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Stuart Hampton

Shell’s disappointment. Arctic drilling is on hold

by Stuart Hampton | Dun & Bradstreet Editor

February 8, 2011 | No Comments »

 

For a few months it looked like Royal Dutch Shell had the option to open up new drilling activities in the Arctic Circle in Alaska’s Beaufort and Chukchi seas this year.

In early November 2010, following the lifting of the government’s moratorium on deepwater drilling in the Gulf of Mexico (in the wake of the Deepwater Horizon disaster), Shell sought to win approval for its long delayed plans to open up drilling in Arctic Alaskan waters as a new and safe area of exploration. The water where Shell wants to drill is just a few hundred feet, not a mile deep, as it is for a number of Gulf of Mexico wells.

Shell has invested more than $3 billion in exploration and development activities in the area since 2005, including $2.2 billion for leases in the Chukchi Sea. It had hoped to drill exploration wells there during 2010 but its plans were put on hold by Department of the Interior Secretary Ken Salazar after the Deepwater Horizon explosion in the Gulf of Mexico. On new field development in Alaskan waters Salazar stated that the department will take a cautious approach “guided by science and the voices of North Slope communities.”

The latest stumbling block has been getting clean air permits approved. Alaska Native and conservation and environmental groups challenged clean air permits granted earlier to Shell by the EPA, alleging that they would allow the company to emit tons of pollutants into the Arctic environment from a drill ship and support vessels.

In February 2011, the federal Environmental Appeals Board decided that the EPA’s analysis of the impact of nitrogen dioxide emissions from drill ships on Alaska Native communities was too limited. It pulled the permits, saying that further analysis was needed by the EPA. Shell came to the conclusion that its hopes for new drilling would not be realized, at least not in 2011.

Shell, the oil industry lobby, and the Alaskan political mainstream are pretty steamed. They see safe and plentiful oil being put out of bounds at a time when older fields are being depleted. They need the money and jobs that the new fields offer. Industry officials estimate that there is as much as 25 billion barrels of oil reserves in the Alaskan Arctic, and no offshore drilling has been permitted in Alaskan federal waters since 2003.

Hoover’s editors and First Research analysts will continue to follow developments in Arctic.

In the meantime, for Shell it is a story of no permits, no drilling. Maybe next year.

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Photo by Tatiana Pichugina, used a under a Creative Commons license.

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