Jewell appears to keep door open to future lease sales

By Margaret Kriz Hobson, Nathanial Gronewold | 10/19/2015 08:11 AM EDT

The Obama administration’s decision last week to impose new barriers on oil and gas exploration in the American Arctic is intensifying the heated dispute over federal management of Alaska’s energy-rich lands and waters.

The Obama administration’s decision last week to impose new barriers on oil and gas exploration in the American Arctic is intensifying the heated dispute over federal management of Alaska’s energy-rich lands and waters.

Interior Secretary Sally Jewell angered Alaska officials and oil industry groups when she scrapped the department’s plans to sell oil and gas leases in the Beaufort and Chukchi seas over the next two years.

She also rejected requests by Royal Dutch Shell PLC and Statoil for more time to explore on their existing Arctic leases (Greenwire, Oct. 16).


Environmental activists applauded the Interior Department’s actions and called on President Obama to ban future oil and gas drilling off Alaska’s northern shores.

However in an interview Saturday, Jewell appeared to keep the door cracked open for including Arctic lease sales in Interior’s outer continental shelf oil and gas leasing program for 2017-2022.

The draft proposed version of that program, released in January, included a single lease auction in the Beaufort Sea in 2020 and one in the Chukchi in 2022.

Jewell said she’s received a letter from Alaska Gov. Bill Walker (I) asking her to move up the timetable for auctioning Arctic leases during the 2017-2022 lease sale period.

"He would like to see the leases that were included in the draft plan accelerated," she said.

Jewell noted that the department is still taking comments on the draft OCS leasing plan and said Walker’s input "will be taken into consideration before the next iteration of the leasing plan" is released.

The proposed version of the 2017-2022 OCS lease plan is expected to be completed early next year, she said.

At the same time, Jewell assured that her decision to drop upcoming Arctic lease sales will not affect the department’s planned Gulf of Mexico oil and gas lease auctions.

"We anticipate continuing having robust sales in the Gulf of Mexico," she said. "There may be reduced interest. That’s a function of oil prices dropping 60 percent."

But Jewell noted that "there’s still ongoing interest in the Gulf of Mexico, and we would expect that to continue."

No extensions for Shell, Statoil leases

Last week’s Interior decision to scrap its planned Arctic lease sales came at a time when low oil prices are discouraging energy companies from investing in new oil and gas leases.

It also occurred three weeks after Shell ended its seven-year, $7 billion effort to find a major oil field in the Chukchi Sea. On Sept. 27, the company announced it had not found enough oil to move forward with development and was leaving the region for the foreseeable future (EnergyWire, Sept. 28).

"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 in announcing her decision.

The canceled leases had been tentatively scheduled under the department’s current five-year offshore oil and gas leasing program for 2012-2017.

The Interior Department also said it was denying requests from Shell and Statoil for more time to develop their current Arctic leases because "the companies did not demonstrate a reasonable schedule of work for exploration and development under the leases."

In 2014, the two oil giants had asked the Bureau of Safety and Environmental Enforcement to suspend their Chukchi and Beaufort leases, a move that would have allowed them to retain those lands beyond the current 10-year lease terms (EnergyWire, Sept. 15).

BSEE’s decision to reject those requests means that the companies’ Beaufort leases now expire in 2017 and Chukchi leases in 2020.

The two companies can appeal the regulators’ decision to Interior’s appeals board. A similar request for more lease time filed in 2013 by ConocoPhillips was also rejected by BSEE and was appealed by the company. That appeal is still pending at Interior.

Shell responded to the Obama administration’s decision to reject its request for more time with a statement saying "[w]hen it comes to frontier exploration in Alaska, one size does not fit all. We continue to believe the 10-year primary lease term needs to be extended."

The company didn’t say whether it would appeal the decision.

Alaska sees another blow to oil-dependent economy

Alaska’s oil industry supporters were less restrained in their attacks on the Obama administration’s actions.

Alaska Republican Lisa Murkowski, who chairs the Senate Energy and Natural Resources Committee, described Interior’s decision as "the latest in a destructive pattern of hostility toward energy production in our state that began the first day this administration took office and continued ever since."

She accused federal regulators of imposing strict regulations that discourage oil and gas development in the Arctic.

"It is absurd that Interior has created a regulatory environment where operators cannot have commercially viable exploration programs because so many requirements and hurdles have been put in place and then blames them for not moving forward," she said.

Alaska state lawmakers charged that Interior’s actions will hurt the state’s economy at a time when low oil prices have already created a $3 billion budget deficit. The state depends on oil taxes for roughly 90 percent of the state budget revenues.

Mike Chenault (R), speaker of the Alaska House, charged that Interior’s decisions were made by "patronizing bureaucrats deciding for the market and crippling our economic, harming our future."

Alaska Oil and Gas Association President Kara Moriarty warned that the federal government’s actions will have long-term negative impacts on economic development in Arctic Alaska.

"President Obama and his team are finally showing their true colors on resource development in the Arctic; 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.

Without oil industry support, "the opportunity for Arctic residents to develop ports, search and rescue operations, and infrastructure is now much more difficult," she added.

Take Arctic waters off the table, enviros say

Meanwhile, environmental activists are calling for tougher federal controls on all oil development in the Arctic.

Franz Matzner, director of the Natural Resources Defense Council’s Beyond Oil Initiative said the White House action "grants Arctic waters an essential reprieve."

"The administration recognizes that we can’t expose this vital resource to the risks of a catastrophic blowout and we can’t lock the next generation into the fossil fuel dependence that’s driving global climate change," he said.

"The next step should be to take Arctic and Atlantic waters off the table to oil and gas drilling for good. That’s one way to help speed our transition to a clean and safe energy future for America."

Michael LeVine, Pacific senior counsel for Oceana, argued that Interior’s actions end the chance that oil and gas development will occur in the American Arctic for years to come.

Although Shell and other oil companies still own hundreds of oil and gas leases in the Chukchi and Beaufort seas, he noted that "no companies have existing plans to explore those leases, and it would be very difficult to do so in the time frame left."

"This certainly moves us a lot closer to wiping the slate clean and starting over," LeVine asserted.

"It allows us to make new choices about whether to sell leases and allow exploration and if so under what conditions. Hopefully we’ll now have the time to set good standards, get good science, prove [oil cleanup] response, and to make a decision about whether this is a place we want to look for oil."