Shell Clears Air Permit Obstacle for Alaska Offshore Drilling Plans

By Cassandra Sweet, The Wall Street Journal Online

The U.S. Environmental Protection Agency removed a longtime obstacle to Royal Dutch Shell PLC’s Arctic offshore drilling plans, granting the company final air-quality permits to drill for oil and natural gas off the coast of Alaska.

The permits will allow Shell to operate the Discoverer drill ship and a support fleet of icebreakers, oil-spill response vessels and supply ships for up to 120 days each year in the Chukchi Sea and Beaufort Sea Outer Continental Shelf starting in 2012, the EPA said.

The EPA permits have been a major hurdle to the company’s Alaska offshore drilling plans, on which the company has invested more than $3.5 billion. Legal challenges and other regulatory hurdles also have delayed the company’s plans.

In 2010, the EPA issued similar permits to Shell, but Alaska native villagers and environmental groups filed appeals opposing those permits with the EPA’s independent Environmental Appeals Board, saying pollution from the drill ships and support vessels would harm residents and wildlife.

In December, the appeals board invalidated the permits and sent them back to the EPA to be revised.

The new permits require Shell to cut emissions of soot and nitrogen dioxide from its fleet by more than 50% compared to the levels allowed in the 2010 permits, the EPA said. Shell will use new emissions controls to meet new limits on nitrogen dioxide that went into effect this year, the agency said.

Shell plans to drill up to three wells next year in the Chukchi Sea off the Alaska coast using the Discoverer drill ship, for which the EPA issued the air permits, said a Shell spokeswoman.

The spokeswoman added that Shell plans to drill up to two wells in the Beaufort Sea in 2012 using the Kulluk drill ship, although the company is still waiting for a final air permit for that ship and hopes to obtain one by October.

“The issuance of final air permits for our exploration program is another in a series of recent, positive developments and ads to our confidence that we will be drilling our offshore Alaska leases by July of next year,” the spokeswoman wrote in an email.

The EPA also is considering an application filed by ConocoPhillips for permits to explore for oil and natural gas in the Chukchi Sea starting in 2013.

The EPA permits require Shell to limit nitrogen dioxide emissions by installing selective catalytic reduction systems on two icebreakers, installing filters that collect particulate matter on the Nanuq oil spill response vessel and using ultra-low sulfur diesel fuel on the Discoverer and all support vessels.