Editorials

Shell’s retreat on arctic oil just makes sense

Activists in July dangle from the St. Johns Bridge in Portland to protest the departure of a Royal Dutch Shell PLC icebreaker that was part of the company’s oil exploration in the Alaskan Arctic. The company this week announced it was retreating from Arctic projects.
Activists in July dangle from the St. Johns Bridge in Portland to protest the departure of a Royal Dutch Shell PLC icebreaker that was part of the company’s oil exploration in the Alaskan Arctic. The company this week announced it was retreating from Arctic projects. The Associated Press

Environmentalists are high-fiving and bitter-enders are blaming government regulation. But this week’s decision by Royal Dutch Shell to abandon oil exploration off the coast of the Alaskan Arctic was mainly about supply and demand.

Thanks to gushers from fracking and falling demand in the slowing economies of Europe and China, oil prices have fallen more than 50 percent since last summer. Hopes for a rebound, meanwhile, have dimmed as the glutted world market braces for a fresh supply from Iran.

Yes, protesters sought vigorously, as they have for years, to keep the Arctic wilderness pristine and to protect its polar bears, walruses and sea life. In July, they dangled from bridges in the Pacific Northwest, trying to block an icebreaker bound for a Shell drilling operation. Environmental activists delayed the company’s Alaskan effort in every way they could.

In the statement it released this week, Shell mentioned “the challenging and unpredictable federal regulatory environment in offshore Alaska” as one reason among several for its decision.

But “Stop Big Oil” signs have been around for generations, and federal regulations are part of the cost of doing business in the energy sector. The regulatory snark came off more as a parting shot at the end of a list of much more obvious factors, beginning with the fact that the company didn’t find enough oil in exploratory wells to make a multibillion-dollar investment pencil out.

Add the $7 billion Shell has spent looking for oil off the Alaskan coast for the past nine years and the storms and accidents that have plagued its vessels and equipment, and it’s clear, whatever political arguments both sides now muster, that greenbacks simply did what Greenpeace couldn’t. Indeed, oil exploration projects are being scaled back worldwide, so Shell isn’t the only corporation that’s doing the math.

The retreat from oil exploration creates winners and losers. Alaska’s wildlife will be better off; the state’s human recipients of oil jobs and royalty checks temporarily less so. For the nation, however, the industry’s move creates a valuable opening.

With a now-ample supply of domestic oil, we can afford to shift more aggressively into cleaner, less geopolitically fraught energy sources. California is pointing the way, and the outrage over the Volkswagen emissions scandal indicates that the American public wants change, too.

U.S. fossil fuel industries are important, and we want to keep them. But the federal government should resist pressure from nervous Alaskans to open the Arctic National Wildlife Refuge to natural gas drilling, and lawmakers should resist ideological attempts to weaken U.S. regulations, which ensure that the world has at least one source of oil that has been developed responsibly and without human exploitation.

Meanwhile, 2016 voters should ensure that the next occupant of the White House realizes that it’s in everyone’s enlightened self-interest to diversify.

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