Shell delays Alaska drilling for a year amid court challenge

Royal Dutch Shell said it will delay drilling in offshore Alaska for another year owing to an ongoing court challenge by environmentalists who say regulators should not have approved the project because of possible risks to whales and other marine animals.

Shell’s decision comes amid a national debate over drilling in the US. This week John McCain, the Republican presidential candidate, called for lifting a federal moratorium on offshore oil and gas drilling in US waters to reduce dependence on foreign energy sources. The plan, also endorsed by President George W. Bush, has been criticised by Barack Obama, the Democratic presidential candidate.

“The US is in an energy supply crisis and delays like this [court case] only extend and aggravate it,” said Pete Slaiby, Shell’s general manager for Alaska. “In times of shrinking global supply, ever increasing reliance on imported oil and surging energy prices, the Alaska offshore could be a significant resource for national energy security.”

As petrol has risen to $4 a gallon in recent weeks, opening federally protected areas in places such as Alaska and offshore Florida to oil and gas exploration and development has become a central theme in the presidential campaign.

Yet oil companies note the difficulties they have in areas already open to drilling mean a green light in these protected areas by no means guarantees they will be swiftly developed.

“There is a lot of what people in the industry just consider red tape and really silly and foolish conditions, that don’t really achieve their stated goals,” said Kevin Shaw, a partner focusing on energy matters for Mayer Brown law firm.

“It’s a real issue for industry.”

In Alaska, environmentalists complain Shell’s work could expose the marine life to harmful blasts from seismic tests, as well as injuries from vessels that could strike them, leak oil in the area, or scare them out of their traditional migration or feeding areas.

“Whenever the oil and gas industry tries to find new areas to explore, there is invariably an environmental battle,” said Larry Nichols, chief executive of Devon Energy.

Shell said, given the court delays, it would shift focus to other opportunities, given the very tight market for labour at a time when the oil and gas industry was rushing to capitalise on rising oil prices.

Yet the company said the US would lose out because of its decision.

“This lack of decision has delayed drilling for another year – extending the timeline it will take to bring this much-needed US production online,” Mr Slaiby said.

“That timeline starts only after we drill our first well.”

Shell said it would continue to prepare to drill, with a new timeline of 2009. It will focus on collecting seismic data, along with other projects critical to its developments offshore, including marine mammal monitoring and data gathering.

“We remain committed to this project for the long-term and we consider Alaska a future heartland for Shell,” Mr Slaiby said.