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Shell to submit new Arctic offshore drilling plan

2 April 2011

ANCHORAGE, Alaska (AP) — Shell Oil will apply to drill 10 wells off Alaska’s Arctic shore over the next two years under exploration plans headed to federal authorities.

The company hopes to see results from a $3.5 billion investment into Arctic Ocean drilling that has been thwarted in recent years by court challenges or inability to obtain federal permits.

“Maybe four times is a charm,” said Pete Slaiby, Shell Alaska vice president, on Monday. “This is our fourth Beaufort Sea exploration plan that has gone down the pike. And next week it will be the second Chukchi exploration plan. We feel that we’ve got pretty good and robust plans.”

Shell Alaska spokesman Curtis Smith said the company will seek permission to drill four wells in the Beaufort Sea off Alaska’s north shore and six in the Chukchi Sea off the state’s northwest shore using two drilling ships in 2012 and 2013.

Drilling is bitterly opposed by environmental activists and some Alaska Native groups, who say petroleum companies have not demonstrated the ability to clean up a spill in ice-choked waters. Critics contend leases in the Chukchi Sea were auctioned off before proper environmental studies were performed to determine how drilling and the accompanying industrial activity would affect endangered whales and other wildlife — including polar bears, walrus and ice seals.

The stakes are high for both the state of Alaska — where onshore reserves have diminished and the trans-Alaska pipeline now operates at less than one-third capacity — and for the rest of the country looking to lower its dependence on imported oil. But in light of environmental concerns — and last year’s disaster in the Gulf of Mexico — federal regulators are proceeding cautiously.

Federal officials estimate Arctic waters hold 26 million barrels of recoverable oil and 130 trillion cubic feet of natural gas.

Shell obtained leases in the Beaufort Sea off Alaska’s north coast in 2005 and in 2008 spent $2.2 billion on leases in the Chukchi off the state’s northwest coast.

The company had hoped to drill exploration wells in 2010 during the roughly three and a half month open water season in both the Chukchi and the Beaufort but its plans were put on hold by Interior Secretary Ken Salazar after the Deepwater Horizon spill.

Salazar suspended applications for drilling and has said the department will take a guarded approach guided by science and the voices of North Slope communities.

Shell’s 2011 plans called for drilling only in the Beaufort. The company in February dropped those plans. The decision was made after an appeals board of the Environmental Protection Agency said it would review the air permit the agency had granted regarding the effect of emissions from drilling ships and support vessels.

Shell officials have said a catastrophic well blowout similar to last year’s disaster in the Gulf of Mexico is unlikely because its plans mitigate two key contributing factors. Shell intends to drill in shallower waters. Also, company officials expect far less pressure on their wellhead.

Shell submitted a response plan that it says can handle a spill of 504,000 gallons per day — more than double what federal regulators said would be a worst-case discharge from the exploratory wells it has applied for to date.

Smith says the company expects to submit the plan of exploration for the Beaufort on Wednesday and for the Chukchi soon.

Slaiby said Shell’s previous exploration plans already had received the blessing of a federal appeals court and will benefit from lessons learned from the Deepwater Horizon drilling rig at the Macondo Prospect in the Gulf of Mexico.

“We’re building on what we had previously and we have taken and lifted, I think, the right stuff out of the BP Macondo incident and made the plans even more robust,” Slaiby said.

“We really had a good plan that was site specific for Alaska, had looked at things like one-hour response time, and addressed a lot of the issues that folks were saying weren’t available in the Gulf of Mexico.”

He made an analogy to the air transport industry.

“There was a crash,” Slaiby said. “People have looked at what was deficient, and we built upon that. I clearly think that our plan prior was a good plan. Our plan post is a better plan.”


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