For a business that supposedly was not interested, the US oil and gas industry was remarkably disappointed when US President Barack Obama's administration pulled two scheduled offshore Alaska leases from the 2012-17 US Outer Continental Shelf program with a classic late-Friday afternoon announcement on Oct. 16.
DOI's Bureau of Safety and Environmental Enforcement (BSEE) also denied requests from Royal Dutch Shell PLC and Statoil AS for lease suspensions, which would have extended the expiration date of leases they hold in Beaufort and Chukchi Seas.
Sec. of the Interior Sally Jewell noted Shell said on Sep. 28 that it will stop exploring off Alaska's coast for the foreseeable future because of disappointing results at its Burger J well in the Chukchi Sea.
"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.
Officials from two national oil and gas groups immediately disagreed. "Investment decisions have been directly thwarted by the policy decisions of the administration related to Alaskan OCS development, and lease extensions are clearly justified under the circumstances," said Erik Milito, American Petroleum Institute upstream operations director.
"While it is not surprising that [DOI] 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.
Proved it can be done
National Ocean Industries Association Pres. Randall B. Luthi called the lease sale cancellations and lease extension denials "extremely disappointing and short-sighted" the next day.
"The Shell outcome should not have resulted in the cancellation of these two sales, which have been scheduled since 2012," Luthi said. "Shell proved that exploration and drilling can be done safely in the Arctic, but the real challenge was navigating under the regulatory thumb of the federal government."
The decision finally shows the Obama administration's true colors toward resource development in the US Arctic, Alaska Oil & Gas Association Pres. Kara Moriarty said in Anchorage. "Obviously, the president has no desire to see Shell succeed in Alaska, and does not want to see any new companies succeed either," she said. "This move is so short-sighted it is hard to put into words."
Now, she said, the US will lack the emergency response capacity that would have inevitably resulted from its own activity as Russia and other Arctic nations begin to develop their own natural resources. It will be more difficult now for Alaskans to develop ports, search and rescue operations, and infrastructure, Moriarty said.
