Spanish oil giant Repsol’s decision to pull out of the Arctic is sending reverberations of alarm across the oil sector, with industry groups telling the Obama administration it should not use the company’s decision to justify barring future drilling in the icy north.
Repsol’s decision is the latest sign of the toll that low crude oil prices are taking on companies invested in expensive offshore drilling ventures. Even with prices beginning to pick up in recent weeks, the decision shows that modest movements in the market aren’t enough to justify staying in Alaska’s Chukchi Sea.
Repsol, which has one of the largest number of federal drilling leases in the Chukchi, has decided to pull out of all 93 leases, the company said Tuesday. That makes Shell the last remaining single-lease driller in the sea. In recent months, a number of oil companies decided to abandon their leases due to the global oil glut and the resulting low oil prices, making operations there not financially feasible.
But the industry doesn’t want the decision to give the Obama administration any ideas. Groups fear the Repsol pullout will incentivize the administration to bar new leases in the Arctic when it finalizes a new five-year offshore leasing plan.
The administration is keeping the Arctic lease option open for the time being. The Interior Department’s proposed five-year plan, issued earlier in the spring, pulled back on drilling off the Atlantic coastline and other areas, but kept drilling in the Arctic.
“The decision by Repsol to relinquish its Chukchi Sea leases demonstrates the challenging commercial and regulatory conditions that come with developing offshore Arctic resources. It is not, however, proof that the administration should withdraw the Arctic from the forthcoming 2017-22 … offshore leasing round,” said Lucas Frances, spokesman for the Arctic Energy Center, a coalition among Alaskan and national oil and gas trade groups.
There is precedent for the administration to reverse its leasing decision, given that it reversed its plans to open swaths of the Atlantic to drilling. Critics say the policy reversal was driven by the president’s climate change and environmental agenda to keep fossil fuels in the ground.
“These five-year plans are, by design and more importantly by law, focused on ensuring that the United States has the resources available to maintain energy security in a turbulent world,” Frances said. “To exclude the Arctic and other [offshore] regions in the next five-year plan is not pro-environment, but would simply increase the U.S. dependence on foreign oil.”
The company’s decision came on “World Oceans Day,” which environmental groups used as a fitting moment to boost their fight to “permanently protect our Arctic and Atlantic coasts from the ravages of offshore drilling,” said Rhea Suh, president of the Natural Resources Defense Council, a leading advocate of environmental causes.
Suh discussed her group’s fight to protect the Arctic in a note to donors Wednesday, calling holding the administration accountable for its five-year plan a “pivotal moment in our fight.” “President Obama is moving forward with a reckless five-year offshore drilling plan that keeps the Atlantic off-limits for now, but opens our fragile Arctic to new oil and gas drilling right away,” Suh said. “It’s a start — but it still threatens both of these coasts with dangerous oil spills and climate-wrecking carbon pollution, sooner or later.”
She said the NRDC needs to shift its campaign into “high gear” before the drilling plan is finalized, asking for emergency funds for an “all-out battle” against offshore drilling.
Suh said the funds would be used to increase pressure on the administration to close the Arctic to drilling; push the president to bar drilling in the Arctic and Atlantic coasts “forever”; wage legal fights to stop oil companies from drilling offshore; and “fight to end America’s addiction to dirty fossil fuels and get the federal government out of the oil business as fast as possible.”
