Shell Suspends Oil Drilling Effort In Alaska's Arctic Waters

The Royal Dutch Shell oil drilling rig Polar Pioneer is towed toward a dock in Elliott Bay in Seattle in May.

Elaine Thompson / AP

Royal Dutch Shell is suspending an ambitious effort to become the first company to produce oil in Alaska's Arctic waters, citing a lack of return on what has already been a multi-billion dollar investment.

The announcement posted on Monday comes after the Dutch-held company spent years pushing through a tough regulatory system to gain permission to drill — a right that was bitterly fought by environmentalists.

Shell said it will "cease further exploration activity in offshore Alaska for the foreseeable future" because of lack of any major oil in a test well, the high costs involved, and the "challenging and unpredictable" federal regulatory environment.

Shell has spent more than $7 billion on the exploration effort, according to the Associated Press.

Despite strong pushback from environmentalists who worried about the effects of a major spill on wildlife already grappling with changes brought on by climate change, the drilling project had been seen as a potential game changer for U.S. oil production, which has declined sharply.

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Marvin Odum, director of Shell Upstream Americas, said in a statement that the company continues to see "important exploration potential" in an area that is roughly half the size of the Gulf of Mexico.

"However," he added, "this is a clearly disappointing exploration outcome for this part of the basin."

The so-called Burger J exploration well, located in Alaska’s Chukchi Sea, was drilled to a depth of 6,800 feet. And while indications of oil and gas were found in the well, Shell said they were not sufficient to warrant further exploration.

The well will be sealed and abandoned in line with U.S. regulations, Shell added.

Environmentalists cheered the development, calling it a win for a hard fought campaign to block the drilling, despite the Obama administration's controversial decision to grant a permit — the first for the remote area in more than 20 years.

A group of kayakers raft together in April outside Seattle to protest Royal Dutch Shell drilling effort.

Elaine Thompson / AP

Annie Leonard, executive director of Greenpeace USA, which staged a high-profile campaign against the drilling, called Shell's announcement an historic victory.

“This is a victory for everyone who has stood up for the Arctic. Whether they took to kayaks or canoes, rappelled from bridges, or spread the news in their own communities, millions of people around the world have taken action against Arctic drilling," she said in a statement. "Today they have made history."

In late July, Greenpeace activists hanging from a bridge in Oregon momentarily blocked a newly repaired Shell capping stack from returning to Alaska.

Shell warned that it expects to take a financial hit in its third quarter as a result of the exploration effort and continued efforts to safely "de-mobilize people and equipment" from the Chukchi Sea.

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