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Interior OKs exploratory drilling by Shell in Chukchi Sea

Erika Bolstad

The Interior Department on Monday gave the go-ahead for Shell Oil to begin drilling three exploratory wells in the Chukchi Sea, a move that could open the door for offshore oil and gas production from a new region of the Arctic.

"This is progress," said Alaska Sen. Lisa Murkowski, the top Republican on the Senate Energy and Natural Resources Committee, calling the announcement "an encouraging sign that Alaska's oil and natural gas resources can continue to play a major role in America's energy security."

The Interior Department signed off on a plan that allows Shell to drill up to three exploration wells during the July to October open-water drilling season. The company's proposal calls for using several vessels, including a drill ship and oil spill response vessels, the Interior Department said. The closest proposed drill site is more than 60 miles from shore and about 80 miles from Wainwright.

Shell Alaska Vice President Pete Slaiby said that company executives believe their exploration plan addresses concerns they've heard in North Slope communities, "including concerns around program footprint and pace."

"Shell believes the Chukchi Sea could be home to some of the most prolific, undiscovered hydrocarbon basins in North America," Slaiby said.

However, a number of hurdles remain, Slaiby said, calling the Interior Department's move "positive, but not a full green light."

Shell still must obtain an Environmental Protection Agency air-quality permit for the vessels they hope to use in exploration next summer. Slaiby said that the company listened to critics of its previous drilling plans in the Arctic and spent more than $25 million to tighten the air pollution controls on its drill ship, the Frontier Discovery. Also, the Minerals Management Service, which is under the Interior Department, must still comply with a court-ordered redo of an environmental-sensitivity analysis for the region.

And Interior Secretary Ken Salazar on Monday called his agency's decision "conditional."

"Our approval of Shell's plan is conditioned on close monitoring of Shell's activities to ensure that they are conducted in a safe and environmentally responsible manner," Salazar said Monday in a statement announcing his decision. "These wells will allow the department to develop additional information and to evaluate the feasibility of future development in the Chukchi Sea."

HOPES AND WORRIES

Shell, Conoco Phillips and other companies in 2008 paid more than $2 billion for leases in the Chukchi Sea off the northwest coast of Alaska. The companies and state officials believe the offshore reserves, if found and developed, could power the Alaska economy for decades.

"I appreciate the acknowledgment from the Department of the Interior that responsible development can take place in the Arctic," Gov. Sean Parnell said.

But the potential offshore development remains a concern to Natives and environmentalists. Natives along the northern coast worry the noise of offshore development could chase away bowhead whales and other subsistence foods. They're also concerned about air pollution from the exploratory ships.

"The proposed oil and gas activities affect the very foundations of who we are as individuals and as a people," said Caroline Cannon, president of the Native village of Point Hope. "We have a right to life, to physical integrity, to security, and the right to enjoy the benefits of our culture."

Environmentalists have a number of concerns, chiefly that there is limited technology for cleaning up oil spills in icy water.

"Obviously we're disappointed," said Marilyn Heiman, the U.S. Arctic program director for the Pew Environment Group. "A spill could happen from an exploratory well just as easily as it could from a production well. They have not yet demonstrated they have the ability and the expertise to clean up an oil spill, especially in the darkness, the extreme weather and the icy conditions."

BEYOND 2012 UNDER REVIEW

The Bush administration's five-year plan for oil and gas exploration off the U.S. coast is under review by the Obama administration. Salazar held public hearings on it -- including one in April in Anchorage where then-Gov. Sarah Palin and her replacement, Parnell, spoke in favor of offshore development. The agency is still considering whether to let the plan continue through 2012 or write a new one.

Alaska Sen. Mark Begich, who accompanied Salazar to Alaska for the public hearings and has met with him repeatedly, said he'd continue to work with the secretary "to include protections that address concerns Alaskans and the rest of the nation have to develop these resources in a responsible manner.

"The successful development of these reserves and those of the Beaufort Sea are key to the long term viability of the trans-Alaska (oil) pipeline and the future of the Alaska natural gas pipeline," he said.

Alaska Rep. Don Young called the decision "excellent and encouraging news. Responsible exploration and development of our resources is the key to the economic future of this country, and a step in the direction of energy independence."

In October, Salazar's agency gave conditional approval to Shell's plan to explore two leases in the Beaufort Sea next summer and fall. Those leases lie in the far western area of Camden Bay, west of Kaktovik. National environmental groups also opposed this exploration.

The oil industry already has several oil fields in the Beaufort -- all of them near shore, unlike the distant drilling planned for the Chukchi.

BP Exploration (Alaska) Inc. started production of the Endicott field in 1987 and the Northstar field in 2001. Pioneer Natural Resources started the Oooguruk field in the Beaufort last year.

BP's Niakuk and Point McIntyre fields are largely offshore but produced from onshore sites.

Additionally, BP is developing the Liberty field in the Beaufort from an onshore site, and Italian oil giant Eni is developing the Nikaitchuq field just off the Arctic coast in the Beaufort.

Find Erika Bolstad online at adn.com/contact/ebolstad or call her in Washington, D.C., at 202-383-6104.

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By ERIKA BOLSTAD
ebolstad@adn.com