The opportunity for Shell Oil Co. to drill exploratory wells this year in Alaska's Arctic is rapidly diminishing and it's a situation of Shell's own making, Interior Secretary Ken Salazar told reporters in Alaska on Monday.
While delays already have led Shell to scale back plans for drilling a total of five wells this year in the Chukchi and Beafort seas, Shell maintained through a spokesman that there's still time before freezeup to complete some wells and begin work on others.
The main holdup has been transforming a 38-year-old barge into an oil spill containment vessel. Shell also has been dealing with lingering sea ice and challenges with an air emissions permit for a drilling rig.
Salazar spent the weekend in Alaska touring the North Slope and flew some 40 miles over sea ice and water north of Barrow. While he saw significant sea ice, he said that the area around Shell's most promising prospect, the Burger find in the Chukchi Sea, was clear.
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The oil spill containment vessel, now called the Arctic Challenger, is a condition of Shell's approved exploration plan and must pass Coast Guard inspections and an in-water test before it can be certified for the Arctic, officials have said.
"If they had got it done, they may already be up there today," Salazar said. "Because the waters in the Chukchi around the so-called Burger find are in fact already open. So it's not a matter of ice. It's a matter of whether or not Shell has the mechanical capability to be able to comply with the exploration effort that had been approved by the government."
Shell contractor Superior Energy Services is retrofitting the barge at a shipyard in Bellingham, Wash. As of Aug. 4, about 400 items still needed to be completed, inspected or reviewed, according to the Coast Guard. An updated number wasn't available Monday, Shell spokesman Curtis Smith said.
The barge is intended to carry a containment dome engineered by Shell that could be lowered to a wellhead in the event of a spill. Oil would travel from the dome through an attached hose back to the barge.
"I will hold their feet to the fire in terms of making sure that we are doing everything we can to abide by the standards and regulations we have set, and to make sure that the environment and the Arctic seas are protected," Salazar said.
Under approved plans, Shell must suspend drilling "in known hydrocarbon zones" by Sept. 24 in the Chukchi Sea and by Oct. 31 in the Beaufort Sea. Wells in that area can take from 20 to 40 days to drill, according to Shell.
So far, the company hasn't submitted any formal proposal to extend its drilling season or to start preliminary well work before the oil spill containment barge arrives, Salazar said.
"We are in strong agreement with the Department of Interior that drilling in hydrocarbon zones will not begin until the Arctic containment system is positioned in theater," Shell's Smith said in an email.
Crews are making steady progress on the Arctic Challenger, Smith said. Shell is working closely with the Coast Guard on inspections and regulators on testing. "There's no set timetable for the completion of this important process," he said.
Shell already has sent some vessels to the Chukchi and Beaufort sites to position anchors for its drill rigs, the Kulluk and the Noble Discoverer. Those rigs remain in Dutch Harbor for now.
"We remain confident the Arctic Challenger will arrive in Alaska in time for Shell's rigs to commence drilling into hydrocarbon zones," Smith said.
Shell has spent more than $4.5 billion on leases, ships and special equipment to drill in the Alaska Arctic.
Salazar had earlier said he expected to make a decision on Shell's drilling permits for individual wells by Wednesday. That's not realistic anymore. He now anticipates a decision in 10 to 12 days.
"It might be Aug. 22 now. It might be Aug. 23. I just don't know," he said. "It's dynamic. The curtain of opportunity for 2012 is closing."