Obama administration removes Arctic from offshore lease sale plan

The outgoing Obama Administration has removed the Arctic from the proposed 2017-2022 offshore oil and gas lease sale program.

Presenting the plan on Friday, Department of Interior’s secretary, Sally Jewell, said there would be no lease sales in the Beaufort and Chukchi Seas, offshore Alaska.

During the five-year plan, only one lease sale is envisioned off the coast of Alaska, in the Cook Inlet Program Area, while as many as 10 lease sales are planned for the Gulf of Mexico.

The Proposed Final Program makes available areas containing approximately 70 percent of the economically recoverable resources in the Offshore Continental Shelf, the Department said.

“The plan focuses lease sales in the best places – those with the highest resource potential, lowest conflict, and established infrastructure – and removes regions that are simply not right to lease,” said Secretary Jewell.  “Given the unique and challenging Arctic environment and industry’s declining interest in the area, forgoing lease sales in the Arctic is the right path forward.”

Commenting on the proposed plan, Rob Bishop, representative from Utah, and Chairman of the House Committee on Natural Resources said the plan would push the U.S. towards becoming energy dependent.

Bishop said: “The Arctic has become nothing more than a prop for the President’s legacy. He has ignored pleas from Generals, national security experts and Native Alaskan communities for responsible energy development. Today’s plan will chart a path of energy dependency for decades to come. We should be building on our position as a global energy leader, but we are punting it to Russia as Obama appeases the environmentalists pulling his strings. The American people are sick and tired of being ignored by a President who has never stepped foot on the North Slope.”

Unlike Bishop, the U.S. Bureau of Ocean Energy Management estimates that without the Arctic OCS lease sales, cumulative U.S. oil and gas production will be less than one percent lower over the 70-year life of projected activity and, four percent lower during the 2017-2022 Program’s years of peak production.

Decline of industry interest

According to the Department of Interior, when it comes to the exclusion of the Beaufort and Chukchi Sea areas, the Proposed Final Program, took into consideration the fragile and unique Arctic ecosystem and the recent demonstrated decline in industry interest, such as Shell leaving Alaska last year.

DOI said: “…Foreshadowed by Shell’s disappointing 2015 drilling season and announcement that it would leave the U.S. Arctic for the
foreseeable future, industry has demonstrated its declining interest in the Arctic OCS with the relinquishment of the majority of leases in these Planning Areas. In fact, the number of active leases in the Arctic OCS has declined over 90 percent in a matter of months, from 527 in February 2016 to only 43 as of November 2016, with most of these expected to expire in 2017.”

“Based on consideration of the best available science and significant public input, the Department’s analysis identified significant risks to sensitive marine resources and communities from potential new leasing in the Arctic. Moreover, due to the high costs associated with exploration and development in the Arctic and the foreseeable low projected oil prices environment, demonstrated industry interest in new leasing currently is low,” the DOI said on Friday.

Providing rationale for the inclusion of the Cook Inlet in the proposed lease sale plan, DOI said the area is a mature basin with a long history of oil and gas development in state waters, where existing infrastructure could support new activity.

“The design of this program area balances the protection of endangered species by taking into account the beluga whale and the northern sea otter critical habitat, with the availability for leasing of areas with the greatest industry interest and existence of oil and gas resources,” DOI said.

There have been five lease sales in this area since 1977. The most recent sale was held in 2004, with no bids received.

Murkowski: “Shortsighted decision”

As expected, representatives from Alaska were quick to condemn the proposed final plan, with Lisa Murkowski saying the Arctic sales removal will yield “the weakest offshore development plan in American history and lock up vast resources that are needed to grow our economy, protect national security and keep energy affordable for American families and businesses.”

In her statement, Murkowski shared data according to which development of the resources in the Beaufort and Chukchi seas would create an annual average of 55,000 jobs over a 50-year period, and a total payroll of $145 billion over that span. She also cited a poll, according to which some 73 percent of Alaskans support Arctic OCS development.

Murkowski, who is chairman of the Senate Energy and Natural Resources Committee, said: “President Obama is well aware that the vast majority of Alaskans want OCS development, and I am infuriated that he has once again ignored our voices to side with the factions who oppose it. We have shown that Arctic development is one of the best ways to create jobs, generate revenues, and refill the Trans-Alaska Pipeline.”

She said. “Why the president is willing to send all of those benefits overseas is beyond explanation. And it is even more stunning that just one day after urging the new administration to stand up to Russia, he continues to cede leadership on Arctic energy production to them. I will do all that I can to counteract this shortsighted decision.”

On the other hand, U.S. senator from Washington Maria Cantwell, who is Ranking Member of the Senate Energy and Natural Resources Committee, chaired by Murkowski, applauded the administration’s proposed final program of the Outer Continental Shelf (OCS) Oil and Gas Leasing Program.

“I appreciate that the Interior Department considered the greater risk posed while operating in dynamic and challenging offshore environments in choosing to remove future leasing in the Arctic,” Sen. Cantwell said. “We need to ensure that we can drill safely and respond to spills before exploration moves forward in ecologically sensitive areas.”

New approach for Gulf of Mexico 

While the focus has been on the Arctic exclusion, it’s worth noting that there have been some changes in the Gulf of Mexico plans, as well.

As previously proposed, the Proposed Final Program includes 10 sales in the Gulf of Mexico, however, the program adopts a new approach to lease sales by offering two annual lease sales for the entire Western, Central, and Eastern Gulf of Mexico acreage not under moratorium. This is a shift from the traditional approach of one sale per year in each of the Western Gulf and the Central Gulf and periodic sales in the Eastern Gulf.

The department said these changes would provide greater flexibility for investment in the Gulf.

As for the Atlantic and Pacific coasts of the U.S., these have been, as expected left out of the proposed lease sale plan, in line with the earlier proposed program.

Interior Department says Atlantic is off limits due to current market dynamics, strong local opposition and conflicts with competing commercial and military ocean uses, and the Pacific is not available for lease sales due to the”the long-standing position of the Pacific coast states in opposition to oil and gas development off their coasts.”

Offshore Energy Today Staff