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Obama plan expands and restricts opportunities in the Atlantic

The Obama administration has given a little to the oil industry and taken a little away

Under the administration’s new five-year plan, made public in late January, the industry may get their first chance in decades to bid on coveted new acreage in the Atlantic offshore and will have further opportunities to expand in the Alaskan sectors of the Beaufort and Chukchi seas. However, Obama also said that he would push Congress to declare a vast swathe of the Arctic National Wildlife Refuge (ANWR) off-limits to exploration.

The give-and-take approach has become a hallmark of the Obama administration’s strategy to balancing the environmental concerns of his political base with the economic and energy security benefits that have come from the US’ oil boom. The latest announcements lay the battle lines in Congress for the next fight over the direction of the US energy industry.  

The administration wants congress to classify more than 12 million of ANWR’s 19.8m total acres as wilderness – the highest level of environmental protection, the Interior Department said in a statement this week. The declaration would bar any oil and gas activity in the region.

"We are looking to build up our understanding of resource potential, as well as risks to the environment"

It was the latest in a long-running argument over ANWR, where the oil industry wants access to potentially vast oil reserves, but environmentalists want to protect from development. The administration came down on the side of environmentalists, arguing that the region’s exceptional biodiversity and importance to native communities means that it should be preserved.

“Just like Yosemite or the Grand Canyon, the Arctic National Wildlife Refuge is one of our nation’s crown jewels and we have an obligation to preserve this spectacular place for generations to come,” says secretary of the interior Sally Jewell.

The official recommendation from president Obama to Congress is significant because it means the area will automatically be given the highest level of environmental protection until congress or another president takes further action.

The oil and gas industry has long lobbied to open ANWR to drilling, pointing to a potential economic bonanza for companies and the state of Alaska. The US Geological Survey has estimated that the 1.5m acre Coastal Plain area of ANWR alone could hold between 4.3bn and 11.8bn barrels of recoverable oil, while the rest of ANWR could hold billions more barrels of crude. 

However, environmentalists and conservationists have resisted the industry’s push into ANWR, and welcomed the president’s decision. “This wilderness recommendation at last recognises the wonder and importance of the region for Native cultures, wildlife, and anyone seeking to experience one of America's last great wild places," said Michael Brune executive director of Sierra Club, an environmental organisation.

Days after the administration’s decision on ANWR disappointed the industry and elated environmentalists, though, it proposed opening waters off the Atlantic coast to oil drilling for the first time in decades. The proposal was blasted by environmentalists and cautiously welcomed by the industry.

The offshore regulator Bureau of Ocean Energy Management (BOEM)’s 2017-2022 draft proposed program for oil leases includes a proposal to auction blocks in waters offshore Virginia, North Carolina, South Carolina and Georgia, known as the Mid-Atlantic and South Atlantic areas. 

The Obama administration first proposed opening the waters to oil drilling in 2010 under its previous five-year plan, however the lease sale was shelved after the Macondo oil spill.

However, after lobbying from the industry and the governors from Virginia, North Carolina, South Carolina and Georgia, Atlantic drilling is back on the agenda. The first lease sale could take place in 2021, according to the schedule released in the five-year plan, though it still might not happen. 

“At this early stage in considering a lease sale in the Atlantic, we are looking to build up our understanding of resource potential, as well as risks to the environment and other uses,” Jewell says.

Moreover, waters off the North Atlantic coast and off Florida, where there is stronger opposition to offshore drilling, will not be included in any lease sales.

The first step will be carrying out seismic and other geophysical studies in the waters. The BOEM said that it is evaluating ten permits to carry out seismic surveying, which will help better understand the region’s potential resources. The last time data was collected more than 30 years ago, though those studies pointed to potentially huge oil reserves.

The most recent lease sale in the Atlantic was in 1983, but there have been no active leases in the waters since the mid-1990s, and there has never been any production from the region. One exploration well was drilled in the Mid-Atlantic, while seven have been drilled in the South Atlantic waters, but there have been no commercial discoveries. 

In spite of the region’ spotty exploration history, industry heavyweights Chevron, ExxonMobil, Statoil, Shell and ConocoPhillips all lobbied the BOEM to open the Mid- and South Atlantic areas to drilling.

They will face stiff opposition from environmental groups, which decried the decision to consider opening the waters to oil exploration, saying the industry couldn’t be trusted after the Macondo oil spill.

The industry could also face pushback from the military in the Atlantic. The Department of Defense said that it has concerns that oil and gas drilling could interfere with military training operations in the Atlantic waters, thought the Interior Department said it wouldn’t lease any acreage within 50 miles of the coast, in part to avoid potential conflicts with the military. 

In addition to the Atlantic waters, the 2017-2022 lease plan also includes a potential auction for new acreage in the Arctic Beaufort and Chukchi seas off Alaska. The Beaufort Sea auction has been tentatively set for 2020, while the Chukchi auction not scheduled to take place until 2022.

Shell’s exploration struggles in the Alaskan Arctic, however, has seen other companies temper their interest in drilling in the region. The company has spent billions of dollars on licences and equipment to drill in the area. But after a slew of legal challenges and operational blunders that have prevented it from completing a single well, it has little to show for the investment besides a bruised reputation. 

Statoil and ConocoPhillips have both suspended their Arctic drilling plans. And with the oil price rout, neither company is likely to return to the waters anytime soon.

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