In a parting gift to the environmental movement, President Obama has withdrawn his support for two leases in the Arctic Ocean off the coast of Alaska. The move stops production in the Chukchi and Beaufort Seas.
Given the low price of both oil and gas right now, the order is essentially hallow, given that drillers are not motivated to add new supplies and thus further depress prices. But they still want access, eventually. In 2017, they will look to the Trump administration for that right, which will will try to appease the oil and gas industry.
“As a result of this decision, people across Alaska will be looking to the Trump Administration to quickly tear up the lease plan and implement an entirely new schedule, which includes the Arctic and helps secure the state’s future,” says Lucas Frances, a spokesperson for the Arctic Energy Center.
To be exact, it was the US Department of Interior that issued the ruling last week. President Obama in January 2015 designated portions of the Beaufort and Chukchi Seas off limits from consideration for future oil and gas leasing to protect the area’s sensitive environmental resources. The president said earlier this year that he would review the policy.
“The plan focuses on lease sales in the best places — those with highest resource potential, lowest conflict, and established infrastructure — and removes regions that are simply not right to lease,” said Interior Secretary Sally Jewell. It’s all part of a five-year plan that would otherwise get another look in 2022.
Previously, Shell Oil spent more than $7 billion in the Arctic, only to come up empty. It pulled out in 2015. Conditions are harsh there, which not only increases the financial risks but it also raises the environmental risks if something goes wrong.
It’s not yet clear whether a Trump administration could toss out the ruling or whether it would have to wait until 2022. It’s more likely that it would issue a proposal that would have to go through a comment period — and all the subsequent legal challenges involved with enacting a pro-drilling policy. By the time all that happens, it’s 2022. By then, pricing in the oil and gas markets may improve from a developer’s standpoint.
The Minerals Management Service has said that altogether, 86 billion barrels of recoverable oil and 420 trillion cubic feet of recoverable natural gas lies within all those bodies of water: Gulf of Mexico, Arctic Ocean and Atlantic Ocean.