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Shell Says Slow U.S. Drill Permits in Alaska ‘Irresponsible’

By Kim Chipman – Apr 26, 2011 9:05 PM GMT+0100

Royal Dutch Shell Plc (RDSA) is being blocked from offshore oil and gas exploration in Alaska by the “irresponsible” delays of federal regulators, said the company’s U.S. president, Marvin Odum.

Shell, based in The Hague, has spent more than $2 billion for hundreds of drilling leases in Alaska since 2005, and has invested $1.5 billion on an exploration program that exceeds current regulatory requirements, Odum said.

“Despite our most intense efforts, we have yet to drill a single well,” Odum said today at a conference in Washington.

Shell’s biggest impediment has been obtaining an air permit from the Environmental Protection Agency for temporary exploration operations off the Alaska coast, Odum said.

“The delay is frustrating and disappointing and it undermines confidence in the American regulatory system,” he said. “Beyond that, you might call it irresponsible. Thousands of men and women were counting on those jobs, local businesses were counting on the revenue and communities were counting on the tax boost.”

Shell delayed its drilling campaign in Alaska and put off plans to spend as much as $150 million in the region until 2012, citing regulatory delays, according to a Feb. 3 statement. Alaska may hold the second-biggest U.S. oil and gas reserves after the Gulf of Mexico, according to government estimates.

Odum said Shell supports appropriate new offshore drilling regulations after the 2010 BP Plc oil spill in the Gulf. The U.S. must restore projects in the Gulf and open areas of the eastern Gulf and Alaska for exploration, he said.

Shell Deep-Water Permit

Last month, Shell won a U.S. permit to drill a deep-water well in the Gulf where exploration was banned after the BP blowout a year ago.

“That’s encouraging and I’m cautiously optimistic that marks a turning point in the Gulf,” Odum said today. Shell is the second-largest producer of crude from U.S. Gulf wells.

The regulatory status in Alaska is “much different,” he said. Odum said he’s hopeful the delay will be resolved and he appreciates EPA Administrator Lisa Jackson looking at the issue.

Several federal agencies have worked with Shell to help the company in Alaska, including the EPA, which issued a permit on March 31, 2010, according to a statement.

“That permit was subsequently appealed by outside groups, including local Alaskan stakeholders, and overturned by the independent Environmental Appeals Board,” according to the statement. “EPA immediately appealed for reconsideration and we have worked with Shell to address the concerns.”

‘Preferred Fuel’

Odum said Shell, which has invested more than $17 billion in North American natural gas production and development, next year will produce more gas than oil.

“It’s worth pursuing and it will be a preferred fuel,” he said.

The U.S. has enough untapped gas to last a century, though some states and environmentalists are concerned that hydraulic fracturing, or fracking, in which a chemical mix is injected into shale rock to free gas will taint drinking water.

Reports challenging the safety of fracking are “at best incomplete and at worst irresponsible,” Odum said. “Make no mistake, it can be done without harming the environment.”

To contact the reporter on this story: Kim Chipman in Washington at [email protected]

To contact the editor responsible for this story: Larry Liebert at [email protected]

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