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Obama Administration Removes Beaufort, Chukchi Seas From 2017-2022 OCS Lease Plan

The Obama administration removed the Beaufort and Chukchi seas from its five-year offshore oil and gas leasing program on Friday but kept 10 potential lease sales in the Gulf of Mexico (GOM) and one in Alaska's Cook Inlet.

The Bureau of Ocean Energy Management (BOEM) and its parent agency, the Department of Interior (DOI), announced publication of a final proposal for the Outer Continental Shelf (OCS) Oil and Gas Leasing Program for 2017-2022. The agencies said the Beaufort and Chukchi were removed from the leasing program after "analyzing the best available scientific data" and input from more than 3.3 million public comments.

"The plan focuses lease sales in the best places -- those with the highest resource potential, lowest conflict, and established infrastructure -- and removes regions that are simply not right to lease," said DOI Secretary Sally Jewell. "Given the unique and challenging Arctic environment and industry's declining interest in the area, foregoing lease sales in the Arctic is the right path forward."

BOEM Director Abigail Hopper concurred, adding that the plan "was informed by robust stakeholder engagement and the best available science. The proposal makes available more than 70% of the economically recoverable resources, which is ample opportunity for oil and gas development to meet the nation's energy needs."

Jewell may approve the final leasing program after a minimum of 60 days. If she approves the plan, it would take effect on July 1.

A draft version of the 2017-2022 leasing program, containing 14 potential lease sales in eight planning areas, was unveiled in January 2015. The draft version included 10 potential lease sales in the GOM, three in offshore Alaska (one each in the Beaufort and Chukchi seas and the Cook Inlet) and one in the Atlantic Ocean, covering areas offshore Virginia, North Carolina, South Carolina and Georgia. After receiving criticism from coastal communities and the military, the Obama administration removed the Atlantic sale from the program last March.

The federal agencies said the one sale in the Cook Inlet would cover the northern portion of the Cook Inlet Planning Area. On its decision to keep Cook Inlet in the program, the agencies called the offshore area "a mature basin with a long history of oil and gas development in state waters, where existing infrastructure could support new activity.

"The design of this program area balances the protection of endangered species by taking into account the beluga whale and the northern sea otter critical habitat, with the availability for leasing of areas with the greatest industry interest and existence of oil and gas resources."

Conversely, the Beaufort and Chukchi seas were removed due to the "fragile and unique Arctic ecosystem," as well as because of a decline in industry interest, the agencies said.

"Based on consideration of the best available science and significant public input, the DOI's analysis identified significant risks to sensitive marine resources and communities from potential new leasing in the Arctic. Moreover, due to the high costs associated with exploration and development in the Arctic and the foreseeable low projected oil prices environment, demonstrated industry interest in new leasing currently is low."

Case in point, Royal Dutch Shell plc, once the biggest leaseholders in offshore Alaska, said last May that it will abandon all but one of its leases in the Chukchi, and was evaluating its holdings in the Beaufort. At the time, the international major cited an "unpredictable" regulatory environment and disappointing initial drilling results.

Shell, ConocoPhillips, Italy's Eni SpA and Iona Energy Inc. together relinquished about 350 leases, covering 2.2 million acres of drilling rights, in the Chukchi before a May 1 deadline to do so.

Under the proposed 2017-2022 leasing program, two annual lease sales would be conducted for acreage in the Western, Central and Eastern regions of the GOM not under moratorium. "This is a shift from the traditional approach of one sale per year in each of the Western Gulf and the Central Gulf and periodic sales in the Eastern Gulf," the agencies said.

By comparison, the OCS Oil and Gas Leasing Program for 2002-2007 called for 20 lease sales: five each in the Western and Central GOM, three in the Beaufort, two in the Eastern GOM, two in the Cook Inlet (including the Shelikof Strait), two in the Chukchi (including the Hope Basin) and one in Alaska's Norton Basin. Meanwhile, a revised OCS Oil and Gas Leasing Program for 2007-2012 included 16 sales, some of which were later cancelled: 11 area-wide sales in the Western and Central GOM, one sale in the Mid-Atlantic 50 miles offshore Virginia, two special interest sales in the Cook Inlet and one sale in the Chukchi.

The vast majority of U.S. offshore oil production occurs in the GOM.

Lucas Frances, spokesman for the Arctic Energy Center (AEC), called the decision to remove the Beaufort and Chukchi seas from the leasing program "a body blow for the Native communities, businesses, elected officials, military experts and other Alaskans who repeatedly have pleaded with the White House to allow offshore energy development in the Arctic.

"Having been told that local views would take priority, they have now seen that the exact opposite is true and their wishes have been ignored in the name of legacy building. 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."

The AEC, through a campaign by the Arctic Coalition, had lobbied DOI to keep the Arctic in the leasing program. The coalition's 20 members include the Independent Petroleum Association of America, the Alaska Oil and Gas Association and the largest native-owned corporation in the State of Alaska, the Arctic Slope Regional Corp.

Other industry groups also derided the plan. American Energy Alliance President Thomas Pyle said the nation’s share of oil production from federal lands and waters had reached its lowest point in decades.

"As a farewell gift to the ‘Keep It in the Ground’ activists, President Obama has delivered the most anemic offshore leasing plan in U.S. history,” Pyle said Friday, adding that Obama’s legacy “is one of intentionally undermining America’s energy production and economic growth by holding our vast energy resources under lock and key.

“We look forward to President-elect Trump's pro-energy and pro-growth outlook."

The American Chemistry Council added that the final version of the leasing program “reflects [the Obama administration’s] short-sighted policy of limiting access to oil and natural gas on federal lands. American manufacturers rely on secure and affordable energy supplies to compete globally, yet DOI has repeatedly withdrawn or withheld from development major portions of the OCS.”

Environmental groups were divided in their reaction to the news -- showing support for the removal of the Beaufort and Chukchi seas from the leasing program but disappointment at the continuing inclusion of the GOM.

"We are hopeful that this announcement will help chart a new course forward in the Arctic Ocean," said Jacqueline Savitz, a vice president of environmental group Oceana. "The decades-long push to drill in the Arctic has put this unique and diverse ecosystem at risk, cost tens of billions of dollars and created significant controversy without providing the promised benefits.

"Companies have been given every opportunity to find oil and have failed at every turn because of the extreme conditions and limited window for operations there. We now have the opportunity to put the old arguments behind us and work together toward a sustainable future for the Arctic region."

But Lindsey Allen, executive director of Rainforest Action Network, said the revised program "locks the Gulf into another five years of corporate giveaways -- with decades more of climate pollution, offshore oil spills, devastation to fisheries, and health impacts to local communities. A true transition from fossil fuels doesn't allow for energy sacrifice zones, especially when we know the climate can't handle further fossil fuel development.

"Along with the Arctic and the Atlantic, we need permanent protection for all our coasts to have a fighting chance at stabilizing the climate."

BOEM currently manages about 3,400 active OCS oil and gas leases, covering more than 18 million acres, the vast majority of which are in the GOM. According to the agency, OCS oil and gas leases accounted for about 16% of domestic oil production and 5% of domestic natural gas production in 2015.

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