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Hilcorp’s plan for a 23-acre gravel island, about the size of 17.4 football fields, has drawn mixed reviews from conservationists and outright condemnation from environmentalists who believe the oil should stay in the ground.
The company says it’s walking away from oil exploration in U.S. Arctic waters for the “foreseeable future,” but it’s keeping its options open.
The Interior Department announced it was canceling government auctions of drilling rights in the Chukchi and Beaufort seas, previously scheduled for 2016 and 2017 respectively. At the same time, it formally rejected bids by Statoil and Shell for more time to search for crude under their existing Arctic leases.
Shell’s aggressive bidding for drilling rights in the Chukchi Sea in 2008 put the company on a trajectory that ended with its $7 billion bust in the Arctic Ocean.
After failing to find commercially viable quantities of oil and gas at its Chukchi Sea well, Shell said it will halt exploring U.S. Arctic waters and could take a $4.1 billion write down.
Although other gravel islands have been built in the Beaufort Sea, Hilcorp’s proposed Liberty project would be the first oil production facility located entirely in federal waters off the Alaska coast.
Oil companies could get 10 more years to drill on their Arctic leases, under a provision in a broader offshore drilling bill advancing in the Senate.
The approval means Shell has just four remaining federal permits that are essential for it to resume drilling in the Chukchi Sea this summer.
Environmentalists said the ruling demonstrates federal policies need an update to ensure oil spill response plans get tougher scrutiny.
The NTSB report comes at a pivotal time for Shell, which has asked federal regulators for permission to resume exploratory oil drilling in the Chukchi Sea as soon as July.