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US agency approves Shell Arctic oil drilling plan

By Ayesha Rascoe

WASHINGTON | Thu Aug 4, 2011 6:27pm EDT

(Reuters) – Royal Dutch Shell’s long-stymied Arctic drilling program inched ahead on Thursday, as the U.S. offshore drilling regulator approved the company’s oil exploration plan for Alaska’s Beaufort Sea.

Shell’s plan would allow the company to drill up to four shallow water exploratory wells off Alaska’s northern coast beginning in July 2012.

The approval comes more than a year after BP’s massive oil spill in the Gulf of Mexico upended Obama administration plans to expand offshore drilling and underscores the White House’s plan to streamline permitting for Alaska drilling.

While this is a step forward in Shell’s push to tap the Arctic’s vast oil and gas reserves, the oil giant still has a long way to go before it can begin carrying out its ambitious drilling plans.

The conditional approval of the exploration plan is contingent upon Shell receiving permits from other government agencies, including the Environmental Protection Agency and the U.S. Fish and Wildlife Service.

“The conditional approval of our Revised Beaufort Sea Plan of Exploration is welcome news and adds to our cautious optimism that we will be drilling our Alaska leases this time next year,” Shell spokeswoman Kelly op de Weegh said.

Opposition from local and environmental groups and regulatory delays have so far hindered Shell from developing offshore Alaska leases the company began picking up in 2005.

A plan to drill at least one Beaufort Sea well this year was scuttled by the revocation of a key air-quality permit.


Global warming has lowered summer sea ice levels in the Arctic, increasing access for oil and gas developers, but also stoking sovereignty disputes over resources among the countries bordering the Arctic.

Environmental groups say the risks of oil production in the Arctic could be too great, however, arguing that an oil spill would have devastating consequences for the fragile ecosystem.

The Bureau of Ocean Energy Management, which regulates offshore drilling, stressed that Shell will have to meet rigorous standards imposed after last year’s spill before the agency approves any permits actually to begin drilling.

“We will closely review and monitor Shell’s proposed activities to ensure that any activities that take place under this plan will be conducted in a safe and environmentally responsible manner,” said Michael Bromwich, head of the drilling agency.

Environmental groups expressed outrage at the government’s decision. Erik Grafe, a staff attorney for Earthjustice, said environmentalists are considering their legal options.

“We’re reviewing the agency’s analyses to the extent they exist and we’re making decisions based on that review of the analysis,” Grafe said.

There is a 60-day window for filing a legal challenge to the approval, he added.

In addition to its Beaufort exploration plan, Shell submitted a plan to drill up to six wells in the Chukchi Sea in 2012 and 2013.

(Additional reporting by Kristen Hayes in Houston and Yereth Rosen in Alaska; Editing by Lisa Shumaker and Dale Hudson)


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