Shell gets key EPA permit for Alaska drilling

Thu Apr 1, 2010 6:03pm EDT

* EPA issues permit Shell needs to drill in Chukchi Sea

* Shell plans to drill up to 3 wells off Alaska coastline

* Shell confident it can get other permits needed to drill

By Yereth Rosen

ANCHORAGE, Alaska, April 1 (Reuters) - Royal Dutch Shell (RDSa.L) has secured a critical U.S. regulatory permit to conduct planned exploratory oil drilling this year in Alaska's Chukchi Sea, regulators and the company said on Thursday.

The Environmental Protection Agency has authorized emissions from Shell's drill ship and support vessels, issuing a final air-quality permit.

The permit comes a day after the Obama administration affirmed support for exploration in Arctic waters off Alaska. It is the first "major-source" air-quality permit ever issued for the Arctic outer continental shelf, EPA officials said.

Shell has been seeking the permit for years, a spokesman said. He said the company is confident it can get the rest of the permits it needs for the Chukchi, which the U.S. Minerals Management Service (MMS) has estimated holds about 15 billion barrels of recoverable oil and 77 trillion cubic feet of natural gas.

Only five exploratory wells have ever been drilled in the Chukchi because despite the estimated abundance of recources, remoteness and harsh conditions have discouraged exploration.

The EPA permit is "one of the major milestones we needed to fall in place so we would continue to plan for drilling in 2010," said Curtis Smith, spokesman for Shell in Alaska.

The final air-quality permit is subject to public comment and could be appealed.

The MMS approved Shell's Chukchi Sea drill plan on Dec. 7. The company plans to drill up to three wells at two prospects located about 75 miles (120 km) off the northwest Alaska coastline.

Shell first drilled the prospects, Burger and Klondike, two decades ago. It abandoned the prospects, but won back exploration rights for $2.1 billion in a lease sale held in 2008 by the MMS.

Shell still needs permits from other agencies to drill in the Chukchi, "But we have a high degree of confidence that we will achieve those permits," Smith said.

Shell made concessions to secure the permit, including use of ultra-low-sulfur diesel fuel to reduce air pollution in the fleet, Jan Hastings, EPA regional deputy air-quality director at the Seattle office, said in a telephone news conference.

The final EPA permit for Shell's Chukchi operations sets limits for air pollutants such as sulfur dioxide and particulates. It addresses public concerns on a draft air-quality permit issued on Jan. 8.

Separately, Shell also plans to drill two wells this year at prospects in the Beaufort Sea off Alaska's northern coast. Shell spent $84 million acquiring exploration rights there in MMS lease sales held in 2005 and 2007.

A decision on the Beaufort permit, issued in draft form in February subject to public comment, is due later this month, Hastings said.

(Editing by Bill Rigby and David Gregorio)

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