Shell Halts Alaska Drilling After U.S. Appeal Court Ruling

Royal Dutch Shell Plc (RDSA) put plans to drill in Alaska’s Arctic waters on hold for a second year as a court said the U.S. illegally opened the area to exploration.

Europe’s biggest oil company, which spent about $5 billion over seven years preparing to explore the Beaufort and Chukchi seas, halted work last year after a series of mishaps in 2012.

“The lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014,” Chief Executive Officer Ben van Beurden said in a statement as the company released its earnings. “We will look to relevant agencies and the court to resolve their open legal issues as quickly as possible.”

A federal appeals court ruled on Jan. 22 that the decision to open almost 30 million acres (12 million hectares) to energy exploration broke the law. Greenpeace campaigners hailed Shell’s decision as a victory for efforts to abolish Arctic drilling.

The region has heated up twice as fast as the rest of the planet in the past three decades. By August 2013, sea ice had lost 76 percent of its volume compared with 1979, according to the University of Washington’s Polar Ice Center. The receding ice exposes previously unreachable oil under the sea.

“Shell’s decision to gamble on the Arctic was a mistake of epic proportions,” Greenpeace said today in an e-mailed statement. “We are drawing a line in the ice here to say to these oil companies ‘You come no further.’”

22 Ships

Shell sent 22 ships to Alaska’s northern coast in 2012 to begin searching for oil. First, a Pennsylvania-size patch of ocean froze in 48 hours, forcing Shell to delay drilling, then a rig broke free and ran aground in heavy surf.

“Shell Oil was forced to abandon its plans to drill in the Arctic Ocean in 2013 due to its own lack of preparedness and technical failures, together with Alaska’s harsh and unpredictable conditions,” Cindy Shogan, executive director of the Alaska Wilderness League, said today in a statement.

Oceana, a group focused on ocean conservation, said Shell failed to discuss the 2012 mishaps or provide assurances that flaws have been eliminated from its drilling plan.

“Today’s announcement that it will back away in 2014 confirms once again that the company’s proposed exploration is neither prudent nor feasible,” Susan Murray, the group’s deputy vice president for the Pacific, said in a statement.

The Sierra Club campaign group sued the government over the $2.6 billion sale of development leases for Chukchi Sea off the northwest Alaskan coast in 2008, saying the Interior Department underestimated the amount of oil they held.

The U.S. Court of Appeals in San Francisco last week ruled that the figure was “chosen arbitrarily.” Plaintiffs may now ask for a court order to cancel the Arctic leases.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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