Shell’s Arctic drilling plan could go down to the wire

Interior Secretary Ken Salazar said Tuesday that a decision to grant Shell permits to drill in Arctic waters off Alaska’s coast this summer could arrive as late as Aug. 15, giving the oil giant a tight window for the project.

Salazar spoke to The New York Times on Tuesday:

Asked about the window of opportunity for Shell’s offshore oil drilling in the Arctic this summer, he said he would made [sic] a final decision on whether to issue drilling permits by Aug. 15. While the permits might be issued earlier, he said, the department is still awaiting outstanding tests on equipment including a oil-spill-response barge.

The secretary would not say definitively whether drilling would occur this summer. “We have not yet given the final permits to Shell,” Mr. Salazar said. “We don’t know if it will occur, and if it does occur, it will be done under the most watched program in the history of the United States,” he said, referring to safety precautions.

Interior regulators have strongly suggested in recent weeks that Shell is likely to receive drilling permits.

But the timing is important because Shell’s window to drill into hydrocarbon-bearing zones in the Chukchi Sea ends Sept. 24 under the exploration plan approved by Interior Department regulators, although other activities can last longer.

The company must clear out of both the Chukchi Sea and adjoining Beaufort Sea off Alaska’s northern coast by the end of October.

Sen. Lisa Murkowski (R-Alaska), a strong backer of Shell’s project, told reporters Tuesday that Shell estimates that drilling an exploratory well takes about 30 days.

Shell is already getting a later start than it had hoped on the costly project because it’s waiting for sea ice in the region to clear.

“We’ll make the most of the time we have in each location, and we look forward to achieving final permits for exploration this summer,” Shell spokeswoman Kelly op de Weegh said Tuesday.

If Interior doesn't grant permits until mid-August, that would appear to make it likely that the plan to drill up to five exploratory wells total this year — three in Chukchi and two in Beaufort — would have to be scaled back.

Marvin Odum, the head of Shell’s U.S. operations, said in mid-June that starting in mid-August would reduce the project’s scope.

“Let’s take a worse-case: If we didn’t get started until about the middle of August, we are probably more realistically looking at two wells in the Chukchi and maybe one well in the Beaufort,” he told the energy news service Platts in an interview that aired June 17.

Murkowski said Shell officials have similarly told her that the sea ice conditions could force them to scale back the project.

“They would like to do as much of the schedule as they had hoped, but if the conditions don’t allow, they will not risk it. They have informed me that they will not risk that,” Murkowski, the top Republican on the Energy and Natural Resources Committee, told reporters in the Capitol Tuesday.

Shell has spent billions of dollars to buy and try to develop leases off Alaska’s coast, and Interior Department regulators have strongly signaled that they intend to permit the drilling to begin this summer.

But the oil giant has faced new wrinkles of late in its march toward fulfilling the years-long quest to drill in Alaska’s Arctic.

Over the weekend, the Noble Discoverer drillship slipped its moorings and dragged anchor, almost running aground in Dutch Harbor in the Aleutian Islands. But the company said there was no damage.

“Late yesterday, divers viewed the hull of the Noble Discoverer and confirmed what the earlier ROV inspection had found, that the hull sustained no damage or showed any indication that it had run aground,” op de Weegh said Tuesday.

But environmentalists who oppose the proposed drilling off Alaska’s northern coast have used the incident to raise new questions about the plan.

“Shell can’t keep its drill rig under control in a protected harbor,” Jackie Dragon, Greenpeace’s lead Arctic campaigner, told The Houston Chronicle. “What will happen when it faces 20-foot swells and sea ice while drilling in the Arctic?”

Shell has vowed to abide by strict safety standards, and Interior Department officials say they’re keeping close watch, too, and have touted their work to inspect and test Shell’s infrastructure and spill containment systems.

“This is designed where nothing goes wrong. But if something did, that very small chance that something does, we have the response systems in place to react to that,” Odum told Platts.

Green groups are also attacking Shell for its recent request to EPA to revise air pollution permits.

The company says the Discoverer’s main generator cannot meet the permit’s requirements for nitrogen oxide and ammonia emissions, among other changes that Shell is seeking to its EPA permits.