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Salazar Urged to Bar Shell’s Plans For Oil Drilling in Arctic

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By Kim Chipman

May 5 (Bloomberg) — Royal Dutch Shell Plc’s plans to drill in the Arctic Ocean should be halted by the U.S., because the BP Plc incident in the Gulf of Mexico shows that companies aren’t capable of handling big oil spills, environmental groups said.

Oceana, Pew Environment Group and Audubon Alaska asked Interior Secretary Ken Salazar today to reconsider approval of Shell’s plans to drill exploration wells in the Chukchi and Beaufort seas off Alaska’s coast. The risk is too great, the groups said in a letter sent to Salazar, citing the incident that has led to the leaking of at least 5,000 barrels of oil a day into waters off the Louisiana and Mississippi coast.

“The ongoing oil spill in the Gulf of Mexico makes it unambiguously clear that the oil industry has only limited capacity to respond to large oil spills once they occur,” the groups said.

President Barack Obama said in March that lease sales in Alaska’s Chukchi and Beaufort seas may be scrapped to allow further study. Shell has said that the administration has signaled that existing leases would move ahead into the exploration phase and the company is preparing to start drilling in the U.S. summer season.

“We are committed to safe and environmentally sound operations,” a spokesman for The Hague-based Shell, Ted Rolfvondenbaumen, said in a statement today. “We have the expertise and technological know-how to operate reliably in the Chukchi and Beaufort.”

Safety Review

The Interior Department responded to the environmental group’s letter, saying the decision on whether to let Shell drill depends on results of a safety review ordered by Obama. The review by Salazar is set to be completed May 28, spokeswoman Julie Chavez Rodriguez said.

Salazar in December conditionally approved Shell’s plan to drill three exploratory wells in the Chukchi Sea after the company spent $2.1 billion. The Chukchi Sea is estimated to hold 15 billion barrels of recoverable oil and 77 trillion cubic feet of recoverable natural gas reserves.

The well off the Louisiana coast is spilling about 5,000 barrels of oil a day after a Transocean Ltd. drilling rig leased by BP sank about two weeks ago. Oil leaking from the well may, by the third week of June, surpass the amount dumped by the Exxon Valdez in 1989 if a solution isn’t found to stem the flow.

BP has stopped one of three oil leaks at the well, the U.S. Coast Guard said today. Crews successfully closed a valve installed yesterday, stopping leakage from a section of drill pipe severed from the well when the rig sank, John Curry, a spokesman for London-based BP, said. The company said it’s planning an underwater containment structure that would capture oil from the largest leak and pump it to a ship on the surface.

BP’s American depositary receipts, each representing six ordinary shares, have fallen about 16 percent since the April 20 incident. Shell’s ADRs, each equaling two Class A ordinary shares, have fallen 6.7 percent. Shell and BP vie for the title of Europe’s biggest company.

–With assistance from Paul Burkhardt in New York. Editors: Romaine Bostick, Steve Geimann.


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