401kRollover Blog

The Obama administration is planning to move forward with plans to issue new oil and gas drilling regulations for the Arctic Ocean despite the fact there is now no drilling in the Arctic. Royal Dutch Shell announced its decision to pull out of drilling in the area “for the foreseeable future” at the end of September. It was a costly decision, both for Shell which stands to lose $2.6 trillion by withdrawing from the area, and arguably for the Alaska region.

Given this, the Obama administration’s insistence on moving ahead with costly plans to “bring clarity” to existing drilling regulations for the area seems illogical. Republicans and the oil industry have criticized the measures as rigid, costly and ultimately unnecessary while Democrats protest that the rules do not go far enough to prevent future oil spills. Shell’s reasons for exiting the area – a lack of promising findings, the halving of the oil price since last year and the continued political risk associated with exploring such an environmentally sensitive area – do not seem likely to change anytime soon. Why, then, the continued insistence on a program of regulation which is set to serve no-one?

The director of the Interior Department’s Bureau of Safety and Environmental Enforcement (BSEE) Brian Salerno told Platts in an interview that it is something that BSEE feels “we need to do to provide clarity, not only to the industry, but also to the public as to what will be expected, should another operator decide to exercise their rights to the leases that they hold.” Other companies including ConocoPhillips and Statoil hold drilling rights for the area but none of these companies have current plans to drill there.

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