U.S. cancels Arctic oil-lease sales, citing ‘low industry interest’

In yet another blow to the belief that the Arctic Ocean would be the next frontier in domestic oil production, the Obama administration said Friday it was canceling planned lease sales for offshore drilling in the Arctic and had denied requests by Shell and another company to extend leases they hold.

The move, announced by Interior Secretary Sally Jewell, was praised by environmental groups, which have argued for years that drilling in the Arctic poses serious risks to wildlife and the environment. But the decision may have few immediate effects — and it does not preclude future lease sales.

Various energy companies hold about 500 leases in the Arctic, but Shell is the only one that has actively pursued offshore drilling in the region in recent years. Its reward after spending more than $7 billion: a string of legal and logistical setbacks, with little to show for it.

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Last month, after Shell conducted exploratory drilling in the Arctic’s Chukchi Sea for much of the summer, the company said it was abandoning its efforts in the Arctic “for the foreseeable future” because of challenging economic conditions, including consistently low oil prices, and what it said were disappointing results from drilling. Shell owns about 350 leases in the Arctic.

On Friday, the Interior Department referred to Shell’s efforts and said it was making its decision “in light of current market conditions and low industry interest.” The department, which sells oil leases in five-year blocks, said it had heard from no potential lessees for a planned 2016 sale in the Chukchi Sea and from just one for a planned sale in the Beaufort Sea in 2017.

Before Shell announced that it would not pursue drilling in the Arctic in the foreseeable future, it had asked the department to extend its leases in the Chukchi beyond their expiration in 2020, and to extend its leases in the Beaufort Sea beyond their 2017 expiration. Another company, Statoil, had made a similar request. But the department declined both companies, saying they “did not demonstrate a reasonable schedule of work for exploration and development under the leases.”

The department still plans to hold lease sales in the Arctic in its next leasing window, 2017 to 2022, when a new administration will be in office.

“Today’s announcement marks a significant step in the right direction,” Marissa Knodel of Friends of the Earth said in a statement. “But it is disappointing that current market conditions and lack of industry interest — not a safe climate future — moved the administration to action.”

william.yardley@latimes.com