UPDATE 1-Shell scales back drilling for Alaska offshore

Wed Oct 6, 2010 6:28pm EDT

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* Shell seeks permit to drill single well in Beaufort Sea

* Not seeking permits to drill in more remote Chukchi Sea

By Yereth Rosen

ANCHORAGE, Alaska, Oct 6 (Reuters) - Royal Dutch Shell (RDSa.L) has scaled back its plans to drill offshore the Alaska coast in 2011 and now plans only a single well for the Beaufort Sea.

Shell, which has spent $3.5 billion in preparation for the drilling, is not seeking federal permits to drill in the more remote Chukchi Sea, where it had originally planned three wells.

Unresolved litigation about the validity of Chukchi Sea leases makes it impractical to plan for drilling next year in that lightly explored region, which lies off northwestern Alaska, said Pete Slaiby, the company's vice president for Alaska.

"We've got, I think, clearer sailing in the Beaufort Sea," he told reporters at an Anchorage news conference.

The pending litigation includes a case in a Washington, D.C. appeals court in which the entire five-year Alaska leasing program was ruled improper, and a separate case in U.S. District Court in Anchorage in which the judge ruled that MMS had failed to do sufficient environmental review before selling leases in the Chukchi in 2008.

Any further exploration work in the Chukchi is on hold until the Department of Interior remedies what the courts characterized as deficiencies in pre-sale environmental work.

The litigation was launched by environmentalists and Alaska Natives who argued that oil drilling in Arctic waters poses risks of oil spills and habitat disruptions that were never adequately studied.

New drilling had also been on hold in Arctic waters because a policy announced by the Obama administration in the wake of the Deepwater Horizon disaster in the Gulf of Mexico. In concert with a moratorium on new deepwater Gulf of Mexico drilling, the administration announced that it was temporarily delaying any permits for offshore Arctic drilling until environmental issues were better studies.

The U.S. Bureau of Ocean Energy Management, Regulation and Enforcement -- the successor agency to the Minerals Management Service -- has 30 days to respond to the application, according to statute, Slaiby said.

(Editing by Bill Rigby and Lisa Shumaker)

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