President Barack Obama on Tuesday moved to indefinitely block drilling in vast swaths of U.S. waters.
The president had been expected to take the action by invoking a provision in a 1953 law that governs offshore leases, as CNBC previously reported.
The law allows a president to withdraw any currently unleased lands in the Outer Continental Shelf from future lease sales. There is no provision in the law that allows the executive’s successor to repeal the decision, so President-elect Donald Trump would not be able to easily brush aside the action.
Trump has vowed to open more federal land to oil and natural gas production in a bid to boost U.S. output. Obama on Tuesday said he would designate “the bulk of our Arctic water and certain areas in the Atlantic Ocean as indefinitely off limits to future oil and gas leasing, though the prospects for drilling in the affected areas in the near future were already questionable.
U.S. Outer Continental Shelf
The lands covered include the bulk of the Beaufort and Chukchi seas in the Arctic and 31 underwater canyons in the Atlantic.
Canada also imposed a five-year ban on all oil and gas drilling licensing in the Canadian Arctic. The moratorium will be reviewed every five years.
“These actions, and Canada’s parallel actions, protect a sensitive and unique ecosystem that is unlike any other region on earth,” Obama said in a statement.
“They reflect the scientific assessment that, even with the high safety standards that both our countries have put in place, the risks of an oil spill in this region are significant and our ability to clean up from a spill in the region’s harsh conditions is limited.”
The action potentially tees up a battle that touches on hot-button issues: environmental protection, energy independence, climate change, and the scope of executive power.
Like other efforts by the Obama administration to advance environmental protection through executive action, it could also be challenged in the courts. It could get tied up there throughout much of Trump’s four-year term.
The Republican-controlled Congress could also try to change the law.
The provision, contained in the 1953 Outer Continental Shelf Lands Act, has been invoked in the past to set aside smaller portions of the Outer Continental Shelf, such as coral reefs or natural habitats. Presidents George H.W. Bush and Bill Clinton used the provision to block drilling in much of the Outer Continental Shelf, but for limited periods.
The Obama administration’s action marks the broadest use of the statute ever because it would be far-reaching in terms of the lands it would protect and come without an expiration date.
Provision 12(a) of the law states, “The President of the United States may, from time to time, withdraw from disposition any of the unleased lands of the outer Continental Shelf.”
Momentum to use the provision has been building this year. In May, a coalition of environmental groups circulated a fact sheet that highlighted the authority provided under 12(a).
In September, Democratic Congress members Frank Pallone, Jr. and Jared Huffman sent a letter to Obama urging him to exercise that authority. The letter was signed by 74 lawmakers, almost all Democrats, and contained quotes from representatives from some of the groups that produced the fact sheet in May.
Environmentalists say drilling in the Arctic and Atlantic puts the waters at immediate risk, for oil and gas that would not come online for years, after a transition to cleaner energy sources could be under way.
“The Arctic Ocean is ground zero for the impacts of climate change, and any oil production there would be decades away and inconsistent with addressing climate change before it is too late,” the League of Conservation Voters said in a statement after the announcement.
The White House echoed that sentiment on Tuesday, saying, “it would take decades to fully develop the production infrastructure necessary for any large-scale oil and gas leasing production in the region — at a time when we need to continue to move decisively away from fossil fuels.
Industry groups acknowledge that offshore projects come with long lead times, but they say deepwater oil will be critical for meeting the country’s future energy needs.
“Our national security depends on our ability to produce oil and natural gas here in the United States,” Erik Milito, upstream director at the American Petroleum Institute, said in a statement. “This proposal would take us in the wrong direction just as we have become world leader in production and refining of oil and natural gas and in reduction of carbon emissions.”
API said it believes Obama’s action can be overturned and said it looked forward to working with the Trump administration.
To be sure, any drilling in the affected waters already faced significant challenges in the coming years.
Energy companies have pulled out of Alaska’s Arctic waters, where conditions can be perilous and weather conditions allow drillers to operate for only a few months of the year. In light of more than two years of weak oil prices, drillers could not justify the costs and risks of exploration there.
Last month, the Bureau of Ocean Energy Management did not include any blocks in the Atlantic, Arctic or Pacific in the latest five-year plan to lease offshore land controlled by the government. Trump could scrap that plan and develop a new auction schedule for the 2017 to 2022 period, but it typically takes two to three years to put together a new program.
Drilling in the Atlantic has also faced challenges from a number of other sources, including coastal states that could be affected by a spill, as well as the Pentagon, which said drilling in the Atlantic could disrupt naval exercises.
The federal government spent $1.5 billion to compensate drillers whose offshore leases were canceled due to local and state opposition in North Carolina, Florida, California and Alaska, according to a 2012 Congressional Budget Office review.
Fifty-nine percent of voters surveyed in September said they would support blocking leasing in the Arctic and Atlantic, according to a study from Hart Research Associates that was paid for by the NRDC and the League of Conservation Voters. The survey polled 1,103 registered voters by phone and had a margin of error plus or minus 2.9 percentage points.
In response, the pro-drilling Arctic Energy Center conducted a survey of 511 Alaskans that found 76 percent supported drilling in Arctic waters. The margin of error was plus or minus 4.4 percentage points. Alaskans receive a cash disbursement from the state every year that is underwritten by oil revenues.
In his statement, Obama said significant production in the Arctic will not occur in the current low oil price environment, citing the Department of the Interior analysis. He said Arctic communities must focus on economic diversification.
— CNBC’s Eamon Javers contributed reporting to this story.
