US, Canada designate nearly all Arctic waters off limits to drilling: White House

Washington (Platts)--20 Dec 2016 527 pm EST/2227 GMT

The US and Canada agreed Tuesday to designate the majority of their Arctic waters off limits to oil and natural gas drilling.

The US is also permanently withdrawing areas of its Atlantic waters from future oil and gas leasing as well, according to the US Department of the Interior.

In a statement, the White House said the "vast majority" of federal US waters in the Chukchi and Beaufort seas and all Arctic Canadian waters would be "indefinitely off limits" to offshore oil and gas leasing.

The leasing prohibitions on Canadian waters would be reviewed every five years through a "climate and marine science-based life-cycle assessment," the White House said.

The withdrawal areas cover 3.8 million acres in the north and mid-Atlantic Ocean off the East Coast and 115 million acres in the US Arctic Ocean.

President Barack Obama will use Section 12(a) of the Outer Continental Shelf Lands Act to permanently block new oil and gas development in the Arctic and Atlantic, according to Jessica Kershaw, an Interior spokeswoman. The 63-year-old provision allows the president to "withdraw from disposition" any unleased lands in federal waters.

Obama's decision, made with just a month left in his presidency, sets up what are likely to be years of legal battles for the US oil and gas industry and the incoming Trump administration to open federal Arctic and Atlantic waters to drilling.

"We disagree with this last-minute political rhetoric coming from the Obama Administration and contest this decision by the outgoing administration as disingenuous," Dan Naatz, a senior vice president with the Independent Petroleum Association of America, said in a statement.

"With exactly one month left in office, President Obama chose to succumb to environmental extremists demands to keep our nation's affordable and abundant energy supplies away from those who need it the most by keeping them in the ground," he said.

Tuesday's announcement follows a November decision by the Obama administration to remove planned sales in the Chukchi and Beaufort seas from the final 2017-2022 federal offshore leasing plan. A proposed Atlantic lease sale had been removed from that plan in March.

While President-elect Donald Trump was expected to redo the leasing plan to include additional sales in federal waters, the process was expected to take years.

But with the blocks on leasing for much of the Arctic and, possibly, portions of the Atlantic, the incoming Trump administration would likely face a tough legal battle to get the decision reversed.

"It's unclear if [Trump] would want to change something that has such clear legal authority," said one source Tuesday.

But Christopher Guith, a senior vice president for policy at the US Chamber of Commerce's Institute for 21st Century Energy, said Tuesday the decision could be easily reversed by Trump once he is sworn into office.

"There's no such thing as a permanent withdrawal," Guith said. "It can be repealed with the stroke of a pen."

According to the latest government data on recoverable oil resources, offshore Alaska has an estimated 26.6 billion barrels of oil and 131.45 Tcf of gas. There are also 1.35 billion barrels of oil and 9.87 Tcf of gas in the North Atlantic and 1.42 billion barrels of oil and 19.36 Tcf of gas in the Mid-Atlantic.

--Brian Scheid, brian.scheid@spglobal.com

--Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com

© 2016 Platts, The McGraw-Hill Companies Inc. All rights reserved.  To subscribe or visit go to:  http://www.platts.com

http://www.platts.com/latest-news/oil/washington/us-canada-designate-nearly-all-arctic-waters-21401460