Washington (Platts)--17Feb2012/401 pm EST/2101 GMT

Shell's plans to drill exploration wells in Alaska's Chukchi Sea this summer advanced Friday when the US Interior Department approved the company's oil spill response plan.

While Shell must still file individual permits for the six wells it proposes to drill in the Chukchi over the next two years, approval of the response plan is a major step and the farthest the company has gotten in mult-year effort to drill on its Chukchi leases.

"After an exhaustive review, we have confidence that Shell's plan includes the necessary equipment and personnel pre-staging, training, logistics and communications to act quickly and mount an effective response should a spill occur," James Watson, director of Interior's Bureau of Safety and Environmental Enforcement said in a statement. "Our staff will maintain vigilant oversight over Shell to ensure that they adhere to this plan and that all future drilling operations are conducted safely with a focus toward spill prevention."

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Shell said it had submitted an application for a drilling permit for one well in the Chukchi and a for a second proposed well in the Beaufort Sea. Regulators have yet to approve the company's oil spill response plan for the Beaufort.

"Approval of our Chukchi Sea oil spill response plan is another major milestone on the path to drilling in the Alaska offshore this summer and further validates the huge amount of time, technology, and resources we have dedicated to assembling an Arctic oil spill response fleet, which is second to none in the world," Peter Slaiby, Shell's Alaska exploration manager, said in a statement.

The oil spill plan for the Chukchi includes a commitment from Shell to station six response vessels on site during drilling. The ships would contain a capping stack to shut the potential flow of oil in case of a blowout, a collection system capable of moving up to 80,000 b/d from the well to barges and thousands of feet of boom and skimmers to collect oil on the water's surface.

BSEE also will take the unprecedented step of placing an inspector on the drilling rig at all times and combine on-site inspections with remote monitoring of data, Watson said.

Before individual drilling permits are issued, regulators will require Shell to complete an area contingency plan in coordination with native communities, Watson said. Federal government agencies, including BSEE, the Coast Guard, the National Oceanic and Atmospheric Administration and the Environmental Protection Agency, also will conduct tabletop spill exercises.

The capping stack and all other specialized containment equipment will be tested by government inspectors before it is shipped to the Arctic, Watson said.

"Today's announcement reflects the most stringent compliance of our new and enhanced regulations for offshore drilling based on the most robust science available to us in the history of Arctic offshore drilling operations," Deputy Interior Secretary David Hayes said on a conference call with reporters.

But at least one environmental group disagreed with that contention, saying it was "appalled" at the approval.

"Unfortunately, today's approval, which comes just two days after an exploration well blowout on the Arctic coast, is another sign that it is business as usual and that public trust is being put behind Big Oil's bottom line," Susan Murray, senior director for the Pacific with Oceana, said in a statement. "The Obama administration has joined Shell in oil spill response dream land."

--Gary Gentile, gary_gentile@platts.com

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