Salazar: Feds likely to approve Shell’s Arctic drilling permits

A top Obama administration official predicted today that Shell will win government permits to drill exploratory oil wells in Arctic waters north of Alaska, despite stiff environmental opposition.

Inteior Secretary Ken Salazar stressed that federal regulators are still scrutinizing Shell Oil’s applications to drill up to five wells in the Beaufort and Chukchi seas this summer, following a test of one of the firm’s emergency systems in Puget Sound on Monday.

“We are still in the process of doing the inspections and making sure the (applications for permits to drill) meet the requirements. Until all those requirements are met, no permit will be issued, but I do anticipate — having seen the conditions that Shell has already met — that it is probable that they are going to get these permits,” Salazar said. “It is highly likely the permits will be issued.”

Salazar also insisted that “there’s not going to be an oil spill” in the Arctic waters where Shell intends to drill, because the company’s plans have been so heavily scrutinized.

The declaration is a major show of confidence in Shell’s Arctic drilling program, more than seven years after the company began its quest to launch a fresh search for oil in the region. Shell and other companies last drilled in U.S. Arctic waters in the 1980s and 1990s, but those wells were abandoned because the relatively low price of oil made the further development too expensive.

“We appreciate the lengths to which the Department of Interior is going to ensure our readiness to drill this summer,” said Shell spokeswoman Kelly op de Weegh. “We look forward to receiving approved Applications for Permits to Drill.”

Shell Oil Co. spent $2.2 billion buying drilling rights in the region during federal lease sales dating back to 2005 and has since invested billions more trying to overcome regulatory hurdles, environmental concerns and legal challenges to kick off the exploration.

Further legal challenges are expected, Salazar said.

Salazar made his remarks to reporters while in Norway for a ministerial forum focusing on ways to boost the safety of offshore drilling. On Tuesday, Salazar also highlighting the administration’s handling of a new five-year plan to govern oil and gas leasing on the outer continental shelf from 2012 through 2017.

The Interior Department has been putting the finishing touches on a new five-year OCS plan that would replace the existing blueprint that expires on June 30.

The final 2012-2017 outer continental shelf plan that will be finalized later this week is nearly identical to a proposed leasing blueprint the Interior Department unveiled in November, though it would briefly postpone sales of drilling rights in the Beaufort and Chukchi seas. Under the proposed 5-year plan, those sales would have taken place in 2015 and 2016 respectively; the final document schedules them for 2016 and 2017.

By contrast, Shell’s proposed drilling is slated for areas that were leased in 2005, 2007 and 2008.

Shell tested its first line of defense against runaway Arctic oil wells for federal inspectors on Monday. During a deployment drill, Shell sent its capping stack into the waters of the Puget Sound.

“The capping stack was deployed to a depth consistent with the shallow-water scenario we will encounter off the coast of Alaska,” op de Weegh said. “The functionality of the stack was tested and sea water was flowed through the system to test for integrity.”

It was unclear when regulators would conduct a separate test of Shell’s containment system for siphoning off crude oil and gas.

Shell says its capping stack would allow it to choke off flowing hydrocarbons at a damaged subsea well and its containment system could siphon off crude oil and gas, sending it to the surface for collection and flaring.

Federal regulators in the Interior Department’s Bureau of Safety and Environmental Enforcement previously conducted a tabletop test to simulate a spill response and had planned on testing the basic functions of Shell’s capping stack while on land.

Environmentalists who oppose Shell’s planned drilling say there is no guarantee the capping system would work correctly in remote and choppy Arctic waters. Conservationists also have complained that regulators aren’t requiring Shell to prove it can use its containment system in the Arctic waters where it hopes to be drilling later this summer.