Interior approves Bush-era leases in, clearing way for Shell drilling

The Interior Department today issued final approval of an oil and gas lease sale in the Arctic Ocean that could clear a path for Royal Dutch Shell PLC to drill there this summer.

The agency's record of decision reaffirms a George W. Bush administration decision in 2008 to sell $2.7 billion in oil and gas leases in Alaska's Chukchi Sea, including $2.1 billion in leases to Shell.

BOEM's supplemental environmental review aimed to remedy what the 9th U.S. Circuit Court of Appeals last year found were deficiencies in the Bush administration's 2007 environmental review of the lease sale -- namely that it badly underestimated how much oil could be developed as a result of auctioning the waters.

The agency's final supplemental environmental impact statement assumed a new exploration and development scenario of 4.3 billion barrels of oil, up from an old estimate of 1 billion barrels.

Federal scientists believe the Chukchi contains 15.4 billion barrels of undiscovered technically recoverable oil -- one of the largest untapped sources of energy in the United States.

But environmental groups have been fighting to keep it buried below the seabed, arguing that drilling in the frigid and storm-prone waters is too dangerous and that burning the oil would accelerate global warming.

"The Arctic is an important component of the administration's national energy strategy, and we remain committed to taking a thoughtful and balanced approach to oil and gas leasing and exploration offshore Alaska," Interior Secretary Sally Jewell said in a statement today. "This unique, sensitive and often challenging environment requires effective oversight to ensure all activities are conducted safely and responsibly."

Today's decision clears the way for BOEM to formally consider Shell's revised exploration plan for the Chukchi, which calls for two drill rigs to sink up to six wells beginning in July.

An Interior spokeswoman said BOEM has not formally accepted Shell's exploration plan. Once it does, the agency will have 30 days to decide whether to approve it.

By late April, the multinational oil company could secure a conditional drilling permit for the Arctic operation, although several other federal and state permits would be required before drilling could actually begin.

Production of oil and gas in the Chukchi could require up to eight Arctic-class platforms and 589 wells for exploration, delineation, production and service over the next several decades, BOEM's review found.

At the company's January investor meeting, Shell executives said they anticipate spending $1 billion for this year's Arctic venture, even if the company isn't able to drill in the Chukchi.

Shell has already spent roughly $6 billion trying to develop its leases.

Greenpeace USA Executive Director Annie Leonard today said Interior's decision is "deeply disappointing" and that environmental activists will "oppose Shell at every turn."

"Shell may now have approval from the Obama administration to drill in the Arctic, but it does not have approval from the people," she said. "Millions around the world are saying 'no' to Arctic drilling and other extraction projects that we have to freeze to avoid catastrophic climate change."

Phil Taylor, E&E reporter

Republished from EnergyWire with permission. EnergyWire covers the politics and business of unconventional energy. Click here for a free trial

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