The Obama administration today said it will finalize a plan to offer new leases in the Arctic Ocean but will take precautions to protect sensitive waters, wildlife and Alaskan subsistence hunters.
The announcement by Interior Department officials from Norway signals the administration's commitment to long-term development of the Arctic -- a region believed to be flush with oil, but which environmentalists and some Alaska Natives warn is too fragile, remote and risky to drill.
In addition, Interior Secretary Ken Salazar said he believed it was "probable" that Royal Dutch Shell PLC would be issued final permits to drill in both the Beaufort and Chukchi seas, the strongest indication yet that drilling could commence as early as mid-July.
Salazar said the agency's final leasing plan for the next five years will include potential lease sales in the Chukchi Sea in 2016 and in the Beaufort Sea in 2017. The plan would postpone by two years a sale in the Beaufort that was initially planned for 2015 (Greenwire, Nov. 8, 2011).
"We want to make sure we get it right, so we are not going to rush to process," Interior Deputy Secretary David Hayes said.
In contrast to recent Gulf of Mexico leases that included virtually all of the federal planning areas, the size and location of the Arctic sales will be determined by factors including resource potential, subsistence use and environmental conditions, Salazar said.
"We are taking a different approach -- a more strategic approach -- than the past," Salazar said in prepared remarks at a roundtable on Arctic development in Trondheim, Norway. "We intend to gather information from industry, Native Alaskan communities, the scientific community and the public to identify specific high-resource, low-conflict areas that are best suited for exploration and development."
Salazar said the agency will maintain a 25-mile buffer along the Chukchi coast put in place under the George W. Bush administration to protect Native Alaskan communities. He said the new plan would also include an additional area north of Barrow that has attracted minimal industry interest but that has very high subsistence value.
Today's announcement advances a five-year leasing plan first announced last November that also includes a dozen sales in the western, central and eastern Gulf, but excluded the entire Atlantic and Pacific seaboards -- to industry and most Republican lawmakers' chagrin.
Interior officials said that East Coast states lack infrastructure to respond to potential oil spills and that West Coast states do not support offshore development. Federal agencies also lack adequate resource data to proceed with development in either ocean, the agency said.
The planned leasing areas, the agency said, include more than three-fourths of the known oil and gas resources in federal waters. Critics argue the estimate is flawed considering resource surveys in uncharted waters are out of date.
"If we are to access these resources, we have to take a careful, step-by-step approach that is grounded in science and that protects subsistence uses, wildlife, local communities and the broader ecosystem," Salazar said. "You can call this targeted leasing."
New leasing in the Arctic is strongly opposed by environmental groups that argue that government and industry are yet to implement needed reforms in the wake of the Deepwater Horizon disaster in the Gulf and that oil spill response would be hindered by weather and a dearth of infrastructure.
"Leasing in the Arctic was premature under the Bush administration," said a coalition of more than a dozen groups including Alaska Wilderness League, the Wilderness Society and Natural Resources Defense Council in comments to Interior in January. "In the Obama administration, government and industry are still disregarding the scientific and technological information needed for informed decisions about both protecting and exploiting the pristine Arctic waters."
Sen. Mark Begich (D-Alaska) said today's leasing decision is a "vote of confidence" in the state's offshore oil prospects.
"For over three years, my message to the Obama administration is that as America's energy storehouse, Alaska can and should responsibly supply a significant portion of our country's energy needs," he said in a statement today.
Contrary to the expectations of some observers, today's announcement did not include final approval of Shell's plans to drill up to five exploratory wells this summer in the Beaufort and Chukchi.
Interior's Bureau of Safety and Environmental Enforcement yesterday tested Shell's ability to deploy a capping stack capable of squelching a runaway well, Salazar said. The exercise in Washington's Puget Sound is one of the final steps in what officials have described as the most scrutinized drilling proposals in U.S. history.
"If Shell meets our standards and passes our inspections, its exploration activities will be conducted under the closest oversight and most rigorous safety standards ever implemented," Salazar said, adding that BSEE will have an inspector on-site 24 hours a day.
"It is probable that they will get those permits," Salazar added. "If that occurs, it will occur with the kind of oversight that I'm going to be very confident ... that there's not going to be a problem."
If approved, Shell's wells would be the first drilled in more than 20 years in an area believed to contain about 26 billion barrels of oil.
The Hague-based company had planned to begin drilling in early July, but operations could be delayed for weeks by unusually heavy ice pack. Any permitting delays could compromise the company's ability to conclude drilling by mid-September in the Chukchi and late October in the Beaufort, when ice is expected to halt activities.
Salazar, who this week toured Statoil's Kristin oil and gas platform in the North Sea, 62 miles offshore Norway, said he hoped this week's ministerial forum will result in an "integrated management approach to Arctic matters," including better information sharing.
Norway's Statoil, Italy's Eni and ConocoPhillips Co. are among companies that purchased leases in the Arctic during a trio of sales offered under the Bush administration. In addition to Shell, ConocoPhillips has submitted an exploration plan for drilling.