The Trump administration just lost a powerful ally in its quest to open up Alaska's Arctic National Wildlife Refuge to fossil fuel companies. On Monday, Bank of America announced that it won't provide any financing for projects that involve oil and gas exploration in the Arctic. The announcement puts Bank of America in line with the positions of Chase, CitiBank, Goldman Sachs, Morgan Stanley, and Wells Fargo, all of whom have likewise decided to withhold funding for any efforts to tear up ANWR.
The news means every major bank in the US is now in lockstep when it comes to their positions on drilling in the largest plot of untouched wilderness in America. That will create significant hurdles for any company hoping to land funding with the goal of drilling for oil in the Arctic at a time when the Trump administration is hoping to lease plots of the land as quickly as possible before the Biden administration takes office.
Big Wall Street banks have quietly been one of the keys to the oil boom in the United States over the last decade or so. In that time, America has become the biggest oil producer in the world, in large part thanks to significant increases in fracking and off-shore oil drilling projects. Big banks were the primary financiers of these endeavors, ignoring both the lack of financial stability in the business and the environmental concerns while funneling tens of billions of dollars in loans to fossil fuel companies.
That money kept flowing when oil seemed like an extremely profitable business to be in, but things have changed quickly in the industry, which is why it's hard to believe that banks have made this shift solely for the good of the planet.
A better bet: they're doing it for their bottom line.
During the coronavirus pandemic, oil prices have dropped to record lows, with things getting so bad at one point that companies were actually willing to pay buyers to take barrels off their hands. It's also spelled doom for many drilling and fracking companies as the surplus of supply has made demand shrink, bankrupting many oil exploration companies. Banks want to finance projects that will provide a return on investment, and that would be difficult for any Arctic drilling effort to accomplish in the current economy. So with little to gain by funding drilling, banks are finding much more to gain by taking a stance that supports the environment.
Is such a perspective a little jaded? Sure. But at least it's producing the preferred result for the planet. And these banks really couldn't have picked a better time to get out of the oil exploration business. Republicans have been trying to open up ANWR to drilling for decades, and were finally able to make it happen under the Trump administration. Earlier this year, Trump's Interior Department (which is run by a former oil lobbyist) finalized a rule that would allow the federal government to lease plots of land within the nation's wildlife refuge for oil exploration. With Trump's time in office coming to an end, the administration is racing to lease off as much land as possible in an attempt to let the ink dry before Biden takes office and likely takes action to end drilling on federal lands.
Banks backing off from providing the financial backing required to make these drilling efforts viable will make the Trump plan more challenging, but it's not assured to put an end to drilling in the Arctic. There are plenty of ways for these types of projects to find funding, and Trump and his cohorts are sure to seek every opportunity to sell the land to the highest bidder. But the big banks pulling support for drilling shows that there is hope for ending our reliance on fossil fuels. It just requires showing that it's not a reliable moneymaker.