

Government agencies, such as IBAMA, Brazil's environmental agency, and NGOs shared Amazon Fund donations. IBAMA used the money primarily to enforce deforestation laws, while the NGOs oversaw projects to support sustainable communities and livelihoods in the Amazon.

There has been some controversy as to whether the Fund has actually achieved its goals: in the three years before the deal, the rate of deforestation fell dramatically but, after money from the Fund started pouring into the Amazon, the rate remained fairly stationary until 2014, when it began to rise once again. But, in general, the international donors have been pleased with the Fund's performance, and until the Bolsonaro government came to office, the program was expected to continue indefinitely.

Norway has been the main donor (94 percent) to the Amazon Fund, followed by Germany (5 percent), and Brazil's state-owned oil company, Petrobrás (1 percent). Over the past 11 years, the Norwegians have made, by far, the biggest contribution: R$3.2 billion ($855 million) out of the total of R$3.4 billion ($903 million).

Up till now the Fund has approved 103 projects, with the dispersal of R$1.8 billion ($478 million). These projects will not be affected by Norway's funding freeze because the donors have already provided the funding and the Brazilian Development Bank is contractually obliged to disburse the money until the end of the projects. But there are another 54 projects, currently being analyzed, whose future is far less secure.

One of the projects left stranded by the dissolution of the Fund's committees is Projeto Frutificar, which should be a three-year project, with a budget of R$29 million ($7.3 million), for the production of açai and cacao by 1,000 small-scale farmers in the states of Amapá and Pará. The project was drawn up by the Brazilian NGO IPAM (Institute of Environmental research in Amazonia).

Paulo Moutinho, an IPAM researcher, told Globo newspaper: "Our program was ready to go when the [Brazilian] government asked for changes in the Fund. It's now stuck in the BNDES. Without funding from Norway, we don't know what will happen to it."

Norway is not the only European nation to be reconsidering the way it funds environmental projects in Brazil. Germany has many environmental projects in the Latin American country, apart from its small contribution to the Amazon Fund, and is deeply concerned about the way the rate of deforestation has been soaring this year.

The German environment ministry told Mongabay that its minister, Svenja Schulze, had decided to put financial support for forest and biodiversity projects in Brazil on hold, with €35 million ($39 million) for various projects now frozen.

The ministry explained why: "The Brazilian government's policy in the Amazon raises doubts whether a consistent reduction in deforestation rates is still being pursued. Only when clarity is restored, can project collaboration be continued."

Bauxite mines in Paragominas, Brazil. The Bolsonaro administration is urging new laws that would allow large-scale mining within Brazil's indigenous reserves.

Hydro / Halvor Molland / Flickr

Alternative Amazon Funding

Although there will certainly be disruption in the short-term as a result of the paralysis in the Amazon Fund, the governors of Brazil's Amazon states, which rely on international funding for their environmental projects, are already scrambling to create alternative channels.

In a press release issued yesterday Helder Barbalho, the governor of Pará, the state with the highest number of projects financed by the Fund, said that he will do all he can to maintain and increase his state partnership with Norway.

Barbalho had announced earlier that his state would be receiving €12.5 million ($11.1 million) to run deforestation monitoring centers in five regions of Pará. Barbalho said: "The state governments' monitoring systems are recording a high level of deforestation in Pará, as in the other Amazon states. The money will be made available to those who want to help [the Pará government reduce deforestation] without this being seen as international intervention."

Amazonas state has funding partnerships with Germany and is negotiating deals with France. "I am talking with countries, mainly European, that are interested in investing in projects in the Amazon," said Amazonas governor Wilson Miranda Lima. "It is important to look at Amazônia, not only from the point of view of conservation, but also — and this is even more important — from the point of view of its citizens. It's impossible to preserve Amazônia if its inhabitants are poor."

Signing of the EU-Mercusor Latin American trading agreement earlier this year. The pact still needs to be ratified.

Council of Hemispheric Affairs

Looming International Difficulties

The Bolsonaro government's perceived reluctance to take effective measures to curb deforestation may in the longer-term lead to a far more serious problem than the paralysis of the Amazon Fund.

In June, the European Union and Mercosur, the South American trade bloc, reached an agreement to create the largest trading bloc in the world. If all goes ahead as planned, the pact would account for a quarter of the world's economy, involving 780 million people, and remove import tariffs on 90 percent of the goods traded between the two blocs. The Brazilian government has predicted that the deal will lead to an increase of almost $100 billion in Brazilian exports, particularly agricultural products, by 2035.

But the huge surge this year in Amazon deforestation is leading some European countries to think twice about ratifying the deal. In an interview with Mongabay, the German environment ministry made it very clear that Germany is very worried about events in the Amazon: "We are deeply concerned given the pace of destruction in Brazil … The Amazon Forest is vital for the atmospheric circulation and considered as one of the tipping points of the climate system."

The ministry stated that, for the trade deal to go ahead, Brazil must carry out its commitment under the Paris Climate agreement to reduce its greenhouse gas emissions by 43 percent below the 2005 level by 2030. The German environment ministry said: If the trade deal is to go ahead, "It is necessary that Brazil is effectively implementing its climate change objectives adopted under the [Paris] Agreement. It is precisely this commitment that is expressly confirmed in the text of the EU-Mercosur Free Trade Agreement."

Blairo Maggi, Brazil agriculture minister under the Temer administration, and a major shareholder in Amaggi, the largest Brazilian-owned commodities trading company, has said very little in public since Bolsonaro came to power; he's been "in a voluntary retreat," as he puts it. But Maggi is so concerned about the damage Bolsonaro's off the cuff remarks and policies are doing to international relationships he decided to speak out earlier this week.

Former Brazil Agriculture Minister Blairo Maggi, who has broken a self-imposed silence to criticize the Bolsonaro government, saying that its rhetoric and policies could threaten Brazil's international commodities trade.

Senado Federal / Visualhunt / CC BY

Maggi, a ruralista who strongly supports agribusiness, told the newspaper, Valor Econômico, that, even if the European Union doesn't get to the point of tearing up a deal that has taken 20 years to negotiate, there could be long delays. "These environmental confusions could create a situation in which the EU says that Brazil isn't sticking to the rules." Maggi speculated. "France doesn't want the deal and perhaps it is taking advantage of the situation to tear it up. Or the deal could take much longer to ratify — three, five years."

Such a delay could have severe repercussions for Brazil's struggling economy which relies heavily on its commodities trade with the EU. Analysists say that Bolsonaro's fears over such an outcome could be one reason for his recently announced October meeting with Chinese President Xi Jinping, another key trading partner.

Maggi is worried about another, even more alarming, potential consequence of Bolsonaro's failure to stem illegal deforestation — Brazil could be hit by a boycott by its foreign customers. "I don't buy this idea that the world needs Brazil … We are only a player and, worse still, replaceable." Maggi warns, "As an exporter, I'm telling you: things are getting very difficult. Brazil has been saying for years that it is possible to produce and preserve, but with this [Bolsonaro administration] rhetoric, we are going back to square one … We could find markets closed to us."

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