Three weeks after Royal Dutch Shell announced it was walking away from exploratory drilling in US Arctic waters, US President Barack Obama’s administration has taken steps to keep drill rigs out of Alaska’s northern ocean for a decade or more.
US Secretary of the Interior Sally Jewell on Friday said that the US federal government is canceling federal petroleum lease sales in US Arctic waters that were scheduled for next year and 2017.
Jewell said the Chukchi Sea off Alaska’s northwest coast and the Beaufort Sea off the state’s north coast is not be included in the agency’s next five-year lease sale plan. Current leases held by Shell and other companies in Arctic waters are not be extended, she added.
The Beaufort Sea leases are set to expire in 2017 and the Chukchi Sea leases in 2020.
The decision reflects current market conditions and low industry interest, Jewell said in a news release.
“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,” she said.
Shell was the only company actively exploring in US Arctic waters, and it was in with both feet.
The company estimates it has spent upward of US$7 billion on Arctic offshore development, including US$2.1 billion in one day for leases at a 2008 Chukchi Sea sale.
Shell hoped to tap into a resource the US Geological survey estimates at more than 26 billion barrels of conventionally recoverable oil under Arctic waters.
However, the company said on Sept. 28 that an exploratory well drilled this summer had been a bust.
Shell found oil and gas, but not in commercial quantities. It said it was stopping exploration “for the foreseeable future” because of the disappointing results and the uncertain US federal regulatory environment.
However, Shell had applied to extend leases in both the Chukchi and the Beaufort.
Statoil ASA, Norway’s state-controlled oil producer, requested an extension for Chukchi leases.
Shell spokesman Curtis Smith said the company disagrees with the agency’s decision not to extend current leases.
“When it comes to frontier exploration in Alaska, one size does not fit all,” Smith said by e-mail. “We continue to believe the 10-year primary lease term needs to be extended.”
In denying the extension, the US Bureau of Safety and Environmental Enforcement’s regional supervisor for field operations, Kevin Pendergast, said Shell had not met the criteria to extend its leases, including providing the agency with a work schedule on them. Shell could apply again, he said.
Environmental groups strongly oppose drilling. They say industrial activity would harm marine mammals already hurt by a loss of sea ice and a spill could not be cleaned in ice-choked Arctic waters.
They also said burning Arctic Ocean oil would accelerate global warming.
“This is great for the Arctic and its polar bears,” said Miyoko Sakashita of the Arazona-based Center for Biological Diversity.
“We need to keep all the Arctic oil in the ground,” Sakashita said.
“Secretary Jewell’s decisions today are consistent with the law as well as economic and environmental realities,” said Mike LeVine of oceans advocate Oceana.
As much as 90 percent of Alaska state revenue is generated by the petroleum industry.
The state faces a deficit in the billions between projected spending and revenue because of low oil prices.
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