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Shell forfeits Arctic leases once worth $2b

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Screen Shot 2016-05-10 at 08.42.36By Liz Ruskin, APRN: May 10, 2016

Shell is giving back all but one of its leases in the Chukchi Sea.

The announcement comes seven months after Shell said it was halting exploration in Alaska’s offshore Arctic for the foreseeable future.

Gov. Bill Walker calls the news “disappointing.”

Michael LeVine, Pacific senior counsel for the conservation group Oceana, says the lease-surrenders underscore Shell’s exit.

“They’re significant because they really call to an end this era of exploration, at least in the Chukchi Sea,” he said.

To Oceana and other anti-drilling groups, Shell’s decision shows industry can’t make offshore drilling work in the Alaskan Arctic if companies are held to high safety standards. They say it’s a sign the federal government should not include the Arctic in its next off-shore leasing plan.

Sarah Erkmann, manager of external affairs for the trade group Alaska Oil and Gas Association, sees other contributing factors.

“Uncertainty comes at a cost,” she said. “And frankly, the companies have decided that low oil prices, combined with having no idea what … the federal government will require in the future, are just too expensive and are unsustainable in this low-price environment.”

Shell spokesman Curtis Smith cited high costs and an “unpredictable” regulatory environment, but also the poor results from Burger J, the sole test well it completed in its $7 billion Arctic program.

Shell paid more than $2 billion for its Chukchi leases.  To keep them, the company would have to pay about $40 million in rent over the next four years, by Oceana’s calculations. Shell will retain its lease to the Burger J site, which Smith says will allow it to keep proprietary data.

Shell says it’s still evaluating whether to retain its leases in the Beaufort Sea. But the company will, quite literally, pull up stakes this summer. The spokesman says Shell will return to the Arctic to retrieve 55 anchors it left on the floor of the Chukchi and Beaufort seas.

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