Interior Dept. cancels Arctic lease sales, refuses lease extensions

The U.S. Department of the Interior announced Friday it is canceling scheduled Arctic Ocean lease sales in the Beaufort and Chukchi seas previously set for 2016 and 2017, and that it is refusing requests from Shell and Statoil for lease suspensions.

Shell announced Sept. 27 it was indefinitely suspending its Arctic Ocean exploration after drilling one well in its Chukchi lease this summer, a fact cited by Secretary Sally Jewell in her announcement of the sale cancelation and lease suspension denials.

Alaska Gov. Bill Walker criticized the decision by the Interior Department.
“I am disappointed by this announcement. Alaska must be able to responsibly explore and develop our rich natural resources both onshore and offshore. Any action that limits our ability to explore for more oil, and to increase much-needed new production for the Trans Alaska oil pipeline, creates unnecessary uncertain and a burden on our economy,” the governor said in a statement.

In her statement, Jewell said “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,” said Secretary of the Interior Sally Jewell.

“I am proud of the performance of Interior’s Bureau of Ocean Energy Management and Bureau of Safety and Environmental Enforcement, the U.S. Coast Guard and others in ensuring that Shell’s program this past season was conducted in accordance with the highest safety and environmental standards.”

The Interior Department stated that no nominations were submitted for Chukchi lease sales. Under the current five-year program Chukchi Sea Lease Sale 257 was scheduled for 2016.

The agency’s statement said that the U.S. Bureau of Ocean Energy Management (BOEM) issued a Call for Information and Nominations from industry in September 2013, in response to which there were no specific nominations. Shell recently announced that the results of its exploration well at the Burger J site in the Chukchi Sea did not warrant further exploration in the Burger prospect, the Interior Department said.Similarly, Beaufort Sea Lease Sale 242 had been scheduled potentially for the first half of 2017. BOEM published a Call for Information and Nominations in July 2014, but only received one nomination, thereby raising concerns about the competitiveness of any such lease sale at this time.

In another development, the U.S. Bureau of Safety and Environmental Enforcement (BSEE) denied requests from Shell and Statoil for lease suspensions, which would have allowed the companies to retain the leases beyond their primary terms of ten years. The leases will expire in 2017 (Beaufort) and 2020 (Chukchi). Among other things, the companies did not demonstrate a reasonable schedule of work for exploration and development under the leases, a regulatory requirement necessary for BSEE to grant a suspension, the Interior Department said in its announcement. 

10/16/2015 - 2:30pm