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Charles Kennedy

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Big Oil Pulls The Plug On Arctic Oil, Relinquishes Drilling Rights

The prospect of producing oil from the U.S. Arctic looks increasingly remote as the oil industry walks away from drilling leases.

After Royal Dutch Shell pulled the plug on its drilling program in the Chukchi Sea last autumn, there had been little chance that the industry would return to the region anytime soon. But several companies officially forfeited their rights to drill in the Arctic on May 1, having declined to pay the U.S. government to renew licenses, according to a Freedom of Information Act request filed by the environmental group Oceana. Shell, Eni, Statoil, and ConocoPhillips all decided against paying to hold onto those drilling rights in recent weeks.

"Hopefully, today marks the end of the ecologically and economically risky push to drill in the Arctic Ocean," Michael LeVine, senior regional counsel for Oceana, said in a statement emailed to UPI. Related: 90% Off Sale On Offshore Drilling Rigs?

Bloomberg reports that collectively the companies have surrendered the right to drill in 2.2 million acres of the Chukchi Sea. They spent more than $2.6 billion to obtain those licenses, and Shell ultimately poured in about $8 billion in its disastrous drilling campaign, walking away with little to show for its struggles. Shell also gave up on drilling rights in the Beaufort Sea. "These actions are consistent with our earlier decision not to explore offshore Alaska for the foreseeable future," Shell spokesman Curtis Smith told Bloomberg. Still, Shell decided to keep the one tract that it drilled in 2015 in order to hold onto the data that it collected from its operations. Aside from that, Repsol remains the last company to have drilling rights on some tracts, although the company has no drilling plans.

With these companies foreclosing on the opportunity to drill in the Chukchi Sea, Arctic drilling is now dead for years at least. The Interior Department could theoretically hold another auction for drilling rights, but even if it did so, it would be years away. The agency cancelled lease sales for 2016 due to limited interest from the industry.

By Charles Kennedy of Oilprice.com

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