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Financial Times: Licensing of oil rights off Alaska angers activists

By Dino Mahtani in London
Published: February 8 2008 02:00 | Last updated: February 8 2008 02:00

The US government has licensed off nearly 3m acres near the coast of Alaska to exploration companies, drawing the ire of environmental activists.

Shell, ConocoPhillips, StatoilHydro, Repsol and Eni this week bid for the licences, which fetched more than $2.6bn (£1.3bn, €1.8bn) in signature fees, a fraction of the sum companies could be expected to invest in exploring in the Chukchi Sea area off Alaska.

Environmentalists say that increased oil and gas exploration activity in Arctic areas will threaten endangered wildlife, including polar bears and whales.

Alaska has already borne the brunt of several oil spills by major companies operating there, notably Exxon’s Valdez spill of 1989, which released 10.8m gallons of unrefined Alaskan crude into the sea. More recently, BP’s Alaskan operations were shut down by authorities after pipeline corrosion led to a spill in the Prudhoe Bay area.

State officials are still keen on bringing in as much investment as possible, and Sarah Palin, Alaska’s governor, has backed the auction, even though the Chukchi Sea area is classified as federal land and therefore not subject to Alaskan tax laws.

She praised Shell in particular for buying 275 licences on its own, accounting for $2.1bn of the total raised. “Shell continues to play a major part in meeting the world’s growing energy needs, and we are pleased this company continues to include Alaska in its plans,” she said.

International oil companies, under increasing political pressure in other countries, are turning to new frontiers.

A spokesman for Shell said that its Alaskan plans were part of the company’s overall strategy of finding new sources of oil and using the company’s technological prowess to overcome environmental problems.

Randall Luthi, the director of the US Minerals Management Service, promised that leases issued from the sale would include stipulations for protection of animals and communities affected by oil exploration.

But environmentalists were sceptical. “The technology to effectively contain and clean up oil spills does not currently exist and this oil lease is a disaster waiting to happen,” said James Leaton, oil and gas policy adviser at WWF, the environmental group.

Alaska has recently raised taxes on oil operations taking place in state lands, prompting BP to say it would review its Alaskan operations. So analysts say the Chukchi Sea area, which is estimated to hold 15 billion barrels of recoverable oil, could offer companies a more viable alternative.

Opposition in Alaskan political circles to the oil industry is also growing. Last year two former Alaskan lawmakers were convicted of accepting bribes from executives working for Veco, an oilfields servicing company.

Copyright The Financial Times Limited 2008

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