Arctic offshore lease sales halted, no extension on current leases: Interior Dept

Market conditions poor, low interest in Arctic offshore lease sales

Arctic offshore

Arctic offshore lease cancellation significantly reduces the chances for future offshore drilling in the area.  Shell photo.

ANCHORAGE, Alaska – The Interior Department announced Friday it is cancelling future lease sales and will not extended current leases in Arctic waters off Alaska’s northern coast, a decision that significantly reduces the chances for future Arctic offshore drilling.

The news follows a Sept. 28 announcement by Royal Dutch Shell that it would cease exploration in the Chukchi and Beaufort seas after spending upward of $7 billion on Arctic exploration. The company cited disappointing results from a well drilled in the Chukchi and the unpredictable federal regulatory environment.

Interior Secretary Sally Jewell said the federal government is cancelling federal petroleum lease sales in U.S. Arctic waters that were scheduled for 2016 and 2017.

“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 in a statement.

Jewell added the Chukchi Sea off Alaska’s northwest coast and the Beaufort Sea off the state’s north coast will not be included in the agency’s next five-year lease sale plan. And current leases held by Shell and other companies in Arctic waters will not be extended.

Beaufort Sea leases are set to expire in 2017, and Chukchi Sea leases in 2020.

Current market conditions and low industry interest made the leasing decision easier, Jewell said in a release.

Royal Dutch Shell PLC is the only company actively exploring off Alaska’s northern costs. It applied to extend leases in both the Chukchi and the Beaufort. Statoil 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 email. “We continue to believe the 10-year primary lease term needs to be extended.”

In denying the extension, the 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 Arctic drilling. They say industrial activity will harm marine mammals already hurt by a loss of sea ice, and global warming would be accelerated by burning oil found in the Arctic Ocean.

Miyoko Sakashita of the Center for Biological Diversity lauded the Interior Department’s announcement.

“This is great for the Arctic and its polar bears,” Miyoko Sakashita said. “We need to keep all the Arctic oil in the ground.”

Mike LeVine of oceans advocate Oceana added: “Secretary Jewell’s decisions today are consistent with the law as well as economic and environmental realities.”

Alaska Gov. Bill Walker had personally lobbied to extend Shell’s leases and says the Obama administration’s decision to essentially put drilling in Arctic waters off Alaska’s northern coast off-limits as a “loss of hope.”

Walker said Friday the decision from Interior Secretary Sally Jewell “pretty much shut down offshore” drilling, leaving onshore drilling as the only option in Alaska.

After Shell announced it was pausing its Arctic drilling after poor well results, Walker went to Washington to push Jewell on opening up a small part of the Arctic National Wildlife Refuge. She indicated at the time that opening the refuge might be a political hurdle.

Walker says he’s vey “adamant and aggressive” about opening up the small patch of the coastal plain of the refuge to drilling to help the economy of his oil-dependent state.

He says, “We know where the oil is, we just don’t have access to it.”

The Canadian Press

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