Shell cleared a major hurdle Thursday in its effort to begin a two-year drilling program in the Arctic Ocean next summer, receiving a conditional exploration permit from the federal agency that oversees offshore oil development.
The company said it was buoyed by the morning announcement from the Interior Department's Bureau of Ocean Energy Management, Regulation and Enforcement, just as Interior Secretary Ken Salazar was preparing for an Alaska visit next week at the invitation of Sen. Lisa Murkowski, R-Alaska.
That congressional tour, which will also include Sen. Jack Reed, D-R.I., chairman of the Interior Appropriations Subcommittee, will focus on energy issues.
The exploration permit covers an overall program that would drill four wells over two years in Camden Bay of the Beaufort Sea, due north of the coastal plain of the Arctic National Wildlife Refuge.
But the permit is contingent on many other federal permits and approvals, among them governing air pollution from drill ships and companion vessels, oil-spill response plans, marine mammal protection and specific plans for each of the wells. A Shell spokesman in Alaska, Curtis Smith, said the company has been informed that at least the oil-spill response plan is near conclusion and will be approved next week.
Representatives of several environmental organizations, in a joint telephone news conference from Washington, D.C., said they were disappointed by the decision and were studying whether to challenge it in court. Erik Grafe, an Anchorage-based attorney for Earthjustice, said they had 60 days to file a lawsuit.
Grafe and the others said the federal approval was granted before Shell proved it could clean up an oil spill in the Arctic. They said the drilling program should have been subject to a full-blown environmental impact statement with public comment and additional research, not the more limited environmental assessment that the agency conducted.
The agency found no evidence that Shell's exploration "would significantly affect the quality of the human environment," a key for rejecting the need for an environmental impact statement.
Shell is also seeking authorization to drill in the Chukchi Sea about the same time as in the Beaufort. That application is pending.
Alaska's congressional delegation had been pressing for agency action this year and quickly praised the decision.
"Shell has been working to secure approval of this plan for over five years," Murkowski said in a prepared statement. "This is another positive step forward, and I'm hopeful that they will soon be able to move forward with exploration and production in the Beaufort."
She, Sen. Mark Begich, D-Alaska, and Rep. Don Young, R-Alaska, said the exploration project would create jobs and, if commercial development followed, could forestall problems with the trans-Alaska pipeline associated with declining oil flow.
Shell first won the Beaufort leases in 2005 and 2007. The company began applying for permits, but the Deepwater Horizon oil spill in the Gulf of Mexico in 2010, and the moratorium on new offshore drilling that followed, set Shell back.
In the aftermath of the spill, Shell bolstered its oil-spill prevention and response capability. On the federal side, one government agency, the Minerals Management Service, was replaced with another, the Bureau of Ocean Energy Management, Regulation and Enforcement. Shell had to resubmit its revised plans.
"Since Deepwater Horizon, BOEMRE has made significant improvements to the regulation and oversight of offshore oil and gas development," the agency said through a spokesman. "Permit applications for drilling projects must meet new standards for well-design, casing, and cementing, and be independently certified by a professional engineer per the new drilling safety rule. All of these improvements and experiences will go into further reviews of oil spill response plans."
In addition to obtaining more spill-response equipment, Shell says it is adapting technology being developed for the Gulf of Mexico that would allow drillers to quickly cap a damaged well or direct oil from a blowout to tankers on the surface.
Shell says the Arctic subsurface conditions are easier for operations than the Gulf because they are relatively shallow, at least for the early stages of exploration. The Beaufort wells would be about in about 120 feet of water, spokesman Smith said, making them accessible to divers as well as remotely controlled vehicles.
But surface conditions, with broken ice and cold water that reduces the natural ability to break down spilled oil, has been concerning environmental organizations since Shell first announce its plans.
"The most recent spill drill in the Beaufort Sea described mechanical containment in icy conditions as a 'failure,' " said Holly Harris, an attorney for Earthjustice.
Peter Van Tuyn, an environmental lawyer from Anchorage with the Alaska Wilderness League, phoned in to the Washington press conference from a mountain in Montana to say too little is still known about the Arctic environment to justify drilling.
"The data gaps are monstrous," he said.
While the approval of Shell's drilling plan might signal the Obama administration's desire to move ahead with offshore oil development, there are plenty of opportunities for opponents to challenge permits. For instance, Shell's draft air quality permits, issued by the Environmental Protection Agency, are currently up for public comment. Even if the agency approves the permits, anyone who initially commented can seek redress in the EPA's Environmental Appeals Board, which once before rejected Shell's air permits.