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US administration greenlights Shell Arctic drilling plans

12 May 2015

On May 12, the Obama administration approved Shell’s plan to resume drilling for oil and gas in the waters off the coast of Alaska, three years after the Anglo-Dutch oil major was forced to suspend operations during a summer campaign that suffered a series of mishaps.

Abigail Ross Hopper, the director of the US Interior Department’s Bureau of Ocean Energy Management (BOEM), which approved the plans, said: “We have taken a thoughtful approach to carefully considering potential exploration in the Chukchi Sea, recognising the significant environmental, social and ecological resources in the region and establishing high standards for the protection of this critical ecosystem, our Arctic communities, and the subsistence needs and cultural traditions of Alaska Natives. Any offshore exploratory activities will continue to be subject to rigorous safety standards.”

The approval depends on Shell getting agreement from other US regulators, the Bureau of Ocean Energy Management said, including permits from the federal government and the state of Alaska, before drilling can begin this summer.

A spokesman for Shell said the approval was an “important milestone” that “signals the confidence regulators have in our plan. However, before operations can begin this summer, it’s imperative that the remainder of our permits be practical, and delivered in a timely manner. In the meantime, we will continue to test and prepare our contractors, assets and contingency plans against the high bar stakeholders and regulators expect of an Arctic operator.”

Shell was forced to halt operations in Arctic in the middle of 2012 after the failure of a key piece of safety equipment that would be used to tackle oil spills. The situation for the company became worse when the drilling rig it was using, the Kulluk, ran aground after it was being towed back to port.

A US coast guard report into the incident was heavily critical and Noble Drilling, which was working for Shell, was slapped with $12m worth of fines and community payments. Shell hoped to restart in 2013 and then again in 2014 but failed after a series of legal challenges and other setbacks.

Shell plans to drill up to six wells about 70 miles northwest of the village of Wainwright, Alaska and will have two ships in the Chukchi Sea which will leave at the end of each drilling season.

Shell has spent about $6bn so far on exploration in the Arctic - a region estimated to have about 20% of the world's undiscovered oil and gas. The US Geological Survey estimates that offshore reserves in the Arctic total 26 billion barrels of recoverable oil and 130 trillion cubic feet of natural gas.

Environmentalists, who have opposed Shell’s  campaign, warn that drilling in Arctic waters is much more dangerous than in existing offshore oil fields, and could lead to oil spills and other environmental damage that would be far harder to clean up than in temperate or tropical zones.

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