The Biden administration is approving a scaled-back version of ConocoPhillips' (COP.N) $7 billion oil and gas drilling Willow project in Alaska, the U.S. Department of Interior said on Monday, drawing cheers from Alaskan officials and the oil industry but criticism from environmental advocates.

The decision came after opponents fought hard at the last minute. They said that developing the three drill sites in northwest Alaska goes against President Joe Biden's well-known efforts to fight climate change and switch to cleaner energy sources.

Alaska's elected officials say the project will create hundreds of jobs and bring billions of dollars in revenue to state and federal coffers. The state relies heavily on revenue from oil production, but output there has declined dramatically from its peak in the 1980s.

"I feel the people of Alaska have been heard," U.S. Representative Mary Peltola, a Democrat from Alaska, said on a call with reporters. "The state of Alaska cannot carry the burden of solving our global warming issues alone."

The fate of the project has been closely watched as Biden seeks to balance his goals of decarbonising the U.S. economy and restoring U.S. leadership on climate change while also increasing domestic fuel supplies to keep prices low.

The United Nations, which has urged nations to accelerate the transition away from fossil fuels, criticised the move.

"These are not projects that move us in the right direction," spokesperson Stephane Dujarric told reporters when asked about the Willow approval.

The Interior Department approved the project with three drill pads after saying last month it was concerned about the greenhouse gas impacts of Willow. ConocoPhillips had sought to build up to five drill sites and project infrastructure, including dozens of miles of roads and pipelines and seven bridges.

The agency said the smaller scope will reduce the impact on habitats for species like polar bears and yellow-billed loons.

The administration also announced late on Sunday sweeping new protections for undisturbed Alaskan lands and waters that would keep nearly 3 million acres of the Beaufort Sea in the Arctic Ocean "indefinitely off limits" for oil and gas leasing, effectively closing off U.S. Arctic waters to oil exploration. It also issued protections for 13 million acres of "ecologically sensitive" special areas within Alaska's petroleum reserve.

Environmental groups, however, criticised the Biden administration, saying it was trying to have it "both ways" on climate change.

"Promoting clean energy development is meaningless if we continue to allow corporations to plunder and pollute as they wish,” Food & Water Watch Executive Director Wenonah Hauter said.

Green groups have said they would challenge Willow in court. U.S. Senator Dan Sullivan of Alaska said the congressional delegation is expecting an imminent legal challenge and is preparing an amicus brief to defend the project.

Houston-based ConocoPhillips welcomed Monday's decision, having already endorsed the trimmed-down version of the project.

"This was the right decision for Alaska and our nation," ConocoPhillips Chief Executive Ryan Lance said in a statement.

U.S. Senator Lisa Murkowski, an Alaska Republican, on Monday, welcomed the "good news," saying "this will mean jobs and revenue for Alaska" by bringing upwards of 180,000 barrels of oil per day into the Trans Alaska Pipeline.

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Source: Reuters