U.S. Bans Arctic Oil Drilling, Upsetting Some Alaskans

U.S. Bans Arctic Oil Drilling

The U.S. Department of the Interior announced Friday that it was halting offshore oil drilling in Alaska for two years, pointing to declining sales and interest.

Because of those market conditions, the agency will scrap two pending lease sales in offshore areas of the Beaufort and Chukchi seas.

Interior Secretary Sally Jewell cited Shell Oil’s decision last month to stop its own Arctic drilling because of “a disappointing exploration outcome” in the area. That meant scrapping a $7 billion operation.

“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,” Jewell said in a statement.

But while the decision drew support from environmentalists, some Alaskans were not so pleased. That isn’t surprising since the state benefited from $5.6 million in oil revenue last year according to the Christian Science Monitor.

Gov. Bill Walker, a Republican, called it “disappointing” and told Jewell “I need to send you an invoice for the cost of doing business in Alaska, because you are taking away our ability to earn a living.”

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Along with the lease sale cancellations, the Interior Department also rejected requests from Shell and Statoil for suspensions of their existing ten-year leases. That would have allowed them to extend those beyond their currently scheduled expiration dates. So while Shell voluntary ended its own offshore operation in September, the company said it “continue[s] to believe the 10-year primary lease term needs to be extended.”

But Lois Epstein of The Wilderness Society said that thanks to “Shell’s failure…new Arctic Ocean lease sales – which require extensive government preparation and costs – would likely be unsuccessful.”

Last month, Stuart Elliott of Platts, an oil industry analysis firm, told the BBC that Shell’s decision could give it cover.

“It is possible that Shell might almost be relieved as they can stop exploration for a legitimate operational reason, rather than being seen to bow to environmental pressure.”

Written by Gene Giannotta


Gene Giannotta is a writer based in Washington, D.C. He reports on economic policy, finance and business news.