The Associated Press February 3, 2011, 2:45PM ET

Shell: No Beaufort Sea drilling in Arctic for 2011

Shell Alaska has dropped plans to drill at least one exploratory well in the Arctic waters of the Beaufort Sea this year.

Royal Dutch Shell PLC Shell Chief Executive Peter Voser announced the decision during a question and answer session Thursday.

Shell Alaska has planned a press conference in Anchorage.

Shell in October said it would scale back its Arctic Ocean exploration plans in 2011 to promising sites in the Beaufort Sea, backing off prospects in the Chukchi Sea until legal questions were cleared. Shell had hoped to drill exploration wells during the 2010 open water season in both areas but its plans were put on hold by Interior Secretary Ken Salazar after the Deepwater Horizon disaster in the Gulf of Mexico. Salazar suspended applications for permits and has announced no timetable for lifting the suspension.

Drilling in Arctic waters is opposed by environmental groups and some Alaska Native groups, who say petroleum companies have not demonstrated an ability to clean up a spill in ice-choked waters. They also say the remote location of drilling sites, the area's notorious inclement weather and the lack of infrastructure, including a deep-water port, would make a cleanup of a major spill nearly impossible.

Shell has invested more than $3.5 billion in the Arctic outer continental shelf, including $2.2 billion in leases in the Chukchi that have been challenged.

Shell Alaska Vice President Pete Slaiby said in October that Shell needed a decision by December to move forward with its 2011 plans, which involve moving north a drilling ship and a small fleet of support vessels, including spill response boats.

Shell has continuously stressed that Arctic drilling would be in water far more shallow than the Macondo well, the site of the Gulf of Mexico disaster, and that the risk of a spill is minimal. The company also said it would position a second drilling ship in Alaska as a safety measure, so if the first drilling ship were crippled by a blowout, the second ship could drill a relief well.

Alaska's U.S. senators issued statements bemoaning the loss of jobs from Shell's decision. Democrat Mark Begich blamed the Obama administration and the Environmental Protection Agency, to which Shell has applied for an air permit.

"Their foot dragging means the loss of another exploration season in Alaska, the loss of nearly 800 direct jobs and many more indirect jobs," he said. "That doesn't count the millions of dollars in contracting that won't happen either at a time when our economy needs the investment."

Republican Sen. Lisa Murkowski said actions taken by the administration will result in higher gasoline prices and a loss of jobs and revenue.

"We talk a lot about the economy, but rarely do our actions match our rhetoric," she said. "That's unfortunate."


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