Federal Government Thwarts Arctic Energy Development – Yet Again

November 18, 2015 in Blog

Yesterday, Statoil announced that it was abandoning any further exploration efforts related to its leases off the north coast of Alaska. While the company cited more competitive opportunities for investment as the reason for the exit, many others close to the issue called out the reason behind the noncompetitive nature of the Alaskan assets – a federal regulatory environment that makes it practically impossible to invest in. This marks the second major company to announce their Arctic exit this fall.

A spokeswoman for the House Energy and Natural Resources committee summed up the situation perfectly, declaring:

“Statoil follows Shell to flee the Arctic thanks to Obama’s regulatory onslaught in the region, which has made a tough economic outlook impossible for companies to overcome.”

Statoil purchased its Alaska leases back in 2008, believing in good faith that the government would allow them to develop the resources. The company even announced in 2012 that it was stepping up operations in the Arctic by tripling its research budget. Of course, one would believe the administration should have made every effort to work with Statoil and other companies who were willing to invest significant resources into the region.

Yet, instead of fostering investment that would create American jobs, further U.S. energy independence, and help build a brighter economic future for the state of Alaska, what did the federal government do?  They created a regulatory environment so cumbersome and uncertain that sent some of the largest and most capable companies in the world packing from a region estimated to hold over one-fifth of the world’s untapped oil and gas reserves.

Alaska leaders once again expressed disappointment and exasperation with the current federal regulatory environment. Sen. Lisa Murkowski stated:

 “I am very concerned that, for the second time in as many months, a major company has decided   to walk away from Alaska because of the uncertainty surrounding our federal government’s support for Arctic development […] Low oil prices may have contributed to Statoil’s decision, but the real project killer was this administration’s refusal to grant lease extensions; its imposition of a complicated, drawn-out, and ever-changing regulatory process”

State Senator Lesil McGuire of Anchorage also conveyed her discontent with the administration’s Arctic priorities saying:

The federal government has placed economic development for the people of the north as one of  their three Arctic Council Chairmanship priorities, but so far that priority has only materialized on paper”

There seems to be a tremendous misunderstanding in the federal government about what leasing mineral rights entails. Generally, when you lease something, you expect to be able to reasonably exercise the rights you paid for.  Unfortunately, that has not been the case in Alaska where the federal government has pocketed billions (yes, billions) in lease bonus payments while continually raising the bar, moving the bar, hiding the bar and wondering why no one can or will jump over it.

Most regrettably, the federal government does not seem to understand how important Arctic development is both to local Alaskan communities, and to people across America. Our entire nation can benefit economically from responsible development of U.S. Arctic resources. Instead of taking advantage of this opportunity, the federal government has one again quashed investment in the region.

We need clear, sensible regulations in the Arctic in order to move forward – and we need them soon.