Shell wins approval of Arctic spill response plan

Associated Press

ANCHORAGE, Alaska (AP) — Shell Oil cleared one of the last remaining hurdles to Arctic offshore drilling Friday as the federal government said it has approved the company's spill response plan for the Chukchi Sea.

Environmentalists and Alaska Natives living along the Arctic Coast have bitterly opposed drilling. Interior Secretary Ken Salazar said in a prepared statement that the federal government was taking a cautious approach.

"In the Arctic frontier, cautious exploration — under the strongest oversight, safety requirements, and emergency response plans ever established — can help us expand our understanding of the area and its resources, and support our goal of continuing to increase safe and responsible domestic oil and gas production," Salazar said.

The federal government estimates there are 26.6 billion barrels of recoverable oil and 130 trillion cubic feet of natural gas in the Arctic Ocean's outer continental shelf reserves. The total includes both the Chukchi Sea, off Alaska's northwest coast, and the Beaufort Sea off the state's north coast.

Shell Oil Co., the U.S. arm of Royal Dutch Shell PLC, hopes to drill up to three wells in the Chukchi during the short open water season this summer and two wells in the Beaufort.

Salazar said Shell must still obtain approval from the Bureau of Safety and Environmental Enforcement, which must inspect and approve equipment that has been designed for spill response. That equipment includes Shell's capping stack, a device that could be lowered onto a well after a blowout.

Rebecca Noblin, an attorney for the Center for Biological Diversity in Anchorage, said Shell's cleanup plan relies on technology such as the capping stack that has not even been built, much less tested.

"The reality is, we don't know how to deal with an oil spill in the Arctic," she said.

Chris Krenz of Oceana, an environmental group that focuses on oceans, applauded the decision to test Shell's response equipment but questioned why officials would sign off on the spill prevention plan before the tests.

"It's really ludicrous to approve Shell's spill plan before those in-water tests are done," Krenz said.

The decision presumes the next test will succeed, but the last public test of cleaning a spill in ice-filled waters was in 2000 and was a failure, Krenz said. Shell's spill response plan claims it can clean up nearly all oil spilled, even though the recovery from BP PLC's Deepwater Horizon in the Gulf of Mexico, a location with far more infrastructure, was about 10 percent.

"It's crazy," Krenz said. "It's just not going to be possible. It seems like the Obama administration had joined Shell in oil response dreamland."

Shell Alaska Vice President Pete Slaiby said approval of the oil spill response plan is a major milestone. The decision, he said, validates the huge amount of time, technology and resources the company has dedicated to assembling an Arctic oil spill response fleet.

The company spent $2.1 billion on leases in the Chukchi Sea at a 2008 lease sale that was challenged by environmental groups, which claimed federal regulators did not follow environmental law before putting leases up for bid. The sale remains under court review.

Salazar said the approval of Shell's plan was guided by the latest science, new safety standards and lessons learned from Deepwater Horizon.

Besides the capping stack, Shell had to show the capability to capture and collect oil from the stack and to have a second drilling ship stationed nearby that was capable of drilling a relief well that could kill a well blowout.

Shell's Chukchi wells are proposed for the Burger Prospect, about 70 miles offshore in about 140 feet of water. Slaiby has said the site presents far fewer technical challenges and cannot be compared to the deep-water drilling and high pressures involved in the Deepwater Horizon blowout.

James A. Watson, director of the Bureau of Safety and Environmental Enforcement, said Shell's plan underwent an exhaustive review and his agency had confidence that the company can pre-stage equipment and personnel for effective spill response.

Alaska's elected officials praised the decision. Upward of 90 percent of state government revenue is tied to the oil industry, but the trans-Alaska pipeline has been running at less than one-third capacity as North Slope oil fields have matured and reserves have dwindled.

Sen. Mark Begich, D-Alaska, said the announcement showed the federal government is preparing for short-term emergency response as well as long-term science for responsible development of Arctic resources.

"Alaskans should be assured the federal government is taking this seriously and has plans in place," he said.

Sen. Lisa Murkowski, R-Alaska, congratulated the Interior Department.

"Today's decision confirms what we've known for some time — that Shell has put together a robust and comprehensive spill prevention and response plan that offers the highest level of environmental protection," she said.

Yet, Shell faces other hurdles.

The federal government approved Shell's Chukchi Sea exploration plan with the condition that the company stop drilling into hydrocarbon zones 38 days before sea ice forms around the lease area. The condition was put in place so Shell would have time to fix a wellhead blowout while operating in open water. However, the requirement cuts a 105-day open water drilling season down by 38 days. Shell is seeking to reverse the decision.

Shell plans to use the drill ship Noble Discoverer in the Chukchi. The vessel is drilling a well in New Zealand before a trip to the West Coast for modifications.

Shell is awaiting a decision on an appeal by environmental groups of EPA air permits for a second drill ship, the Kulluk, which Shell will use for Beaufort Sea drilling. The Kulluk also could drill a relief well in the Chukchi Sea if a blowout disabled the Noble Discoverer.

The Kulluk is undergoing upgrades in Seattle, including replacement of its engines to make them compliant with air standards.