On Friday, the US Interior Department announced that it is suspending the sale of offshore drilling leases in the Arctic. The reason? “[C]urrent market conditions and low industry interest,” according to a DOI press release.
The decision comes just weeks after Shell exhausted its 2015 Chukchi lease and announced that it was pulling out of the region. Citing disappointing returns from its exploratory well, Shell said it was done with the Chukchi “for the forseeable future,” casting doubt on the estimated 90 billion barrels of oil beneath its surface.
Yet the Interior is not only halting the sale of further Arctic leases, it is also denying requests from Shell and Statoil, a Norwegian energy company, to “suspend” their current leases. A “suspension” in this sense would extend the companies’ current Arctic leases beyond their 2020 expiration dates. According to the DOI, the decision was based on the companies inability to work quickly or efficiently enough.
“The companies did not demonstrate a reasonable schedule of work for exploration and development under the leases,” the DOI explained, a regulatory requirement of suspension approval.
“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,” Sally Jewell, the secretary of the U.S. Department of the Interior, said in a statement. “I am proud of the performance of Interior’s Bureau of Ocean Energy Management and Bureau of Safety and Environmental Enforcement, the U.S. Coast Guard and others in ensuring that Shell’s program this past season was conducted in accordance with the highest safety and environmental standards.”
Arctic Drilling in America: A Series of Curveballs
The decision to end Arctic drilling comes as an abrupt but pleasant surprise to conservationists, who have been fighting tooth and claw to get the oil industry out of the Arctic. Even so, it is but the latest in a series of federal curveballs that have left us here at Planet Experts scratching our heads.
See if you can follow the logic here. For almost a decade, Shell and ConocoPhillips have been trying to get access to the Arctic, with Shell spending an estimated $7 billion in the process. In 2008, Shell obtained leases to drill in Alaska’s Chukchi Sea from the DOI but was unable to act on them due to a January 2014 ruling by the Ninth Circuit Court of Appeals, which decreed that the DOI had violated the law by selling the leases. The DOI was forced to carry out an environmental impact review and subsequently concluded that drilling in the Chukchi held a 75 percent chance of risk that one or more large oil spills would occur if the leases were developed.
Then, in April 2015, the Interior Department approved Shell’s Arctic drilling leases anyway.
The move was met with unanimous derision from environmentalists and Alaskan conservationists. Niel Lawrence, Alaska director of the Natural Resources Defense Council, said, “Our Arctic ocean is flat out the worst place on Earth to drill for oil.”
Marissa Knodel, a climate campaigner for Friends of the Earth, called the approval “unconscionable.”
Even before the leases were granted, Marilyn Heimann, director of the US Arctic Program for Pew Charitable Trusts, warned that the “extreme cold, darkness, high seas and ice” would make an oil spill in the Arctic far more destructive than what occurred in the Gulf of Mexico in 2010.
Over the past year, major protests were staged throughout the country. In Seattle and Portland, protesters tried to kick Shell out of a port and keep Shell from leaving a port respectively. In July, Vivienne Westwood enlisted celebrities like George Clooney, Kate Moss and Dame Judi Dench in its #SavetheArctic campaign.
In August, the Obama administration approved Shell’s application to drill even deeper in its exploratory Burger J well.
In early September, President Obama visited Alaska to give speeches on climate change and praise Alaska’s dedication to energy efficiency after telling the world “[w]e can’t prevent oil exploration completely” in the region.
And then, in late September, Shell decided to pack up its bags and leave the Arctic “for the forseeable future.”
There are several possibilities, and likely it is a combination of some or all of these:
- Maybe Shell has some insight into the upcoming COP21 conference, in which leaders from around the world will gather in Paris to discuss regulating the fossil fuel industry, and thus deemed the Chukchi a bridge too far…
- Maybe the stringent regulatory restrictions placed on Shell by the Obama administration – limiting it to drilling one well at a time, granting it only three months to drill – were always intended to keep it from making genuine progress…
- Maybe the wrath of Mother Nature – tearing a gash in Shell’s Fennica rig, preventing drilling in late August and early September with choppy weather – was simply too tempestuous to bear…
- Maybe, with the market saturated and the world turning to renewables, Shell is reading the writing on the wall, that the oil era is at an end…
- Maybe, after losing nearly 50 percent of its profits between 2012-2014, Shell is on the verge of collapsing on itself…
- Maybe the whole industry is…