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Shell halts 2013 drilling plans in Alaska's Arctic seas

Sara Francis / U.S. Coast Guard via AP, file

An aerial image provided by the U.S. Coast Guard shows the Royal Dutch Shell drilling rig Kulluk aground off a small island near Kodiak Island on Jan. 1. Shell announced Wednesday that it had put off further drilling in Alaska's Arctic Ocean for the year.

ANCHORAGE, Alaska -- Royal Dutch Shell will not drill for oil in Alaska's Arctic seas this year, the company said Wednesday in a widely expected decision that follows a series of high-profile setbacks in 2012.

Both critics and supporters of Shell's controversial Arctic offshore foray welcomed its decision to give up on drilling there for 2013 while the company tries to get its drill ships ready and answers to U.S. investigators.

Michael LeVine, senior Pacific counsel for environmental group Oceana in Juneau, Alaska, said Shell and the government agencies regulating the company faced a "crisis of confidence."

"The decisions to allow Shell to operate in the Arctic Ocean clearly were premature," LeVine said in a statement. "The company is not prepared and has absolutely no one but itself to blame for its failures."

Few observers doubted that a postponement of Shell's drilling in the Chukchi and Beaufort seas was coming after the company said earlier this month its two Arctic offshore rigs would head to Asia for repairs and upgrades.

But ConocoPhillips reaffirmed on Wednesday that it will continue with its own plans to drill one or two exploration wells in the Chukchi Sea in 2014 and that it expected to submit more information on the plans to federal regulator by the end of March.

Analysts say the Arctic's allure for oil drillers remains strong given the complications of politics and violence they face in other parts of the world.

Shell has spent more than $4.5 billion searching for oil in Alaska's Arctic seas since it won licenses to drill in 2005. Yet its season last year was delayed by problems with equipment, and 2012 ended dramatically with the grounding of the Kulluk drill ship in a storm as it was being towed south for the winter.

"Our decision to pause in 2013 will give us time to ensure the readiness of all our equipment and people," said Marvin Odum, director of Shell Upstream Americas.

David Yarnold, of environmental group Audubon, said Shell had "come to its senses," since drilling amid ice floes near the nurseries of threatened wildlife was not "smart or safe."

The Anglo-Dutch company's move into Alaska's Arctic waters -- the first since the Macondo disaster of 2010 -- was expected to face criticism, but technical problems with its rigs led to even deeper concerns.

'A disappointment'
U.S. Sen. Lisa Murkowski, R-Alaska, said in a statement that she was a strong supporter of Shell's activities off her state's northern coast if they meet the "highest safety standards."

"This pause -- and it is only a pause in a multiyear drilling program that will ultimately provide great benefits both to the state of Alaska and the nation as a whole -- is necessary for Shell to repair its ships and make the necessary updates to its exploration plans," she said.

Alaska Gov. Sean Parnell, also a Republican, said in a statement: "While Shell's decision to pause drilling in Alaska is a disappointment, I commend the company's commitment to safety and responsible development."

"Much progress has been made toward developing the vast resources in Alaska's Outer Continental Shelf, and we recognize this is a long-term endeavor," the governor added. "Taking the long view, we are at the early stage of a new era of oil exploration in the Arctic, one that will continue for decades in a measured and responsible way."

Even before the Kulluk ran aground on Dec. 31 after escaping its tow lines, Shell's 2012 drilling program was stalled by troubles with support vessels and regulatory scrutiny of the other rig, the Noble Discoverer, owned by Noble Corp.

After the Arctic drilling season closed at the end of October, a fire broke out on the Discoverer. There were also engine failures on the Aiviq, the specially designed ship pulling the Kulluk, before it lost its tow connection.

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