Arctic Drilling Battle Halts Abruptly as Shell Comes Up Dry

Arctic Drilling Battle Halts Abruptly as Shell Comes Up Dry

Arctic Drilling Battle Halts Abruptly as Shell Comes Up Dry


By:  Ben Geman

One of the biggest en­vir­on­ment­al fights in re­cent years is end­ing with a whim­per.

Roy­al Dutch Shell said Monday that it’s abandon­ing oil and gas ex­plor­a­tion off Alaska’s north­ern coast after an ex­pens­ive well came up es­sen­tially dry.

The de­cision ends, at least for the fore­see­able fu­ture, a key battle in the years-long polit­ic­al and lob­by­ing war over Arc­tic off­shore drilling that has reached in­to the 2016 pres­id­en­tial cam­paign.

Green groups have fought to pre­vent Shell from drilling in the Arc­tic Ocean, and Pres­id­ent Obama’s cau­tious en­dorse­ment of Arc­tic off­shore de­vel­op­ment has been a source of ten­sion between the White House and en­vir­on­ment­al­ists.

Shell began full-scale drilling of a well in what’s called the Bur­ger pro­spect last sum­mer after years of seek­ing Obama ad­min­is­tra­tion per­mis­sion, but the com­pany said Monday that “in­dic­a­tions” of oil and gas wer­en’t enough to “war­rant fur­ther ex­plor­a­tion.”

“Shell will now cease fur­ther ex­plor­a­tion activ­ity in off­shore Alaska for the fore­see­able fu­ture,” Shell said in a state­ment Monday.

The com­pany also dinged fed­er­al reg­u­lat­ors in lay­ing out why it’s put­ting the ef­fort on ice after spend­ing around $7 bil­lion over sev­en years on leases, plan­ning, and de­vel­op­ment costs.

“This de­cision re­flects both the Bur­ger J well res­ult, the high costs as­so­ci­ated with the pro­ject, and the chal­len­ging and un­pre­dict­able fed­er­al reg­u­lat­ory en­vir­on­ment in off­shore Alaska,” the com­pany said.

Shell’s de­cision on leases in the Chuk­chi Sea that it spent more than $2 bil­lion to ob­tain in 2008 could de­ter in­dustry in­terest in the U.S. Arc­tic wa­ters more broadly.

Oth­er com­pan­ies with leases in the Beaufort and Chuk­chi Seas off Alaska’s coast, in­clud­ing Cono­co­Phil­lips and Statoil, had been watch­ing Shell’s ex­pens­ive at­tempt to find what could be huge re­sources there.

While Obama has come un­der heavy cri­ti­cism from en­vir­on­ment­al groups for al­low­ing Shell to be­gin drilling, GOP crit­ics say the Obama ad­min­is­tra­tion has moved too slowly in al­low­ing Arc­tic de­vel­op­ment and im­poses too many reg­u­lat­ory hurdles.

Hil­lary Clin­ton broke with Obama in mid-Au­gust when she de­clared that she’s flatly against drilling in the Arc­tic, a stance that drew im­me­di­ate cri­ti­cism from GOP White House hope­ful Jeb Bush, who is slated to lay out his en­ergy plat­form on Tues­day.

Shell’s white flag is wel­come news for en­vir­on­ment­al­ists who have spent years bat­tling to keep the area off-lim­its to oil rigs, ar­guing that off­shore oil and gas de­vel­op­ment there presents huge risks to an eco­sys­tem that provides a hab­it­at for po­lar bears, bowhead whales, and oth­er fra­gile spe­cies.

“Shell’s an­nounce­ment is very good news for the mar­ine en­vir­on­ment, sens­it­ive coastal lands, and the Arc­tic com­munit­ies that would be dev­ast­ated by a ma­jor oil spill,” said Lois Ep­stein, dir­ect­or of the Wil­der­ness So­ci­ety’s Arc­tic pro­gram.

Green groups and some re­search­ers also say tap­ping Arc­tic oil is out of step with con­front­ing cli­mate change.

The battle over Shell’s drilling cam­paign has been the most dir­ect col­li­sion over de­vel­op­ment of wa­ters in the U.S. Arc­tic that, ac­cord­ing to fed­er­al es­tim­ates, could con­tain 23 bil­lion bar­rels of re­cov­er­able oil.

But oth­er fights and de­cisions re­main, such as wheth­er In­teri­or De­part­ment reg­u­lat­ors will ex­tend the dur­a­tion of leases in the re­gion that ex­pire over the next sev­er­al years and wheth­er In­teri­or will auc­tion off new tracts as soon as next year.

“Shell con­tin­ues to see im­port­ant ex­plor­a­tion po­ten­tial in the basin, and the area is likely to ul­ti­mately be of stra­tegic im­port­ance to Alaska and the U.S. However, this is a clearly dis­ap­point­ing ex­plor­a­tion out­come for this part of the basin,” said Mar­vin Odum, Shell’s top Amer­ic­an ex­ec­ut­ive, in a state­ment Monday.

Shell had be­gun pre­lim­in­ary drilling off Alaska’s Arc­tic coast in the sum­mer of 2012, but after a series of prob­lems and mis­haps, the com­pany did not win fed­er­al per­mis­sion to drill in­to oil-bear­ing zones that year.

However, the in­dustry con­tends that Arc­tic re­sources can be de­veloped safely. “The Shell Alaska team has op­er­ated safely and ex­cep­tion­ally well in every as­pect of this year’s ex­plor­a­tion pro­gram,” Odum said.

Lisa Murkowski, a GOP sen­at­or from Alaska who strongly backs off­shore drilling, said she’s “ex­tremely dis­ap­poin­ted” in the de­cision, and said blame lies with Obama ad­min­is­tra­tion reg­u­lat­ors.

“In the more than sev­en years that Shell has held leases in the Chuk­chi, it has only re­cently been al­lowed to com­plete a single well. What we have here is a case in which a com­pany’s com­mer­cial ef­forts could not over­come a bur­den­some and of­ten con­tra­dict­ory reg­u­lat­ory en­vir­on­ment,” said Murkowski, who is chair­wo­man of the Sen­ate En­ergy and Nat­ur­al Re­sources Com­mit­tee.

But Demo­crat­ic law­makers op­posed to Arc­tic off­shore drilling are pleased. Sen. Jeff Merkley of Ore­gon called it “tre­mend­ous news” and gave cred­it to op­pon­ents who have long battled de­vel­op­ment. “The Arc­tic sea is a unique, dan­ger­ous and in­cred­ibly fra­gile en­vir­on­ment, and off­shore Arc­tic drilling is simply not worth the risk,” he said.