Obama bans new oil drilling on millions of acres of U.S. waters
WASHINGTON (Bloomberg) -- President Barack Obama banned new offshore oil and gas development in more than 100 million acres of the U.S. Arctic and undersea canyons in the Atlantic Ocean, an announcement certain to provoke a fight with the Republican-led Congress and his successor in the White House.
In a announcement coordinated between two of the world’s biggest oil producers, Canada committed to freeze new offshore leasing in its waters and review the matter every five years.
"These actions, and Canada’s parallel actions, protect a sensitive and unique ecosystem that is unlike any other region on Earth," Obama said in a written statement. "They reflect the scientific assessment that even with the high safety standards that both our countries have put in place, the risks of an oil spill in this region are significant and our ability to clean up from a spill in the region’s harsh conditions is limited."
The move -- announced a month before Obama leaves the White House -- is sure to draw a legal challenge, and there is scant legal precedent on the matter. President-elect Donald Trump may rescind Obama’s order, but the 1953 statute Obama is invoking doesn’t include an explicit provision for reversal and that question could be tied up in court for years.
Although Obama’s decision was cast primarily as safeguarding 31 ecologically precious Atlantic canyons and "fragile Arctic waters," it was a major victory for environmental activists who have been arguing that even broader climate change concerns should drive the White House to rule out drilling in mostly untouched U.S. waters. Environmentalists said the decision sends a message to the world that the U.S. knows the warming Earth can’t afford to burn "extreme oil" locked under now-protected Arctic and Atlantic waters.
"This is a gift to the public and to our kids that will rank with any in the history of American conservation," said Niel Lawrence, Alaska director of the Natural Resources Defense Council.
The decision builds on Obama’s earlier decision to rule out selling new leases in the Arctic, Atlantic and Pacific from 2017 to 2022. But Tuesday’s announcement, based on the so-called 12(a) provision of Outer Continental Shelf Lands Act, is different because it explicitly puts certain areas permanently off limits for oil exploration and production.
The massive underwater canyons in the Atlantic covered by Obama’s order were carved by glaciers or are the remnants of rivers that once flowed overland. According to a White House fact sheet, they are home to many species of fish, whales and other aquatic life and have been the subject of scientific exploration for decades.
In the Arctic, Obama is making all of the U.S. Chukchi Sea and the vast majority of U.S. Beaufort Sea waters -- all but 2.8 million acres near the shore -- indefinitely off limits for future oil and gas leasing. Only one parcel in the U.S. Chukchi Sea is still leased -- to Royal Dutch Shell, which drilled there in 2015.
Until now, the Outer Continental Shelf Lands Act has been used mostly to permanently preserve coral reefs, walrus feeding grounds and marine sanctuaries, though some presidents have used it more broadly on a temporary basis.
Although presidents have modified decisions made under the act from predecessors, they have never rescinded them altogether. A legal opinion from the U.S. attorney general in 1938 on similar designations under a different law said they “do not imply a power to undo.” And there have been no federal court rulings on the offshore energy statute.
Although oil companies have struggled to tap resources at the top of the globe, industry leaders say they will be needed to meet the world’s energy needs. The industry’s top trade group, the American Petroleum Institute, cast the idea of permanently withdrawing offshore waters as detrimental to national security.
"Blocking offshore exploration would weaken our national security, destroy good-paying jobs and could make energy less affordable for consumers," said Erik Milito, an upstream director for the institute.
API, the industry’s top trade group, expressed confidence that the Arctic withdrawals would be rolled back by Trump and the Republican-led Congress -- even if the matter is ultimately decided by federal courts.
"There’s no case law; there is very little precedent," said Andy Radford, offshore senior policy adviser at API. "There’s a number of avenues to explore to overturn a withdraw."
Obama’s Beaufort Sea withdrawals are not expected to affect drilling or production under existing leases, including 42 parcels that Royal Dutch Shell Plc, Hilcorp Energy Co., Eni Spa, Repsol Sa and other companies own there, according to a government registry last updated in June. It also isn’t expected to affect waters under state jurisdiction, including part of the Beaufort Sea where a Texas company recently trumpeted a potential 6-Bbbl discovery.
The restriction comes as Canadian Prime Minister Justin Trudeau, who has recently committed to a national carbon price while also approving two new oil pipelines, seeks to raise environmental protections and continue developing the country’s energy resources. Canada is home to the world’s third-largest proven oil reserves.
Obama and Trudeau have collaborated on Arctic issues before. In March, they pledged to collaborate in managing the Arctic, including taking unspecified “concrete steps” to protect at least 10 percent of its water. Although some oil companies hold exploration rights in Canada’s Beaufort waters, no drilling is currently taking place. Activity there is now stalled or uneconomical, said Michael Byers, a University of British Columbia professor.
"Today, President Obama and Prime Minister Trudeau are proud to launch actions ensuring a strong, sustainable and viable Arctic economy and ecosystem," a joint statement from the two governments said.
The decision drew a rebuke from Northern residents. Bob McLeod, premier of Canada’s Northwest Territories, said he was not involved in the decision. He spoke with Trudeau Tuesday and expressed concern about the economic impact the move will have.
"We thought we would have a collaborative relationship when it came to these types of decisions, and we’re very concerned," he said in an interview, adding such decisions should include Northern residents and not be "based on what would play to people in Vancouver, Toronto, Ottawa, what have you."
The territory will look to the federal government to support other industries if oil and gas development is reined in. "It’s a hard place to live. We need good jobs for people to support themselves and their families," McLeod said.
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