EPA Gives Shell Preliminary Approval to Drill in Chukchi Sea

WASHINGTON (Dow Jones), Jan. 8, 2010

The U.S. Environmental Protection Agency gave preliminary approval to Royal Dutch Shell (RDSA) to drill exploratory wells off the coast of Alaska, the company said Thursday, one of the last remaining hurdles facing the company's plans to begin drilling this summer.

The company said the EPA's decision to issue a draft air permit will start the clock on a series of events that will determine whether exploration can begin in 2010. The EPA still must finalize the air permit, which is also expected to face legal challenges. The U.S. Interior Department last month approved Shell's plan to drill three exploratory wells.

"While today's announcement is good news, the length of the public comment period combined with likely appeals still pushes the boundaries of our ability to drill in 2010," Shell said in a statement.

"Obviously, the windows in which we have to operate are limited, and a decision to move forward is an extremely expensive one. We will continue to monitor our options in the days ahead as we get closer to making that critical decision."

Shell won the right to drill in the area in 2008, when it spent $2.1 billion on leases to drill in the Chukchi Sea. The Interior Department's Minerals Management Service raised $2.7 billion in total in the auction. It was the biggest award of leases off the coast of Alaska on record, based on the number of leases offered and the area covered, and the first in the Chukchi Sea since 1991.

Environmentalists are likely to be disappointed. Last month, Oceana, an advocacy group, warned about the risk of an oil spill, noise, and other pollution stemming from the industrialization of the waters. The group said that not enough is known about the Chukchi Sea or the potential impacts of drilling.

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