December 8, 2009 / 12:02 AM / 10 years ago

UPDATE 1-Shell Alaska Chukchi drill plan has conditional ok

(Recasts, updates with comments from Shell, adds background; adds byline, new dateline, previously WASHINGTON)

By Yereth Rosen

ANCHORAGE, Alaska, Dec 7 (Reuters) - The Obama administration on Monday approved, with conditions, Royal Dutch Shell Plc’s (RDSa.L) plan to drill the first wells in two decades in the Chukchi Sea off Alaska’s northwest coast.

The U.S. Interior Department’s Minerals Management Service gave conditional clearance to Shell’s plan to drill up to three wells next year in the Chukchi, where the company spent $2.1 billion to acquire leases in 2008.

The approval is subject to several stipulations aimed at avoiding impacts to marine mammals, birds and the autumn whale hunt conducted by the Inupiat Eskimos.

Shell and Alaska officials hailed the decision. The company still must obtain a drilling permit from MMS, along with permits from other agencies, said MMS spokesman Nicholas Pardi. The legal status of the Chukchi leases also remains clouded by a U.S. Court of Appeals decision last spring that declared the 2008 lease sale improper.

Environmentalists and some Inupiat leaders slammed the MMS decision.

Interior Secretary Ken Salazar said “A key component of reducing our country’s dependence on foreign oil is the environmentally responsible exploration and development of America’s renewable and conventional resources.”

“By approving this exploration plan, we are taking a cautious but deliberate step toward developing additional information on the Chukchi Sea,” Salazar said in a statement.

The Chukchi Sea is believed to hold about 15 billion barrels of recoverable oil and about 76 trillion cubic feet of recoverable natural gas, according to the most recent MMS estimate. But its remoteness poses economic challenges.

Oil found at Burger and Crackerjack would have to be transported 60 miles to shore and, from there, about 200 miles east to the nearest existing industrial infrastructure.

“Shell believes the Chukchi Sea could be home to some of the most prolific, undiscovered hydrocarbon basins in North America,” Pete Slaiby, Shell’s Alaska vice president, said in a statement.

Environmentalists and some Inupiat Eskimos, whose culture is based on whale hunting and harvesting wild food from the sea and shoreline, oppose Arctic offshore oil development.

Opponents say the region’s harsh weather makes oil exploration too risky and creates difficulties in cleaning up spilled oil. They also say oil development endangers wildlife.

Other companies acquiring Chukchi leases include ConocoPhillips (COP.N), which has said it plans to drill as early as 2011, Norway’s Statoil and Spain’s Repsol. The MMS has not yet approved drilling plans from any of those companies.

The appeals court ruled against the 2008 lease sale after a challenge by environmentalists, the Native Village of Point Hope and others. It ruled that MMS had not conducted adequate environmental studies before proceeding with leasing.

The court has yet to clarify whether Shell’s leases will remain intact. (Additional reporting by Tom Doggett in Washington; Editing by David Gregorio)

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