US Backs Away From Offshore Arctic Drilling

US Backs Away From Offshore Arctic DrillingUS Backs Away From Offshore Arctic Drilling

The US Interior Department effectively halted drilling off Alaska’s coast for the remainder of President Barack Obama’s term by canceling two sales of Arctic oil and gas leases.

The decision comes less than a month after Royal Dutch Shell Plc said it would indefinitely cease exploration in the region, as the company did not find sufficient quantities of oil or gas in a Chukchi Sea drilling zone, Bloomberg reported.

“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 on Friday.

The cancellations highlight the changing environment for the oil industry after international prices fell more than 50% from their 2014 peak as supply overwhelms demand.

Drilling in treacherous Arctic waters is also expensive and Shell cited the high costs in shuttering its $7 billion search for oil and gas in the region. Alaska projects oil to account for about 75% of the revenue generated in the state for fiscal 2015, down from 88% the previous year and state politicians immediately criticized the decision to cancel the lease sales.

The canceled sales were part of the Interior Department’s 2012-17 offshore leasing program. The agency said it received no industry interest in a potential Chukchi Sea lease sale scheduled for next year and one response to its call for nominations for a possible Beaufort Sea lease sale that was to be held in 2017.

US President Barack Obama's administration in January proposed its offshore plan for 2017-22, potentially curbing exploration in the Beaufort and Chukchi seas while opening part of the Atlantic region to drilling. The plan has not been finalized.