Nathan Bomey

USA TODAY

The Obama administration will abandon its plan to allow new offshore oil drilling on the southeast coast of the U.S., dealing a blow to petroleum companies and marking a victory for environmentalists, coastal residents and the U.S. military.

The Interior Department said Tuesday it will not auction off drilling rights for Atlantic Ocean waters off the coast of Virginia, North Carolina, South Carolina, Georgia and Florida.

At the same time, the Obama administration opened the door to the possibility of allowing limited drilling in Arctic waters.

The moves come amid declining industry investment in new exploration and production activities. The price of oil has fallen by about 70% since late 2014, making new investment less attractive. However, the industry continues to seek long-term investment opportunities under the assumption that oil prices will recover.

Offshore drilling in the Atlantic had drawn vigorous support from the American Petroleum Institute, which represents companies in the industry, saying it would have bolstered jobs, tax revenue and economic development.

“The decision appeases extremists," API CEO Jack Gerard said in a statement. “This is not how you harness America’s economic and diplomatic potential."

Winter of discontent for oil and gas producers

Governors in several Republican states, as well as Democratic Virginia Gov. Terry McAuliffe, had supported offshore drilling plans. Democratic presidential candidates Hillary Clinton and Bernie Sanders voiced opposition.

The move is unlikely to be a serious limitation on industry growth, said Notre Dame law professor Bruce Huber. "Some will see a connection between today's switch and the administration's recent moratorium on federal coal leasing, and they are probably right," Huber said. "Between those decisions and the matter of Keystone XL, it seems clear that the president is intent on doing what he can to confront the large fossil fuel players wherever possible."

Jacqueline Savitz, vice president for the U.S. for environmental group Oceana said it the move will aid in the battle against climate change.

"It will prevent oil spills and coastal industrialization, it makes seismic testing unnecessary and it will help promote the clean energy solutions that we so desperately need," she said.

Meanwhile, the Obama administration said it would consider the sale of drilling rights in three spots in the Arctic — the Chukchi Sea, Beaufort Sea and Cook Inlet — from 2017 to 2022.

Oil giants slash spending as prices plunge

The decision comes nearly six months after the president canceled Arctic leases, including with Royal Dutch Shell.

"We want to hear from the public to help determine whether these areas are appropriate for future leasing and how we can protect environmental, cultural and subsistence resources,” Interior Secretary Sally Jewell said.

More than 5,000 oil and gas leases managed by Interior's Bureau of Ocean Energy Management — located mostly in the Gulf of Mexico — account for about 16% of U.S. oil output and 5% of U.S. gas production.

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