The Arctic Drilling Ban: Much Ado About Nothing?

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Outgoing President Barack Obama is about to invoke a 1953 law in a bid to protect the Arctic and Atlantic shelf of the United States from the claws of the oil and gas industry, but below the surface, it may just be theoretical.

The Outer Continental Shelf Land Act and more specifically its provision 12(a) has only been invoked a few times since the passing of the legislation and has always, until now, concerned discrete areas.

This time will be the first when the provision is invoked to protect such large regions of the country’s shelf and it’s looking like the invocation will be more of a symbolic gesture to the environmentalist lobby than anything of practical significance going forward.

On the face of it, Obama’s move would interfere with President-elect Donald Trump’s energy policy priorities, where drilling for oil and gas in the Arctic and Atlantic shelf features prominently, according to a memo from Thomas Pyle, Trump’s transition team energy policy leader.

While the Trump administration has been expected to open up more federal lands for drilling, the Pyle memo singled out the Chukchi and Beaufort Seas, the Atlantic Ocean, the National Petroleum Reserve-Alaska (NPRA), and federal lands in the Western US.

Invoking provision 12(a) from the OCSLA could theoretically ban oil and gas licensing in these areas for an indefinite future. The powers to do this lay exclusively with the President and the decision cannot be rescinded automatically by a future president.

So, if Trump wants to remove the ban, he would have to go to court. The court, for its part, according to the Alaska director of the Natural Resources Defense Council, Niel Lawrence, will hand matters over to Congress.

Congress, Republican-dominated as it is, will, in turn, revoke Obama’s invocation of the controversial provision, which quite simply states that the U.S. President can “from time to time, withdraw from disposition any of the unleased lands of the outer continental shelf.”

The court proceedings could take years, and this is what some observers see as problematic for the Trump administration. However, at the moment, the oil and gas industry is still weak and unable to commit the substantial amounts of investment needed for Arctic exploration. Big Oil already got burned in the Arctic, shelving projects and giving up licenses due to the high cost of the projects.

The Atlantic shelf is not as hostile but it will still take time for Big Oil and its smaller brothers to get back firmly on the cash flow positive path and be able to afford the investments. They need a few years for this and these few years nicely coincide with an earlier decision by Obama to suspend the sale of new exploration leases in the Arctic, the Atlantic, and the Pacific shelf from 2017 to 2022. Invoking provision 12(a) from the OCSLA, however, as Bloomberg points out, would explicitly put certain parts of the U.S. continental shelf “off limits” for the energy industry.

Chances are that the Trump administration would use all tools at its disposal to overcome this obstacle and will meanwhile seek ways around it, such as parts of the shelf that are under state jurisdiction. What’s more, given the right motivation, Congress could actually strike down the 12(a) provision altogether. Perhaps it’s time for the already very agitated environmentalist lobby to tread carefully lest it incurs greater damage by unduly antagonizing the new administration.

By Irina Slav for Oilprice.com

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