The Interior Department conditionally approved Royal Dutch Shell’s plans to drill in waters off Alaska’s coast Monday in a ruling that could soon end Shell’s tortuous saga to become the first energy producer in the U.S. Arctic.
“We have taken a thoughtful approach to carefully considering potential exploration in the Chukchi Sea, recognizing the significant environmental, social and ecological resources in the region and establishing high standards for the protection of this critical ecosystem, our Arctic communities, and the subsistence needs and cultural traditions of Alaska natives,” Bureau of Ocean Energy Management Director Abigail Ross Hopper said.
The move is a win for the oil and gas industry, which has criticized the Obama administration for moving to slowly to allow Arctic offshore drilling. It’s a setback, however, for environmental groups that sought to keep those waters off limits out of concern for climate change and to prevent spills in the fragile Arctic.
For Shell, though, the decision brings some clarity after years of uncertainty and frustration.
The oil giant endured a series of mishaps in 2012, including technical problems and having one of its rigs run aground, before officially putting its program on ice in 2013. Shell agreed to allow the Interior Department to conduct a diagnostic review of its Arctic woes, a document that later informed an interagency strategy on Arctic drilling and proposed regulations on the practice.
Shell has since scaled back its ambition. It initially planned to explore both Alaska’s Beaufort and Chukchi seas, but will now focus solely on the latter. The Interior Department estimates the Chukchi Sea holds 15 billion barrels of recoverable oil and 78 trillion cubic feet of recoverable natural gas. The Beaufort Sea could hold 8 billion barrels of oil and nearly 28 trillion cubic feet of natural gas.
The company’s revised exploration plan calls for drilling six wells within the Burger Prospect, shallow waters about 70 miles northwest of the village of Wainwright.
The conditional approval was an “important milestone” and it “signals the confidence regulators have in our plan,” Shell spokesman Curtis Smith told the Washington Examiner in an email.
He added that Shell’s drilling is still on hold until the federal government takes further action and urged that “the remainder of our permits be practical, and delivered in a timely manner.”
Shell must still get required permits from state and federal agencies, including drilling permits from the Bureau of Safety and Environmental Enforcement.
No drilling currently occurs in the U.S. Arctic waters, which Republicans and the energy industry contend makes the nation a laggard compared with Russia, Norway and others. The potential for resources is sizable, as the Arctic hosts 13 percent of the world’s oil reserves and 30 percent of natural gas deposits, according to the U.S. Energy Information Administration, the Energy Department’s statistics arm.
Drillers in the U.S. have been waiting on Shell’s moves and what the federal government allows it to do in the Arctic. ConocoPhillips, Statoil and Chevron have halted their programs, though they still hold leases off Alaska’s shores.
Environmental groups have increasingly pressured the Obama administration to block Arctic offshore drilling, saying the ecosystem there is too fragile to withstand a potential spill. Energy production in the Arctic is less understood territory as well, they said, adding that conditions for drilling are harsh and that there’s little infrastructure to support operations.
“Shell’s need to validate its poorly planned investment in the U.S. Arctic Ocean is not a good reason for the government to allow the company to put our ocean resources at risk. Shell has not shown that it is prepared to operate responsibly in the Arctic Ocean, and neither the company nor our government has been willing to fully and fairly evaluate the risks of Shell’s proposal,” said Susan Murray, Pacific deputy vice president with conservation group Oceana.
Climate change also is a consideration for the Obama administration. Secretary of State John Kerry said that would be a main focus of the U.S. chairmanship of the eight-member Arctic Council, an international governance body the U.S. began heading last month. The U.S. term will end in 2017.
Despite focusing on climate change — some environmental groups argue as much as 80 percent of the world’s oil and natural gas reserves need to stay in the ground to avoid producing an amount of greenhouse gas emissions that would cause catastrophic climate change — the Obama administration has sometimes placated industry on oil and gas drilling.
In January, President Obama moved to block drilling in Alaska’s Arctic National Wildlife Refuge. A week later, his administration issued a draft five-year offshore drilling plan that would run from 2017 through 2022 and took some Arctic waters off the market. But that plan also kept a bulk of the Arctic in play and included a large lease in the Atlantic Ocean, where drilling ceased in the 1980s.
