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Obama moves to block development in 9.8 million acres of Arctic Ocean

Citing biodiversity and Alaska Native subsistence whaling, the Obama administration moved to block development in 9.8 million acres within the Beaufort and Chukchi seas as part of a new five-year outer continental shelf oil and gas leasing program, the draft of which was released Tuesday morning by the Department of the Interior.

The announcement came two days after President Barack Obama said he planned to ask Congress to declare much of the Arctic National Wildlife Refuge in Northeast Alaska as wilderness, including the possibly oil-and-gas-rich coastal plain -- and a month after the president closed waters in and around Bristol Bay to oil and gas development.

Those moves come at a time of increased anxiety within Alaska over the future of the state's oil and gas industry, as well as the impact falling oil prices have on the state's budget. Oil production in the state is declining, despite efforts to jumpstart additional production.

The Draft Proposed Program (PDF) released Tuesday includes 14 potential lease sales, three of which are in the Alaska region.

The White House released maps of the Beaufort and Chukchi seas, showing the excluded areas. According to the U.S. Department of Interior, four of the five areas off-limits in the current draft were also off-limits in the previous five-year plan, which covered 2012-2017. The fifth area is around Hanna Shoal in the Chukchi Sea.

The Hanna Shoal is a shallow and biologically productive site important to walruses and other animals. For walruses, it is the primary Chukchi Sea feeding grounds from June to September, according to the U.S. Geological Survey.

Some of the leases sold in the 2008 sale, including leases acquired by Royal Dutch Shell, are just outside the Hanna Shoal exclusion area. A few leases sold in the 2008 sale were acquired by Repsol, a Spanish company that has not submitted any drilling proposals.

The other areas -- a coastal buffer in the Chukchi Sea, the Barrow Canyon in the northeast Chukchi Sea and the subsistence-hunting areas around Barrow and Kaktovik -- have been routinely omitted from federal offshore lease sales. But while these areas were "deferred" in previous sales, pending further study, the new plan would block development there forever.

"The withdrawal of those areas permanently removes them from consideration," said Robert Dillon, communications director for the Senate Energy and Natural Resources Committee, which is chaired by Alaska Sen. Lisa Murkowski. "That is a significant difference."

On a conference call to discuss the plan, Interior Secretary Sally Jewell was asked about criticism from Alaska's elected leaders, who have said the federal government is stifling resource extraction in the state.

She responded that some areas are too special to develop, calling Hanna Shoal, about 100 miles off Alaska's northwest coast, an "ocean garden that drives a lot of the marine life."

Jewell also downplayed the impact of Tuesday's announcement, noting that most of the areas excluded from leasing had also been excluded under previous plans.

"I don't think anyone that looks at those maps would say that is an unreasonable amount," she said. "Those areas, while being taken off the table, are very small in comparison to the areas that are on the table."

But in a statement released Tuesday morning, Sen. Murkowski, Alaska's senior senator, criticized the plan.

"This administration is determined to shut down oil and gas production in Alaska's federal areas -- and this offshore plan is yet another example of their short-sighted thinking," Murkowski said. "The president's indefinite withdrawal of broad areas of the Beaufort and Chukchi seas is the same unilateral approach this administration is taking in placing restrictions on the vast energy resources in ANWR and the NPR-A."

In addition to the Senate Energy Committee, Murkowski chairs a subcommittee that controls the Interior Department's budget, and she's been sharply critical of the Obama administration since the president's announcement this weekend that he'd seek wilderness designation for ANWR.

A top Obama aide on Monday said Murkowski had overreacted to the weekend announcement. But on the conference call, Jewell said she still respects Murkowski's "passion for Alaska, and the issues that are important to Alaskans."

"I am very willing to continue to work with Sen. Murkowski on the issues, and there are many issues in Alaska where I believe we agree," said Jewell, who added that she worked on the trans-Alaska pipeline as a college student.

The new program won't affect existing Outer Continental Shelf leases held by Royal Dutch Shell in the Chukchi Sea, according to Jewell.

"There's nothing we're announcing today that impacts Shell's plans," Jewell said at Tuesday morning's press conference. "They have valid existing leases."

Shell has struggled with a drilling program in those leases. A lawsuit challenged how the leases were awarded, and missteps -- including the grounding of the drill rig Kulluk and the criminal conviction of Shell drilling contractor Noble Drilling -- also hurt the company's efforts.

In a statement, Shell did not comment on whether today's news affects its efforts to continue drilling in the U.S. Arctic Ocean, but it appears committed to moving forward.

The company looked ahead to future decisions that need to happen for it to complete drilling in the potentially oil-rich Burger prospect in the Chukchi Sea, about 70 miles northwest of the Arctic village of Wainwright.

"As for Alaska, our focus remains the Chukchi leases we have and the potential for a future drilling program," a statement from Shell said.

For that to happen, progress is needed in a number of areas, including the Bureau of Ocean Energy Management completing the Supplemental Environmental Impact Statement for Lease Sale 193, involving the sale in 2008 when Shell spent about $2 billion to acquire leases.

The company also needs the "necessary permits" as well as "complete confidence that we can execute a program safely and responsibly."

A Shell spokesman would not comment on how the plunge in low oil prices will affect the costly project.

As for the national sum of Jewell's announcement on Tuesday, Shell said the decision affecting offshore development is "positive recognition" that oil and gas development will continue playing an important role off the nation's coasts. But the company said it was disappointed in Jewell's decision to exclude promising acreage in the eastern Gulf of Mexico.

Jewell also noted that the OCS program announced Tuesday doesn't affect oil and gas development in the National Petroleum Reserve-Alaska, where ConocoPhillips has recently sparred with the Bureau of Land Management over approval for an infrastructure project Conoco needs to build to develop a prospect in the reserve known as Greater Moose's Tooth Unit 1. The BLM is a part of the Department of the Interior.

"We are fully supportive on ongoing exploration and production in the NPR in Alaska," Jewell said, while adding, "we can't do anything about oil prices."

Jewell confirmed during the press conference that she would be visiting Alaska later this year.

The new draft plan also opens part of the Atlantic Ocean to offshore oil and gas exploration for the first time.

Reporters Alex DeMarban and Yereth Rosen contributed to this report.

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