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Shell Hits Roadblocks in Arctic Drilling

Ice and EPA Regulations Delay Projects

Written by Brian Hicks
Posted July 30, 2012

Environmental causes and human bureaucracy are conspiring to delay Royal Dutch Shell’s (NYSE: RDS.A) drilling of around five exploratory wells in the Arctic waters off Alaska’s coast.

Extensive ice on the seas and an inability to meet EPA emissions standards may cause Shell to run a very tight deadline, since it cannot continue any operations beyond October 31.

The drilling was set to take place in the Chukchi Sea in northwestern Alaska, where there would be three wells, and in the Beaufort Sea, where there would be two.

Reuters reports:

"We've recalibrated what's possible, based on weather and logistics this year. No matter how that turns out, we're trying to make the most of the time that we do have in the theater," said Curtis Smith, Shell's spokesman in Alaska.

Shell had originally intended to begin drilling operations as early as July 1. However, ice cover has been denser than usual, and that means dangerous or even impossible conditions for ship passage.

Currently, Shell’s ships are anchored at Dutch Harbor, which is almost a thousand miles away from their drilling locations. Moreover, a crucial barge, the Arctic Challenger, hasn’t even been cleared by the U.S. Coast Guard. No clearance means no permits.

The emissions issue is a third problem for Shell. Back in June, they had appealed to the EPA to relax emissions standards for nitrogen oxides and other particulates and to completely lift limits on ammonia emissions for the Noble Discoverer drilling ship, according to Reuters.

The company’s statement claimed that they could not meet EPA expectations given current technology.

The EPA's response has not been released, but they have said:

“...using the tools we have under the Clean Air Act, we can protect air quality while providing the EPA approvals required for Shell to operate this summer.”

However, Shell appears far more concerned about the ice. Expectations are that the ice will begin to retreat adequately in the first week of August.

But a new complication results from rules stating that any drilling into hydrocarbon-bearing regions must end at least 38 days before October 31.

Shell may not actually get into any oil this year at all, but that remains to be seen.

Critics of marine oil operations have already sounded out their views on the caprices and risks inherent in working within an oceanic environment. The memory of Deepwater Horizon remains a fresh one.

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