Oil executive: ‘Very stressed relationship’ between industry, Obama White House

Royal Dutch Shell’s top U.S. official credits the White House for recognizing the “strategic importance” of oil resources off Alaska's coast, but says that overall, tensions between the industry and the Obama administration persist.

“I think you see a lot and you hear a lot about it being a very stressed relationship, and that’s real. We should just be honest about the fact that that’s real,” said Shell Oil Co. President Marvin Odum in an interview with Platts Energy Week TV broadcast Sunday.

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Shell is on the cusp of winning federal drilling permits to begin exploratory drilling in Arctic waters off Alaska's coast this summer.

The Obama administration has already provided a series of needed approvals, and the permits are expected after Interior Department officials complete testing and inspections of infrastructure the company is deploying in the region.

But more broadly oil companies and allied GOP lawmakers have consistently accused the administration of keeping too many areas off-limits to drilling, and issuing regulations that companies allege are burdensome.

Odum, in the interview, said the approvals Shell has won display federal recognition of the strategic value of the Arctic resources.

“I think it is a recognition of how strategically important Alaska is and offshore Alaska is to the U.S. and U.S. energy security,” he said, citing estimates that there could be over 25 billion barrels of oil off Alaska’s coast.

“I think Alaska is a good example where you would say where the strategic importance of Alaska is understood, because we wouldn’t be where we are today otherwise,” said Odum, whose company has spent billions of dollars to obtain and work toward developing its Arctic leases.

The company plans to drill a total of five exploratory wells this year in the Beaufort and Chukchi Seas. But Odum said that if the project’s start is delayed while the company waits for sea ice to clear, the drilling could be scaled-back.

“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 said. “That’s just part of the uncertainty that we deal with as we enter an area like this.”

Environmentalists are strongly opposing Shell’s plans to drill in the harsh Arctic seas that are home to polar bears, bowhead and beluga whales, and other fragile species, warning that a spill would be enormously destructive and that spill containment and clean-up would be very hard.

But Odum defended the company’s drilling safety preparations and response capabilities, saying the company is “absolutely sure” the operations can be conducted safely.

“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,” he said.

Interior officials say they will keep close watch over Shell's drilling. Interior's Bureau of Safety and Environmental Enforcement plans to have inspectors stationed on Shell's rigs around-the-clock.