Shell Backs Off Arctic Drilling After Legal Blow

The Shell logo is shown at a Shell petrol station April 23, 2003 in London, England.
National Journal
Ben Geman
Jan. 30, 2014, 1:04 a.m.

Oil gi­ant Roy­al Dutch Shell said Thursday that it’s scrap­ping con­tro­ver­sial plans to drill off Alaska’s coast this year after a court rul­ing threw the leg­al status of its leases in­to ques­tion.

The 9th Cir­cuit Court of Ap­peals last week said the In­teri­or De­part­ment botched an en­vir­on­ment­al ana­lys­is un­der­pin­ning its 2008 sale of oil-drilling leases in the Chuk­chi Sea, where Shell hoped to look for oil this sum­mer.

Shell, in a state­ment, said the court de­cision puts “sub­stan­tial obstacles” in front of plans to drill in Arc­tic wa­ters off Alaska’s coast.

“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,” said CEO Ben van Beur­den in a state­ment.

“We will look to rel­ev­ant agen­cies and the court to re­solve their open leg­al is­sues as quickly as pos­sible,” he said.

Shell’s an­nounce­ment Thursday came as the com­pany re­por­ted a steep drop in fourth-quarter profits and said it would cut its cap­it­al spend­ing. Bloomberg has more about that here.

The court rul­ing is the latest set­back for Shell’s years-long, mult­i­bil­lion-dol­lar cam­paign to ex­plore what are be­lieved to be gi­ant oil de­pos­its in the Beaufort and Chuk­chi seas off Alaska’s coast.

The com­pany had a series of mis­haps in its 2012 cam­paign to drill in the two ad­ja­cent seas.

It began pre­lim­in­ary drilling but was un­able to win In­teri­or De­part­ment per­mis­sion to drill in­to oil-bear­ing zones. Shell did not seek ap­prov­al to drill in 2013 but was weigh­ing a scaled-back Chuk­chi Sea plan in 2014.

En­vir­on­ment­al groups op­pose drilling in the Arc­tic re­gion that’s home to po­lar bears, bowhead whales, and oth­er en­dangered or fra­gile spe­cies, ar­guing that it’s too dif­fi­cult to con­tain po­ten­tial spills.

Ac­cord­ing to The Hou­s­ton Chron­icle, van Beur­den said dur­ing a fourth-quarter earn­ings present­a­tion Thursday that the com­pany is “frus­trated” by the de­cision in the law­suit brought by en­vir­on­ment­al groups.

“The obstacles that were in­tro­duced by that de­cision cer­tainly make it im­possible to jus­ti­fy the com­mit­ments of cost, equip­ment, and people that are needed to drill safely in Alaska this year,” the Shell ex­ec­ut­ive said.

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