ANCHORAGE, Alaska – Royal Dutch Shell paid the federal government $2.1 billion for petroleum leases in the Chukchi Sea off Alaska's northwest shore. But nearly four years later, the oil giant has not been allowed to drill an exploratory well.
The company currently is in limbo as it waits for word on the 2012 drilling season.
Explaining the scenario to a pro-development crowd in a state that gets upward of 90 percent of its revenue from the oil industry can be a tough gig, the Interior Department's No. 2 official acknowledged Thursday.
"It's not easy being a fed in this town sometimes," said Deputy Secretary David Hayes, a few hours after a speech in Anchorage to the Resource Development Council of Alaska.
Hayes plays a major role in deciding whether drill ships soon will appear in Arctic Ocean waters, which have outer continental shelf reserves estimated at 26.6 billion barrels of recoverable oil.
President Obama in July appointed Hayes head of a new interagency working group created to coordinate energy development in Alaska. For the first time, Hayes said, all federal agencies with a stake in the regulatory process — such as the Environmental Protection Agency, the Coast Guard, the Fish and Wildlife Service, and the new Bureau of Ocean Energy Management — are simultaneously reviewing a drilling application from their respective angles.
"It responds to complaints that have been charged against the federal government for decades, which is that the right hand doesn't know what the left hand is doing," Hayes said.
Standing in opposition to Arctic Ocean drilling are environmental groups and Alaska Natives who fear their ocean bounty could be fouled by a spill. They contend the federal government has no business allowing drilling in waters that are both fragile and frightening.
Arctic marine wildlife, already disrupted by warming, would be further disturbed by large-scale drilling, the groups say. The remote and inhospitable real estate makes drilling hazardous, the groups say, and the petroleum industry has not demonstrated it can effectively clean up spilled crude in ice-choked waters.
Royal Dutch Shell PLC wants to drill up to three exploratory wells in the Chukchi Sea and two in the Beaufort Sea in 2012.
One reason the company has been kept out the Chukchi was a successful lawsuit challenging the environmental work preceding the 2008 sale by the former Minerals Management Service under the Bush administration. The court, Hayes said, identified serious mistakes.
"We came in and we cured those mistakes, and the court has confirmed that. So it's ironic to me that we were sometimes criticized here when we're basically cleaning up issues that were left for us, and we've done that successfully."
A focus now is an analysis of whether Shell's spill response plan can do everything it promises.
"We're looking hard at that issue, obviously," Hayes said. "The spill response plans are central to this whole thing."
Hayes' boss, Interior Secretary Ken Salazar, suspended applications for Arctic drilling after the Deepwater Horizon blowout and said the department would take a guarded approach guided by science and the voices of North Slope communities.
The agencies are "extremely aware" that Shell needs a months of lead time to assemble a fleet that could accompany drill ships during the short open water season. Hayes said he could not say when a decision will be made.
"We are giving this a very high priority," Hayes said. "I can't give you a date because we're in discussions with Shell. We're working through issues. There are two sides to this transaction. There's the government side and the Shell side, and there's some iteration going back and forth, and it's not fully under our control."