Interior Department cancels lease sales in Alaska’s Arctic waters, citing low

The United States government will cancel new offshore oil drilling lease sales in the Arctic and will not extend leases already held by companies such as Royal Dutch Shell.

Shell said last month it was giving up its Arctic search for oil after failing to find enough crude oil.

“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”, Interior Secretary Sally Jewell said in a statement. 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.

The move upset environmental activists who were concerned the drilling would have detrimental effects, CNN had reported.

Under the 2012-2017 offshore drilling program, the administration had been prepared to offer approximately 55 million acres and 65 million acres in the Chukchi and Beaufort Seas, respectively, to private companies for oil and gas development.

Mike LeVine of oceans advocate Oceana added: “Secretary Jewell’s decisions today are consistent with the law as well as economic and environmental realities”. “While it is encouraging to see the Obama administration take bold actions like cancelling and refusing to extend existing Arctic oil and gas leases, true climate leadership will keep all future leases off the table and Arctic oil and gas in the ground”.

Beaufort Sea leases are set to expire in 2017, and Chukchi Sea leases in 2020.

“This is a stunning, short-sighted move that betrays the Interior Department’s commitments to Alaska and the best interests of our nation’s long-term energy security”, she said. The companies requested these lease extensions a year ago in order to allow for more time for oil and gas exploration. “We continue to believe the 10-year primary lease term needs to be extended”.

This news comes after Shell’s announcement that it would cease further exploration activity in offshore Alaska for the foreseeable future.

The longest-serving Republican in the U.S. House is suggesting Alaska officials take a more aggressive stance with drilling.

In bullet points laid out over a 9-page response, Mark Fesmire, director of the bureau’s Alaska region, said Shell’s allegations of unreasonable, unforeseen delays were unfounded. That raised the prospect that the government would lose more money than it would make in the auctions and that if any blocks were sold, they could go for less than true market value.

Environmental groups were quick to voice approval of the decision.

“Leaseholders knew the Arctic Ocean was a challenging environment in which to operate, and they should not get special treatment because of federal requirements developed to address those hazards”, Epstein said.

“There are numerous steps fully within the company’s control that are now standing between it and drilling”, Fesmire said in a memo to Statoil. The state faces a deficit in the billions between projected spending and revenue because of low oil prices.