Royal Dutch Shell announced on Thursday that it was suspending Arctic drilling plans for summer 2014. The company is reporting a 71 percent decline in fourth-quarter profits and is undertaking a $15 billion asset sale. Shell did not indicate that it was selling its Alaska assets.
The company has spent about $5 billion and more than eight years of work for its Arctic oil exploration off Alaska’s coast in the Chukchi and Beaufort seas. Much of that work has been fraught with mistakes and mishaps.
The decision follows a federal court decision that said that the government used “inadequate information” in the process of awarding licenses for exploration in the Arctic. Part of that process was an environmental impact statement. The Bureau of Ocean Energy Management, the agency that awarded the licenses, did so based on a much lower amount of oil than will likely be produced in the Arctic, the court found.
“This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014,” Shell Chief Executive Ben van Beurden said, according to news reports. “We will look to relevant agencies and the court to resolve their open legal issues as quickly as possible.”
Many environmental groups will be overjoyed. Alaskans less so, many of whom are in favor of oil exploration and production. In addition to jobs and community investment, it was hoped that oil from the Arctic was going to help keep the trans-Alaska pipeline full. In 2013, an average of 534,480 barrels of oil a day flowed down the pipeline, down from more than 2 million barrels a day in the 1980s.
Although the federal court’s decision appeared to have more to do with sloppy bureaucrats than with a Democratic administration, U.S. Sen. Mark Begich will likely take a hit from his Republican challengers. He recently released an ad touting Shell’s activities in the Arctic and last week said that he remained “confident that we will see continued safe exploration in the Arctic this summer.”
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