Shell Oil plans to resume exploratory oil drilling in the Arctic waters off Alaska this summer. The decision could create local jobs by turning a Seattle port terminal into an fleet hub, but environmental groups are opposed to a lease now under negotiation.

Share story

Shell Oil plans to resume drilling off Alaska’s North Slope this summer, a decision that could turn Seattle’s Port into a hub of operations for the company’s efforts to find new crude reserves in the Chukchi Sea.

Before the drilling proceeds, Shell would have to obtain required permits, clear legal challenges and prepare technically and logistically to go, said Ben van Beurden, the company’s chief executive, Thursday in London.

“So, will we go ahead? “ Van Beurden said. “ Yes, if we can … I’d be so disappointed if we wouldn’t … We’ve been working on this for a long period of time.”

Seattle would play a significant role in Shell’s exploration, with eight vessels berthed at the now vacant Terminal 5 under a two-year lease agreement that the Port of Seattle is now negotiating with Foss Maritime.

The agreement is opposed by environmentalists, who have threatened to file a lawsuit should the Port move forward with the lease. Environmental groups have long fought offshore-exploratory drilling, warning it could result in a major Arctic oil spill.

Shell first drilled in Arctic waters in the 1980s, before abandoning the test holes during a period of low oil prices.

In 2012, when Shell prepared to resume oil exploration off Alaska’s Arctic, the company used shipyards in the Pacific Northwest to refurbish an oil rig and for other work. Maritime-industry officials hoped this might mark the start of a prosperous new chapter in Seattle’s waterfront.

Shell has had plenty of things go wrong in the restart of its offshore-oil exploration in Alaska.

A drill rig — the Kulluk — went aground off Kodiak Island in south central Alaska after breaking tow lines during a December 2012 return voyage from the Arctic.

Noble Drilling, the Shell contractor, which operated the drill ship Noble Discoverer, last month pleaded guilty in U.S. District Court to eight felony counts and was fined $12.2 million for safety and environmental crimes related to the 2012 drilling season.

Shell shut down its exploration operations during the past two years. For this new round of drilling, Shell has proposed basing eight vessels at Terminal 5 in West Seattle.

Shell’s Seattle fleet could include drill rigs, icebreakers, environmental-response vessels, tugs and barges for seasonal operations that unfold in the short summer seasons.

The Shell presence at the Port has the potential to create hundreds of jobs and generate tens of millions of dollars of revenue for the region, according to a statement released by the Port this week.

“We stand by our commitment to ensure our economy has diverse opportunities for all of our residents,” the statement said.

Environmentalists accused the Port of secret negotiations that blindsided the community. In a letter sent to the Port this week, they called for a halt to lease negotiations and an environmental review.

“We are talking about Shell’s Arctic drilling fleet here — the drilling fleet that has had everything go wrong,” Patti Goldman, the managing attorney for the Northwest regional office of Earthjustice, said during a news conference Wednesday.

“Before that happens, we are asking the Port to comply with the law, to conduct environmental review, which would allow us to know what would really happen here, and to have more public participation.”

Port officials say this lease is exempt from an environmental review because the terminal will be used in a less intense way than the previous lease for a container terminal.

Shell in 2015 expects to spend more than $1 billion exploring for oil off Alaska, according to Shell Chief Financial Officer Simon Henry. He spoke Thursday in London as fourth-quarter earnings were released.

Federal estimates of the potential oil reserves in the Beaufort and Chukchi seas off Alaska’s North Slope indicate there could be 25 billion barrels there, a greater amount than the crude produced at the giant Prudhoe Bay field during the past 30 years.

But a collapse in world oil prices has dampened interest in exploring many remote, high-cost areas. Actual production from any new fields would be years into the future, when prices might be at higher levels.

Van Beurden, in response to questions Thursday, said, “ … we have retained a very significant capability to be ready this year to go ahead.”

Shell is still waiting on approval from the federal Bureau of Ocean Energy Management to continue Arctic drill operations in the Chukchi Sea.

The lease, Sale 193, was originally issued in 2008.

Last year, after a federal lawsuit by a coalition of environmental organizations, the 9th Circuit Court of Appeals found the Department of Interior did not adequately analyze the environmental impacts on the state.

The Department of Interior in March is expected to announce whether or not it will approve drilling once again in the lease area.