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Shell drops legal attempt to extend offshore lease terms in the Arctic

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Screen Shot 2016-06-25 at 10.21.36Shell drops legal attempt to extend offshore lease terms in the Arctic

Author: Yereth Rosen: 24 June 2016

Months after abandoning its plans for oil exploration in Arctic waters off Alaska, Royal Dutch Shell has dropped its legal effort to hold onto those offshore leases.

Shell notified the Interior Department it will no longer pursue its appeals of a decision that denied extension of the company’s oil leases in the Chukchi and Beaufort seas off Alaska. The department’s Board of Land Appeals on Thursday granted Shell’s request and dismissed the case.

The move adds finality to the company’s expensive but failed campaign to convert Arctic waters off Alaska into a new oil-producing region. Shell says it spent over $7 billion on the effort, but the company managed to drill only one well to completion and the top sections of two others. It was beset with problems, most notably the December 31, 2012, grounding and wreck of one of its drill ships, the Kulluk.

Shell has already given up the bulk of its leases.

The company this spring relinquished all but one of its Chukchi leases, eight years after spending more than $2 billion to acquire them in a record-breaking federal lease sale. The only Chukchi lease Shell will hold, the site where it drilled a well last year, is scheduled to expire in 2020.

Shell still holds 64 leases in the Beaufort Sea, either outright or in partnership with other companies, according to the U.S. Bureau of Ocean Energy Management. Those leases were acquired for a combined $84 million in sales held in 2005 and 2007. They are scheduled to expire as early as next summer, though expiration dates vary, according to BOEM.

The now-withdrawn appeal sought to reverse an Oct. 16 decision by the U.S. Bureau of Safety and Environmental Enforcement. That agency denied Shell’s efforts to put its Chukchi and Beaufort leases into suspension, a status that would had extended lease terms for five years.

ConocoPhilips, another company with offshore Arctic ambitions, has withdrawn a similar legal appeal.

ConocoPhilips, which submitted a Chukchi exploration plan but never got to the point of drilling, in late 2013 asked BSEE to extend its Chukchi leases. The agency in March 2014 denied the request, and ConocoPhillips appealed that decision.

But ConocoPhillips in April relinquished its Chukchi leases, making the appeal moot. The Board of Land Appeals on June 6 granted ConocoPhillips’ motion to dismiss the case.

Other companies — including Statoil, Eni and Repsol — have also relinquished their Chukchi leases, leaving the single Shell-held tract as the only active lease in the basin.

Even though it will no longer look for oil, Shell still has work to do at its drill sites. The company is required to remove 43 anchors and related equipment it left at prospects in the Chukchi and Beaufort seas “in anticipation of activities that are no longer planned,” BSEE spokesman Guy Hayes said in an email.

Anchor removal and site-clearance work is scheduled for July and August. The Bureau of Safety and Environmental Enforcement has reviewed Shell’s plan to accomplish that, Hayes said.

Yereth Rosen

Yereth Rosen has been a journalist in Alaska since 1987. For most of that time, she was the sole Alaska-based reporter for Reuters. She has been reporting on energy issues, the environment, politics and all things Alaska – from oil spills to sled-dog races. She enjoys running, skiing and other outdoors pursuits. She lives in Anchorage with her family.

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