Anglo-Dutch oil and gas giant Royal Dutch Shell has been barred by the Obama administration from exploratory oil drilling in Arctic waters until the company overhauls its operations program and management plan.
"Shell screwed up in 2012, and we're not going to let them screw up after their pause is removed," Interior Secretary Ken Salazar said.
"Before Shell is allowed to move forward, they're going to have to show to the Department of Interior that they have met the standards that have been required."
Salazar's statement came after a report which found that Shell's contractors were not prepared to meet the demands of extreme conditions in the Arctic, which caused a series of accidents, culminating in the New Year's Eve grounding of its drill rig.
Despite its investment of about $5bn (£3.3bn, €3.8bn) to drill the gas-rich Chukchi and Beaufort seas, Shell was unable to fully drill a single well in its initial season. The company had earlier announced a "pause" in Arctic drilling in February and noted that it will not continue offshore Alaska operations until at least 2014.
"Shell will not be able to move forward into the Arctic to do any kind of exploration unless they have this integrated management plan put in place," said Salazar.
The company would be required to submit a comprehensive plan describing each phase of its operations, in addition to a third-party management system audit to ensure the company's systems are suitable for Arctic conditions.
The development would lead to further costs and delays for the company, which has spent years securing permits to drill in Arctic waters.
Conservation group Oceana criticised that the government failed to anticipate Shell's inability to drill in the Arctic.
"The department of the interior must accept responsibility for the failures that resulted in approvals and permits being granted to a company that was obviously not ready," Oceana said in a statement.
"The government should suspend activities on leases in the Arctic Ocean until and unless companies prove they can operate safely and without harm to the environment and without harm to opportunities for the subsistence way of life."
However, Salazar told reporters that the Obama administration is still committed to drilling for oil in the Arctic.