Washington (Platts)--11May2015/414 pm EDT/2014 GMT

The Obama administration on Monday gave conditional approval to Shell's plan to drill up to six exploratory oil wells offshore Alaska this summer.

The decision from the US Interior Department's Bureau of Ocean Energy Management followed a formal 30-day review of the plan.

The approval "is an important milestone and signals the confidence regulators have in our plan," Shell spokesman Curtis Smith said in an email.

Shell plans to resume drilling activity this summer for the first time since 2012 after its Arctic drill rig, the Kulluk, ran aground. The company's plans include drilling up to six wells in the Chukchi Sea's Burger Prospect, in 140 feet of water.

"We have taken a thoughtful approach to carefully considering potential exploration in the Chukchi Sea, recognizing the significant environmental, social and ecological resources in the region and establishing high standards for the protection of this critical ecosystem, our Arctic communities, and the subsistence needs and cultural traditions of Alaska Natives," BOEM Director Abigail Ross Hopper said in a statement issued by the US Department of Interior. "As we move forward, any offshore exploratory activities will continue to be subject to rigorous safety standards."

Monday's approval is conditional since Shell needs additional approvals before it can begin drilling in the Arctic, including needed permits from the Bureau of Safety and Environmental Enforcement and authorizations under the Marine Mammal Protection Act.

Smith said that before operations can begin this summer "it's imperative that the remainder of our permits be practical, and delivered in a timely manner."

"In the meantime, we will continue to test and prepare our contractors, assets and contingency plans against the high bar stakeholders and regulators expect of an Arctic operator," Smith said.

Shell plans to use the drillship M/V Noble Discover and the drilling unit Transocean Polar Pioneer for its planned Arctic drilling this summer. The two vessels will provide relief-well capabilities for each other, BOEM said in a statement.

The conditional approval was lambasted by environmentalists Monday, claiming the administration has unnecessarily exposed the Arctic to an oil spill.

"Any major Arctic Ocean spill would be impossible to clean up," Franz Matzner, director of the Natural Resources Defense Council's Beyond Oil Initiative, said in a statement.

Such a spill would be "catastrophic" since Shell's proposed drilling takes place more than 1,000 miles from a Coast Guard base and other cleanup infrastructure, Matzner said.

"Accidents can and do happen; and there is no proven way to respond to an oil spill in icy Arctic waters," Susan Murray, a deputy vice president with Oceana, said in a statement.

In March, Interior upheld its 2008 Arctic lease sale, which had been suspended by a federal court ruling. Under that ruling, BOEM updated an estimate of recoverable oil in the Arctic area it had leased the rights to, boosting the estimate from 1 billion barrels to 4.3 billion barrels.

Shell has requested a five-year extension on its Arctic leases, which the company said it needs before it invests hundreds of millions of dollars more in the Arctic. Federal officials have not ruled on this request.

Shell has already spent about $6 billion on its Arctic drilling efforts.

--Brian Scheid, brian.scheid@platts.com
--Edited by Jason Lindquist, jason.lindquist@platts.com

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