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Haley Zaremba

Haley Zaremba

Haley Zaremba is a writer and journalist based in Mexico City. She has extensive experience writing and editing environmental features, travel pieces, local news in the…

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The World’s Most Controversial Oil Frontier Falls Out Of Favor With Big Banks

Drilling in the Arctic has been back in the headlines this week with some fresh controversy. The Trump administration has long seen the development of oil and gas assets in Alaska as economically beneficial, and has carried out an environmental assessment that determined that drilling in part of Alaska’s Arctic National Wildlife Refuge (ANWR) would have a “negligible impact” on the surrounding environment. Many Alaskan oil industry insiders and employees would certainly be very happy to see the return of oil development and oil jobs to the state, which has seen a massive decline in what was once one of its most key economic sectors. Bringing oil money back to Alaska would not only boost the local job market, it would also help the state put a dent in its massive debt from outstanding oil tax credits-- the state owes almost $1 billion to oil companies after the oil industry has all but dried up.  But not everyone in Alaska is thrilled about the possible return of oil. Environmentalists and Inuit activists have fought long and hard to keep the Arctic protected. Greenpeace pleads with the public to “keep offshore oil in the ground for good,” citing the impossibility of cleaning up Arctic oil spills and the threat to global warming, and the World Wildlife Fund (WWF) says that “The Arctic Ocean is one of the most pristine and fragile places left on the planet—and it’s in trouble,” before slamming the Trump administration for pushing for the removal of “crucial Arctic protections.” 

When it comes to the touchy subject of drilling for oil and gas in the Arctic, there is almost nothing that is not controversial. Perhaps the reactions of the oil industry and Greenpeace are anything but shocking, but now a new development has stirred up fresh Arctic drilling controversy from a far less expected source: investment banking.

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Let’s start at the beginning. Back in May 2018,  Last September, the Trump administration announced that it intended to open up the 19.3 million-acre ANWR, which had long enjoyed environmental protections that outlawed drilling, to oil and gas exploration. Not even a global pandemic was able to slow that plan, as summed up by InsideClimate News’ April 8 headline “In Alaska’s North, Covid-19 Has Not Stopped the Trump Administration’s Quest to Drill for Oil.” 

Then, later that month, a major development caused both uproar and celebration. In late April, Morgan Stanley revised their Environmental and Social Policy Statement to assert that they would no longer financially support oil and gas exploration in Arctic Refuges, stating: “We will not directly finance new oil and gas exploration and development in the Arctic, including the Arctic National Wildlife Refuge (ANWR).” The statement also addressed the bank’s existing business in the Arctic, albeit with fewer concrete commitments, saying: “Transactions in the Arctic region will require escalation and senior management approval, and we will be prudent in the transactions we undertake.”

This made Morgan Stanley the fifth of six major U.S. banks to announce that they would not fund any future oil drilling in Arctic refuges, bringing the total list of major Arctic drilling divesters to Morgan Stanley, Wells Fargo, Goldman Sachs, JPMorgan Chase, and Citigroup--five of the six biggest banks in the country.

Even though these banks’ declarations have been accused of being “largely symbolic” in a time that oil prices are through the floor and the markets are drowning in a huge oversupply of crude, the headlines earned by these high-profile divestment decisions caused political uproar. 

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In an exclusive interview with Axios, United States Energy Secretary Dan Brouillette compared current banking restrictions in the Arctic to redlining--the historic racist financial practices that kept (and, in some cases, continues to keep) communities of color trapped in poverty. "For years and years and years, banks would not lend money, insurance companies would not write policies in minority areas in the country. Redlining is the term used all throughout those debates. We didn’t want banks redlining certain parts of the country. We don’t want that here. I do not think banks should be redlining our oil and gas investment across the country," Brouillette was quoted by Axios. 

While Brouillette “cited his past work at USAA” to back up his claims, experts have been quick to contradict the Energy Secretary's statements as “both inappropriate and inaccurate.” Even some Republican politicians took offense to the comparison. “Redlining had to do with race and race is specifically constitutionally protected as an area you can’t discriminate against,” Tony Fratto, a former top official in the Bush administration, was quoted by Axios. “There is no similar protection for businesses.”

As politicians and pundits argue back and forth, however, the reality remains that there is not much the Trump administration can do to change these banks’ approach. They’re private institutions, and the vast majority has clearly drawn a line in the snow when it comes to drilling in the Arctic. 

By Haley Zaremba for Oilprice.com 

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