A MAJOR FLIP-FLOP ON ARCTIC OIL AND GAS INVESTMENT
It was just 18 months ago that former Gov. Bill Walker announced he had struck an agreement with Goldman Sachs to participate in financing of a gasline from Prudhoe Bay to Nikiski, along with other global players, such as the Bank of China. The agreement is technically still on the books.
That was then. Of course, the gasline has proven to be financially unfeasible at this time, and other private sector players are now looking at shipping natural gas through newly opened Arctic Ocean shipping lanes.
Today, Goldman Sachs has done a massive flip flop and turned its back on oil and gas investments in the Arctic, specifically naming the Arctic National Wildlife Refuge, which Goldman Sachs has suddenly redlined against investment.
Goldman Sachs, one of the largest investment companies in the world, says it’s also going to shrug off a lot of forestry and mining. Basically, if it is an Alaska resource, one of the largest banks in the world is saying it’s just not that into it.
“Oil development in the Arctic Circle is prone to harsh operating conditions, sea ice, permafrost coverage, and potential impacts to critical natural habitats for endangered species,” Goldman Sachs said in its Environmental Policy Framework. “The unique and fragile ecosystems of the Arctic region also support the subsistence livelihoods of indigenous peoples groups that have populated certain areas in the region for centuries.
“For transactions relating to Arctic oil, we apply enhanced due diligence including understanding companies’ strategy and commitment to reducing overall [greenhouse gas] GHG emissions. Among factors, we consider: energy use and GHG emissions; environmental impacts; emergency management plans; forest and biodiversity preservation; endangered species protection and management plans; and any local community impacts, including those relating to indigenous peoples and subsistence resources.
We will decline any financing transaction that directly supports new upstream Arctic oil exploration or development. This includes but is not limited to the Arctic National Wildlife Refuge. – Goldman Sachs
“Companies’ diversification strategy and carbon emissions reduction initiatives will be a key consideration in our evaluation of future financings with the goal of helping their transition strategy,” the Environmental Policy Framework added. “We will phase out our financing of thermal coal mining companies that do not have a diversification strategy within a reasonable timeframe.”
Goldman Sachs makes no mention of its 2018 agreement with the Alaska Gasline Development Agency, which under the supervision of Gov. Bill Walker had developed a funding framework for the gasline.
The decree against Arctic oil and gas development is coming from the company that during the 2016 presidential election forbade its top executives from donating to the campaign of Donald J. Trump, while allowing them to donate to the Hillary Clinton campaign.
The Wall Street Journal took note of the company’s turning its back on Alaska’s economy.
In an interview with the newspaper, Gov. Mike Dunleavy told columnist James Freeman that Alaskans will have to decide “whether we want to do business” with Goldman Sachs anymore.
“And who can blame Alaska if it chooses to cut ties with the Wall Street megabank?” the columnist wrote.
Goldman Sachs’ newest version of its environmental policy says the company “will decline any financing transaction that directly supports new upstream Arctic oil exploration or development.”
Dunleavy told the newspaper that the unintended consequences of the company decision are real, and that Alaska has some of the most stringent environmental standards in the world. Oil producers will just head to regions that are less regulated.
“You’re going to push jobs and wealth and revenues” to overseas areas and “exacerbate” ecological problems, Dunleavy told the newspaper, which added the obvious: If Goldman Sachs takes this stance against Alaska, other investment institutions will step up and see opportunity. There’s plenty of capital out there right now. Goldman Sachs can virtue signal all it wants, but it’s not the only dance partner.
Could Alaska cut ties with Goldman Sachs? Not only does Alaska have a $67 billion Permanent Fund that is invested on Wall Street, but has billions invested through other trust funds, such as:
- Public Employees’ Retirement System (PERS)
- Teachers’ Retirement System(TRS)
- Judicial Retirement System (JRS)
- National Guard/Naval Militia Retirement System (NGNMRS)
- Alaska Supplemental Annuity Plan (SBS-AP)
- Deferred Compensation Plan (DCP)
- Defined Contribution Retirement Plan (DCR)
A political firewall between the executive branch and the funds’ managers makes it difficult for the Dunleavy Administration to take any specific retaliatory actions against Goldman Sachs through the Alaska Permanent Fund investments, as much as he and Alaskans would like to.
But that doesn’t mean Dunleavy has to remain silent. He can talk with the Legislature and the people of Alaska about whether the State wants Goldman Sachs to handle its bond sales (for oil and gas tax credits, ironically), now that the East Coast banking company has decided it wants to shut down Alaska’s economy. Those bond sales are handled by the Department of Revenue, in the Executive Branch.
In addition, with an ally like President Donald Trump, Dunleavy has some additional leverage of his own in the court of public opinion. And he’s shown he’s not going to be bullied by the environmental organizations that want Alaska to be a playground for the elite to come visit during the summer.