Obama Administration Moves Forward with 'Lease Sale 193' in Chukchi

Obama Administration Moves Forward with 'Lease Sale 193' in Chukchi

WASHINGTON (Dow Jones Newswires), Oct. 4, 2011

The Obama administration announced Monday it was moving forward with oil-drilling leases issued off the coast of Alaska by the previous administration, marking an important development in the battle over Arctic Ocean drilling.

The Interior Department said it was going to uphold nearly 500 leases issued in the Chukchi Sea after several environmental groups challenged the sale of the leases in court. The George W. Bush administration conducted the sale in 2008, collecting bids worth about $2.7 billion.

Among the companies securing leases in "Lease Sale 193" was Shell, the energy giant at the center of a high-profile fight to secure permits to drill in the Arctic.

Environmental groups oppose the Chukchi Sea leases, contending U.S. regulators don't know enough about the Arctic--its marine life and ecosystem--to allow drilling in the region. The groups also raise concerns about the ability of energy companies to respond to spills in the Arctic's icy waters.

"The Obama administration said it would make decisions in the Arctic based on sound science, but today it flunked the test," Earthjustice attorney Erik Grafe said.

The Interior Department said all of the leases will be subject to a series of conditions to mitigate operational and environmental risks, including the protection of biological resources and precautionary action to mitigate potential oil-spill impacts.

The fate of Lease Sale 193 has been uncertain since 2010, when a federal court told the Interior Department to reconsider certain aspects the sale. Among the issues the court asked the department to re-examine were the effects of natural-gas development.

Environmental groups and Alaska Native organizations had sued the Interior Department in 2008 to challenge the lease sale.

The Interior Department said Monday it had addressed issues raised by the environmental groups. In August, it released an environmental review that also analyzed the impacts of a potential oil spill.

The debate over Lease Sale 193 represents the latest skirmish in a broader battle over Arctic drilling. Last week, environmental groups filed a lawsuit to block Shell's plans to explore for oil in the Beaufort Sea, east of the Chukchi, saying the company had not yet developed an adequate strategy to respond to oil spills.

Shell has faced similar challenges in its efforts to secure air-quality permits for vessels slated to begin work in the Arctic in the summer of 2012.

Shell said Monday that the Obama administration's decision to move forward with Lease Sale 193 paved the way for U.S. officials to approve its exploration plan in the Chukchi.

"We believe that plan is technically and scientifically sound, and we look forward to begin exploring this critical part of our Alaska portfolio in 2012," Shell spokeswoman Kelly op de Weegh said.

Environmental groups that want to delay or altogether halt Arctic oil production are often at odds with Alaskan lawmakers, who promote their land and waters as a steady source of domestic oil. Earlier this year, Alaska officials said they planned to offer nearly 15 million acres of state-owned land and waters for oil-drilling leases.

President Barack Obama, meanwhile, pledged in May to hold annual lease sales in Alaska's Petroleum National Reserve. Gasoline prices at the time hovered near $4 a gallon, prompting a wave of criticism from Republicans who accused the president of blocking U.S. oil production.

Copyright (c) 2011 Dow Jones & Company, Inc.