Royal Dutch Shell will abandon plans to drill in the Arctic this summer following a court ruling that put its program in doubt.
The U.S. Court of Appeals for the Ninth Circuit ruled last week that the Interior Department erred in its environmental assessment underpinning the 2008 lease sale in the Chukchi Sea off Alaska's northwest coast, undervaluing the amount of potential development. New Shell CEO Ben van Beurden said that made the legal landscape too murky for this summer.
“This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014,” van Beurden said. “We will look to relevant agencies and the court to resolve their open legal issues as quickly as possible.”
The move is another blow to Shell's Arctic ambitions. A series of mishaps in 2012 forced Shell to skip the drilling season last year as well, and it scaled back its efforts for this summer by forgoing drilling in the Beaufort Sea in the blueprint it submitted with Interior.
The firm has been counting on Arctic drilling to boost profits, which it said dropped 48 percent during the fourth quarter.
Green groups will likely cheer the news. They have been pressuring Shell and the Obama administration to eschew Arctic drilling altogether, saying that the environment is too harsh and ecosystem too sensitive to do it properly.
Those groups had urged the White House to scrap Shell's lease following the Ninth Circuit ruling last week. Those calls will likely continue in the wake of Shell's announcement.
"Shell is finally recognizing what we've been saying all along, that offshore drilling in the Arctic is risky, costly and simply not a good bet from a business perspective," said Jacqueline Savitz, vice president for U.S. oceans with conservation group Oceana.