By Clark Mindock

An Alaska state agency on Wednesday sued the Biden administration over its decision to cancel oil and gas leases in the state’s North Slope, one of the country's largest reserves of pristine federal land.

The lawsuit filed in federal court in Washington, D.C., challenges the U.S. Interior Department’s Sept. 6 decision to scrap seven oil and gas leases in Alaska’s 19 million-acre (7.7 million-hectare) Arctic National Wildlife Refuge, an area that is acutely vulnerable to climate change and home to grizzly and polar bears, herds of moose and snowy owls.

The Alaska Industrial Development and Export Authority, which held the leases before they were canceled, is asking the U.S. District Court for the District of Columbia to restore them, arguing the federal government's decision violates a clear Congressional mandate in a 2017 tax bill to open up the Arctic to drilling.

"The federal government is determined to strip away Alaska’s ability to support itself, and we have got to stop it,” said Republican Alaska Governor Mike Dunleavy in a statement.

The U.S. Interior Department did not immediately respond to a request for comment.

The canceled leases were sold during the waning days of the Trump administration following a decades-long effort by Alaska officials to open up drilling in the refuge and bolster the state's petroleum-reliant economy.

The state agency emerged as the sole bidder for most of the acreage after major oil and gas companies chose to skip the sale in 2020, which generated around $14.4 million.

Those proceeds were a far cry from a 2019 Congressional Budget Office report estimating that two auctions in the refuge over a decade could bring in up to $1.8 billion in bids.

Though the refuge's coastal plain is estimated to contain up to 11.8 billion barrels of oil, it has no roads, established trails or other infrastructure.

Those factors likely kept interest from drilling companies to a minimum, alongside oil market volatility, risks from legal challenges and political uncertainty about the future of any leases given the pending change in presidential administration.

The two other entities that won leases at the 2020 sale withdrew from their holdings in 2022.

The Interior Department justified canceling the seven remaining leases in September by saying the prior administration's lease sale was "seriously flawed" and failed to consider things like the climate change impacts from oil and gas produced in the North Slope.

The state's Wednesday lawsuit said those concerns do not justify the Interior Department's move, because the 2017 tax law did not give the agency discretion to avoid those impacts by declining to issue leases.

(Reporting by Clark Mindock; Editing by Alexia Garamfalvi and Jamie Freed)