Shell likely to receive Arctic offshore permits, Salazar says

Emphasizing that reviews are still under way, US Sec. of the Interior Ken Salazar said Shell Offshore Inc. appears likely to receive permits to begin drilling its Beaufort and Chukchi Sea leases offshore Alaska this summer.

“I anticipate with the conditions Shell has already met, it is highly likely the permits will be issued,” Salazar told reporters during a June 26 teleconference from Trondheim, Norway, where he has been meeting with offshore oil and gas regulators and industry officials from Russia, Canada, Iceland, and Norway. “If that occurs, it will be with the kind of oversight that makes me confident there will not be problems with the wells that are drilled.”

Salazar said the Beaufort and Chukchi seas have some of the nation’s largest undeveloped crude oil resources as indicated by the 30 wells that have been drilled there already. “If they can be developed, they will contribute to the ‘all-of-the-above’ energy strategy this administration is pursuing. But this development will not take place without adequate protections for the environment and local communities,” he maintained.

Shell will have to meet rigorous new requirements if its Arctic offshore operations proceed, Salazar said. It will have to have an inspector from the US Bureau of Safety and Environmental Enforcement on-site 24 hr/day and have a full suite of response capabilities including a capping stack and spill containment systems, he indicated.

He also expects environment and other organizations to sue Interior, the Bureau of Ocean Energy Management, and BSEE if final permits are issued. “We get sued all the time. I am confident the work BOEM, BSEE, and Interior have done will make us prevail,” Salazar said.

‘Capabilities are there’

“But there’s not going to be an oil spill,” he continued. “The scrutiny that’s going to be involved and all the measures that have been taken make a problem unlikely. If there is one, I am confident the capabilities are there to arrest the problem quickly. If I wasn’t, I wouldn’t let this go forward.”

Salazar said that the final 5-year US Outer Continental Shelf program he plans to announce in the next few days will include plans for the offshore Arctic that reflect a different approach from the past. “Specifically, we intend to gather information from industry, Native Alaskan communities, the scientific community, and the public to identify specific high-resource, low-conflict areas that are best suited for exploration and development,” he said.

“This strategy, which is similar to how we now conduct onshore oil and gas lease sales and offshore wind energy planning, will allow us to design potential lease sales in the Arctic in a way that best balances factors like resource potential, subsistence use, and environmental considerations,” Salazar explained. “Specifically, this analysis will help us to design the specific features of Arctic sales—like the size and location of the sale area and the terms and conditions that ensure that any leases are developed responsibly. This will enhance certainty for industry and reduce conflict, litigation, and delays.”

Salazar, who was joined in the teleconference by Deputy Sec. David J. Hayes in Trondheim and BOEM Director Tommy P. Beaudreau in Washington, said the Obama administration’s Arctic offshore resources strategy would be scientifically based and use information from other Arctic countries, the oil and gas industry, and local communities.

“This will involve all the areas with the highest potential,” Beaudreau said. “But we have to maintain our vigilance and go about leasing in all these areas in the right way. The new plan will reflect what is appropriate to leasing offshore. This involves leasing appropriate to each area, particularly off Alaska’s North Slope, which will contain provisions to protect subsistence living there.”

Contact Nick Snow at nicks@pennwell.com.

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