The Strategist

Obama wants to ban oil drilling in the Arctic and the Atlantic

12/20/2016 - 15:17

Still acting US President Barack Obama is going to block rights to offshore drilling in the largest part of the Arctic and the Atlantic. This step may limit oil production on the shelf for a long time, reports Bloomberg.

Bureau of Safetyand Environmental Enforcement BSEE
Bureau of Safetyand Environmental Enforcement BSEE
Obama is going to rely on provisions of a law adopted 1953. It empowers President with a right to exclude areas in coastal waters from oil and gas production. The decision has not been announced officially yet. Until now, the law has mainly been used for conservation of coral reefs and other measures steps to protect environment.

In the last days of his administration, Obama decided to respond to calls of environmental activists. The latter are looking for a way to fix environmental protection measures before President-elect Donald Trump takes office. In the near future, similar actions are expected from Canadian authorities.

With provision of the law, Obama can impose a longstanding ban on drilling on the shelf. Even new head of the White House would not be able to lift the ban soon, since the law allows litigations on this issue to go on for years.

According to Niel Lawrence, Alaska director of the Natural Resources Defense Council, the US Congress has not provided President with authority to lift the ban. Trump may try to turn it off, but it will probably be upheld. Lawrence added that it is in the competence of the US Congress. However, the Republican majority in Congress can promote an initiative to empower the President with such rights.

Leaders of the oil industry say that they have to exploit offshore oil and gas areas to meet energy needs of the world. American Petroleum Institute called President’s decision to protect marine areas "incredibly short-sighted."

In fact, ideas of abundant oil and gas reserves and other mineral resources of the Arctic shelf, and their importance to the global economy, are greatly exaggerated. In 2008, the US Geological Survey concluded that the Arctic shelf held about a quarter of the world's undiscovered oil and gas reserves. This statement quickly turned into a thesis that the area hides quarter or even one-third of the world's reserves of oil and gas. Practically, estimated recoverable resources of the Arctic shelf are much more modest compared to the world's known and undiscovered resources - about 6.5% for oil and 24% for gas.
Undoubtedly, this is quite a number. However, high costs associated with exploration, production and transportation, as well as modern low oil prices, would hinder many Arctic offshore projects from competing with terrestrial projects and unconventional hydrocarbon resources, such as shale gas.
Given long-term trend of transformation of the global energy sector, growing popularity of renewable sources, bets on development of low-carbon economy, as well as high risks of developing the Arctic offshore fields, the question of when and to what extent the hydrocarbon (and other minerals) Arctic marine resources will be demanded by world markets is still open today.