Arctic Regulations: No One Wins

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October 5, 2015 in Blog

It’s been one week since Shell announced its decision to halt its Chukchi Sea drilling project off the Northern coast of Alaska. Environmental organizations have been exuberantly cheering what they are calling a “victory” and a “huge win” – even claiming credit for Shell’s decision – but Shell’s announcement is a victory only for these groups’ fundraising efforts. No one else benefits – and certainly not the people of Alaska.

Suspending plans to drill in the Arctic  threatens Alaska’s economy, not least by sending another blow to the Trans-Alaska Pipeline System (TAPS), a pipeline that delivers oil from Alaska to the Lower 48 and contributes essential tax revenues to the state government – but that is threatened with extinction as throughput continues to decline. Alaska Governor Bill Walker (I) has been vocal about the effect that the Chukchi exit will have on the pipeline and the local communities that rely on oil and gas revenues to survive: “We need to get some oil in that pipeline, and we need to do it as quickly as possible.”

In addition to Gov. Walker, many other Alaskan leaders and national organizations have lamented the negative impacts this decision will have on the Alaskan people. For example, the National Ocean Industries Association said,

“It is disappointing on a number of fronts that due to a variety of factors, including regulatory constraints and cost issues, Shell has decided to halt their offshore drilling campaign in Alaska.  First, the U.S. will lack energy source diversification for the foreseeable future since low oil prices and high drilling costs in the Arctic will likely impact future exploration activity in the Alaskan OCS.  Second, enormous economic opportunities for Native Alaskans have been delayed, if not lost, for the immediate future.  Third, the U.S. will continue to lag other nations in the exploration and understanding of Arctic offshore areas.”

Similarly, Senator Lisa Murkowski (R-AK) said,

“I am extremely disappointed by this decision, just as I have been deeply frustrated by the years-long path that led to it. In the more than seven years that Shell has held leases in the Chukchi, it has only recently been allowed to complete a single well. What we have here is a case in which a company’s commercial efforts could not overcome a burdensome and often contradictory regulatory environment.”

Halting offshore Arctic exploration activities means Alaska will have to forego the massive job-creating potential that have been highlighted by many studies. Recent projections indicate that 35,000 Alaskan jobs could be created from Arctic offshore development alone, and regions outside of Alaska stood to benefit as well: For example, a recent economic study demonstrated that the Puget Sound area has already absorbed $331 million thanks to Arctic development – and that it could receive much more if development continued.

Despite activist groups’ attempts to claim credit, Shell’s decision ultimately came down to the regulatory delays that made development prohibitively expensive – regulatory red tape that will cost U.S. jobs and harm the economies of local Alaskan communities. With America’s Arctic drilling program on hold, no one wins – no one except environmental groups that seek to benefit at the expense of local Alaskans.