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Shell Scraps 2014 Arctic Exploration, Cites 9th Circuit’s Lease Decision

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by Publius
Posted January 31, 2014, 1:13 PM

According to Greenwire:

Royal Dutch Shell PLC announced today it will not drill for oil this summer in the Arctic, citing a federal appeals court decision this month that cast doubt over its leases.

It was another stunning setback for the Anglo-Dutch company that has spent roughly $6 billion over the past eight years hoping to become the first company in decades to tap the U.S. Arctic's estimated 27 billion barrels of oil.

Shell's new CEO, Ben van Beurden, told investors the 9th U.S. Circuit Court of Appeals decision raises formidable legal obstacles to moving forward.

"This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014," van Beurden said. "We will look to relevant agencies and the court to resolve their open legal issues as quickly as possible."

In a 2-1 decision last week, the 9th Circuit judges ruled that the Interior Department's environmental analysis of its 2008 lease sale for oil and gas development in Alaska's Chukchi Sea was flawed because it failed to adequately justify its estimate that oil companies will likely extract 1 billion barrels of oil from the sale (E&ENews PM, Jan. 22).

Shell spent more than $2 billion acquiring leases in that sale, including the parcels it intended to explore this summer.

The Obama administration must decide whether to appeal the court ruling or begin the long, arduous process of rewriting the Bureau of Ocean Energy Management's environmental document. That process could take more than a year to complete.

Shell spokesman Curtis Smith said the court's decision will delay efforts to understand how much oil and gas is in the Chukchi Sea. It "further delays the potential creation of tens of thousands of jobs, billions of dollars in tax revenue and much-needed new oil for the Trans-Alaska Pipeline," he said.

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