Interior Department curbs future Arctic offshore drilling

ANCHORAGE, Alaska – The Interior Department announced Friday it is canceling future lease sales and will not extend 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 canceling 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.

Jewell said 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. In addition, 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 had 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.