WASHINGTON -- Shell is giving up for the year on drilling for oil in the offshore Alaska Arctic after an accident damaged its oil spill-containment dome.
Shell still plans to drill shallow "top holes" but it won't go deep enough to reach oil-bearing geological formations. It's a blow to Shell's $4.5 billion attempt at the first offshore drilling in two decades in the Alaska Arctic.
The company said it will continue doing what the preliminary work it can this year "in order to lay a strong foundation for operations in 2013."
Shell announced the decision Monday after an accident during testing of the Arctic Challenger, the troubled oil spill-containment barge.
"During a final test, the containment dome aboard the Arctic Challenger barge was damaged. It is clear that some days will be required to repair and fully assess dome readiness," the company said in a statement.
The massive containment dome is meant to block releases of oil and natural gas in case of an underwater spill. The company released no details on what happened during the testing in waters off Washington state.
The Coast Guard, Environmental Protection Agency and the Interior Department said they had no information about what happened to the containment dome. The Interior Department referred questions to Shell.
"The extent and the cause are being investigated now," Shell spokesman Curtis Smith said.
"We are disappointed that the dome has not yet met our stringent acceptance standards; but, as we have said all along, we will not conduct any operation until we are satisfied that we are fully prepared to do it safely," Shell said in Monday's statement.
Environmental groups seized on the accident as a sign that Shell shouldn't be allowed to drill in the Arctic waters. Cindy Shogan of the Alaska Wilderness League said there was no proven method of cleaning up an oil spill in the harsh conditions of the Chukchi and Beaufort seas and that the incident showed the company wasn't ready to try. The Natural Resources Defense Council said the "debacle" was just the latest misstep by Shell.
"If you can't even test your safety systems in calm waters without damaging them, you've got no business drilling for oil in the Arctic," said Niel Lawrence, senior attorney at the environmental group.
"I'm disappointed with the news but believe Shell has made the right decision, keeping safety paramount," said Sen. Lisa Murkowski, R-Alaska, the ranking Republican on the Senate Energy Committee.
The Interior Department has said Shell won't be allowed to drill more than about 1,400 feet into the seafloor until its oil spill-containment barge is ready. Oil-bearing zones are thought to be about 5,500 feet down.
Shell already was running out of time for this drilling season before the accident. The company is required to finish any drilling operations before the arrival of sea ice, which could pose a problem for dealing with any spill.
Shell ran into repeated delays with the troubled renovation of its oil spill-containment barge. Shell contractor Superior Energy Services has been retrofitting the 38-year-old Arctic Challenger at a Bellingham, Wash., shipyard. The renovations were finished last week and the ship began sea trials and inspections, which the company had described as successful up until the containment dome was damaged.
Interior Secretary Ken Salazar said Monday that the agency looked forward to working with Shell on Arctic exploration.
"The department has set rigorous safety, environmental-protection and emergency response standards for any exploration activities in the Arctic, and throughout this process, Shell has demonstrated a commitment to those standards," he said.
Shell said it planned to drill as many "top holes" as possible this drilling season in hopes of getting approval to drill more deeply into oil-bearing formations next year.
"The top portion of the wells drilled in the days and weeks ahead will be safely capped and temporarily abandoned this year, in accordance with regulatory requirements," the company said in its statement.
Shell has had problems with even such preliminary drilling. Last week, the company had to halt the effort the day after it began when sea ice started moving toward the drill ship.
Shell said the drill ship, the Noble Discoverer, was expected to resume its position in the Chukchi Sea and start work again in coming days. The company also plans to start "top hole" operations in the Beaufort Sea soon, after the fall Inupiat whaling season.
By SEAN COCKERHAM
Anchorage Daily News