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Arctic drilling rights OKd for Shell Oil

Screen Shot 2013-11-01 at 09.31.18Article by Jennifer A. Dlouhy published Tuesday, March 31, 2015 by

Arctic drilling rights OKd for Shell Oil

WASHINGTON — The Obama administration on Tuesday reaffirmed a 2008 government auction of Arctic drilling rights over objections from environmentalists, delivering a major victory to Shell Oil Co. as it seeks to resume exploratory drilling in the Chukchi Sea this summer.

In validating the 7-year-old auction, Interior Secretary Sally Jewell stressed that the Arctic “is an important component of the administration’s national energy strategy.”

“We remain committed to taking a thoughtful and balanced approach to oil and gas leasing and exploration offshore Alaska,” Jewell said in a statement. “This unique, sensitive and often challenging environment requires effective oversight to ensure all activities are conducted safely and responsibly.”

The move keeps the door open for Shell to return to the Chukchi Sea this summer and drill wells into its Burger Prospect about 70 miles from Alaska’s shoreline.

It is far from the final regulatory step for Shell, which must secure individual drilling permits and win the Bureau of Ocean Energy Management’s approval of its broad exploration plan. But Jewell’s affirmation of the 2008 lease sale — outlined in a “record of decision” Tuesday filed in response to a new court-ordered environmental analysis of the auction — was a critical hurdle for Shell’s 2015 Arctic ambitions.

A formal review of Shell’s Arctic exploration plan — expected to be resubmitted soon — has been on hold until a resolution of legal uncertainties revolving around the 2008 Chukchi lease sale. The underlying leases also have been suspended amid the litigation.

Shell spokesman Curtis Smith said the record of decision “clears the way for the Bureau of Ocean and Energy Management to conclude its review and make a decision on our revised Chukchi Sea exploration plan.”

Shell has already begun moving its two contracted drilling units to the United States in anticipation of operations this summer.

The Interior Department was forced to redo its estimate of how much crude would be extracted from the Chukchi Sea leases after the U.S. Court of Appeals in San Francisco ruled last year that an initial calculation was arbitrary.

Previously, regulators had said up to 1 billion barrels of oil were economically recoverable from the available leases.

In the final environmental impact statement unveiled in March — as well as a draft released in October — the bureau produced a new estimate: 4.3 billion barrels of oil and 2.2 trillion cubic feet of natural gas.

The new analysis also says there is a 75 percent chance of at least one large spill that releases more than 1,000 barrels of oil over 77 years of drilling and development on those Chukchi Sea leases.

Jennifer A. Dlouhy is a reporter in Hearst Newspapers’ Washington bureau. E-mail: [email protected]

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