Obama administration curbs Arctic offshore drilling
WASHINGTON — The Obama administration’s decision Friday to cancel two auctions of Arctic drilling rights and turn down two companies’ requests for more time to explore the area likely close off new energy development in the region for years to come.
The Interior Department said it would not hold government auctions of drilling rights in the Chukchi and Beaufort seas, previously scheduled for 2016 and 2017. At the same time, it formally rejected bids by Statoil and Shell for more time to search for crude under their existing Arctic leases.
The decisions ensure a long chill on oil development in U.S. Arctic waters and deal another blow to Alaska, which heavily depends on energy revenue and is still reeling from Shell’s September decision to abandon the region after “disappointing” results at a critical exploratory well. Environmentalists celebrated the move as a victory for Arctic waters and the animals that thrive in them.
“In light of Shell’s announcement, the amount of acreage already under lease and current market conditions, it does not make sense to prepare for lease sales in the Arctic in the next year and a half,” Secretary of the Interior Sally Jewell said in a statement.
The Obama administration’s moves were partly pragmatic and partly dictated by federal law.
Industry interest in the planned Chukchi and Beaufort sea lease sales was tepid even before oil prices plummeted and Shell saw disappointing results at a critical exploratory well last month. When the Interior Department asked oil companies to highlight areas of interest for future Arctic sales, only one unidentified company spoke up, nominating part of the Beaufort Sea for possible bidding.
It’s a stark reversal from 2008, when Shell and other companies competed aggressively to win drilling rights at the top of the globe. At the time, the industry viewed the Arctic as a potentially lucrative new frontier, with untapped reserves that could replenish companies’ diminishing portfolios. But a domestic energy renaissance has since put rigs to work around the United States. And the high costs of Arctic energy development — illustrated by Shell’s fruitless $7 billion quest — now deter other oil companies from tackling the area.
“The government’s actions are consistent with the law, good public policy and economic realities,” said Michael LeVine, Pacific senior counsel for the conservation group Oceana. “Especially as Shell has stopped its Arctic Ocean exploration program, there is no good reason to extend existing leases or offer new ones.”