Time running out for Shell drilling in Arctic, Salazar says

ANCHORAGE Mon Aug 13, 2012 6:45pm EDT

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ANCHORAGE Aug 13 (Reuters) - Time is running out for Royal Dutch Shell to drill exploration wells in Arctic waters off northern and northwestern Alaska, U.S. Interior Secretary Ken Salazar said Monday.

Shell's long-awaited plan to drill for oil in the Chukchi Sea has been held up by its inability to win approval for an oil-spill barge that is a required piece of safety equipment, Salazar said. The barge remains in Bellingham, Washington undergoing inspections and awaiting certification from the U.S. Coast Guard and American Bureau of Shipping, he said.

"We are in a time frame here where time is short. And sometime I expect over the next several weeks some final decisions will be made," Salazar said at a news conference in Anchorage.

Ice cover in the waters off northern Alaska has been heavier this summer than in recent summers, said the secretary, who spent part of the weekend flying over the Arctic Ocean.

But the area where Shell had planned to drill this summer, the Burger prospect, is currently clear of ice.

"It's not the ice conditions that have held up the effort in terms of moving forward. It's the necessity for Shell to be able to demonstrate that they have met the regulatory requirements which we have put into place. And those regulatory requirements must be met. If they are not met, then there won't be a Shell exploration effort that will occur this year," Salazar said.

Under Shell's approved exploration plans, all operations in the Beaufort and Chukchi seas must cease by Oct. 31. Drilling into known hydrocarbon zones in the Chukchi must cease 38 days earlier than that, though top-hole drilling above hydrocarbon zones would be allowed.

Drilling operations must also be suspended during the traditional Inupiat Eskimo fall whale hunt, a period expected to last two or more weeks, under the exploration plan.

Shell had hoped to drill up to three wells this year in the Chukchi and up to two in the Beaufort, and a similar number next year. It won approval from the Bureau of Ocean Energy Management to proceed with that plan. But permits for specific wells cannot be issued without certification of the barge, Salazar said.

Salazar couldn't say what the final deadline might be.

"I don't know when that time will be, but we don't have a lot of time," he said. "Whatever activity takes place up there is activity that will have to take place in time to be able to be completed before conditions ice over."

Shell has already scaled-back its 2012 plans.

Salazar said Interior will not bend on its requirement for oil-spill prevention and cleanup equipment.

The Deepwater Horizon disaster in the Gulf of Mexico "ought to be a stark reminder to the oil and gas industry and anybody who wants to operate in America's oceans" that the government's requirements "are standards that we believe in and standards that we will enforce," he said.

One opponent of Shell's drilling plans said the company's inability to win approval of its oil-spill barge is a troubling sign for protection of the Arctic waters.

"That sort of tells you that we're not prepared," said Caroline Cannon, a tribal leader in the Inupiat village of Point Hope.

Cannon, whose village is on the Chukchi coast near Shell's proposed drilling sites, said she was surprised that Shell waited so long to complete its preparations. "You would think everything would be in place," she said.

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