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The White House changes course on allowing offshore drilling in the Atlantic

The U.S. Department of the Interior will not be offering leases for offshore drilling in the Atlantic in its next five-year plan, Secretary of the Interior Sally Jewell said in a press conference today. The decision is a reversal from the administration’s decision in January to offer leases to operators off the east coast of the United States.

Obama’s initial support of offshore drilling in the Atlantic drew the scorn of environmentalists, but was supported by governors, state legislators and senators from Virginia, North Carolina, South Carolina and Georgia. Lawmakers in the states’ capitals saw the proposal and potential new source of jobs and tax revenue.

The decision “protects sensitive resources and supports safe and responsible development of the nation’s domestic energy resources to create jobs and reduce our dependence on foreign oil,” said Jewell. “The proposal focuses potential lease sales in areas with the highest resource potential, greatest industry interest, and established infrastructure.”

The Atlantic was removed from the proposal for a number of reasons, according to the DOI. Among the issues that led to the change of heart were opposition from the Department of Defense, which operates naval bases along the coast, market issues, and opposition from coastal residents.

“The decision appeases extremists,” said American Petroleum Institute CEO Jack Gerard. “This inconsistent policy leads to unraveling the nation’s ability to be a global energy leader and has left the future of American energy and national security vulnerable for the geological challenges that lie ahead.”

Artic drilling back on the table, but will anyone bite?

Another change made from the last draft of the DOI’s five-year plan was to re-include certain areas in the Arctic for offshore drilling. The Obama administration will consider lease sales in the Chukchi Sea, Beaufort Sea and Cook Inlet in the 2017-2022 period.

Arctic drilling may not attract the same level of interest as the Atlantic, however. Royal Dutch Shell (ticker: RDSB, Shell.com) pulled the plug on its Arctic operations late last year after disappointing results. Shell took a $4.1 billion write down because of the decision, in addition to the $7 billion the company invested into the project up to that point, including $2.1 billion to acquire the license in the Chukchi Sea.

The regulatory minefield Shell had to navigate in order to produce from the Arctic, in addition to the difficulty associated with such extreme conditions, and disappointing exploration well results that were “not sufficient to warrant further exploration,” may be too strong of a repellant for other operators to consider purchasing leases in the Arctic over the next five years.

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