Obama Puts An End To Arctic Drilling

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Michael Bastasch Contributor
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The Obama administration has canceled all Arctic drilling lease sales for the next couple of years just weeks after Royal Dutch Shell abandoned its oil exploration efforts in the polar seas.

Just as millions of Americans were heading home for the weekend, the Interior Department announced Friday it was canceling Arctic lease sales due to “current market conditions and low industry interest.” Basically, the department is arguing that oil prices are too low for companies to justify drilling in the north pole.

“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 of her department’s plan to cancel two future lease sales for Arctic drilling rights.

Interior also denied a request by Shell and Statoil, Norway’s state-backed oil company, to extend the terms of their leases for another ten years. Interior said “the companies did not demonstrate a reasonable schedule of work for exploration and development under the leases” that’s required by law to get a lease extension.

Environmentalists welcomed the news, while the oil and gas industry argued the decision continues to undermine offshore drilling operations.

“Our industry’s strong interest in developing our country’s vast offshore oil and natural gas resources in Alaska was undermined years ago when the administration began implementing a system of regulatory and permitting unpredictability and uncertainty,” Erik Milito, upstream operations director at the American Petroleum Institute, said in a statement emailed to reporters.

“And while it is not surprising that Interior canceled the remaining lease sales because there was an absence of nominations, it is the significant regulatory uncertainty that has created the reluctance on the part of our industry,” Milito said.

Shell’s decision to end its $7 billion Arctic drilling plan was a huge political blow to supporters of drilling in the region. Shell said it found oil and natural gas in the Arctic, but not enough to “warrant further exploration.” The decision wasn’t a huge surprise given that oil prices have plummeted more than 60 percent since June 2014, meaning expensive oil plays like the Arctic aren’t economical to drill in.

The move also comes as the political tide turns against offshore drilling. Democratic presidential front-runner Hillary Clinton came out against Arctic drilling in August in a bid to move herself left on environmental issues and undercut her primary opponents’ positions.

Clinton came out against drilling one day after Shell got its final approval from the Obama administration to begin exploring for oil in the north pole. Her shift left was meant to gain support among environmentalists, who were angry with Obama for approving drilling.

“In cancelling these leases, the President and Secretary have ensured that Alaska will not be at risk from the dangers of offshore drilling, and one of our last remaining pristine wild places will not be sacrificed for the sake of corporate profits, and dirty fuels are kept where they belong — in the ground,” Michael Brune, executive director of the Sierra Club, said in a statement.

The Sierra Club and other groups held protests against Shell moving its oil rig to the Arctic, going so far as to have activists in kayaks try and block the rig from leaving port in the Pacific Northwest. Ironically, many of those “kayaktivists” were protesting Arctic drilling in kayaks made with petroleum products.

Despite the intense opposition from liberals, oil companies are still interested in Arctic drilling. As technology gets better, the price of oil could become less of a justification for canceling lease sales in the region.

The Arctic is estimated to hold “90 billion barrels of oil, 1,669 trillion cubic feet of gas, and 44 billion barrels of natural gas liquids,” according to U.S. Geological Survey figures.

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