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U.S. Issues Arctic Drilling Permit to Royal Dutch Shell

WASHINGTON—The U.S. government on Monday gave Royal Dutch Shell a final green light to drill for oil and natural gas in the Arctic Ocean, providing the company a long-sought victory and escalating a battle with environmentalists over President Barack Obama’s climate and energy agenda.

The Interior Department said it has issued a permit to Shell to drill an exploratory well into oil-bearing zones in the Arctic Ocean. In July, the department had issued a permit that allowed the company to drill to only the top of such zones because it didn’t have a particular emergency response vessel on hand, which is now present in the region.

“Activities conducted offshore Alaska are being held to the highest safety, environmental protection, and emergency response standards,” said Brian Salerno, director of the Interior Department’s Bureau of Safety and Environmental Enforcement. “We will continue to monitor their work around the clock to ensure the utmost safety and environmental stewardship.”

The Interior Department in May conditionally approved Shell’s drilling plans, but said the company needed several other government permits before it could move forward. The company has until late September to drill before ice in the frigid waters makes it too difficult to drill, according to a spokesman.

“We remain committed to operating in a safe, environmentally responsible manner and look forward to evaluating what could potentially become a national energy resource base,” said Shell spokesman Curtis Smith. “It’s possible we will complete a well this summer but we’re not attaching a timeline to the number of feet drilled. Safe, efficient operations will ultimately determine the progress we make.”

Environmental groups condemned the decision, arguing that it goes against Mr. Obama’s stated commitment to addressing climate change and shifting away from fossil fuels like oil and natural gas toward renewable energy resources.

“To preserve his climate legacy, President Obama must change the course on Arctic drilling set eight years ago by former President George W. Bush, and not perpetuate it,” said Michael Brune, executive director of the Sierra Club. “Granting Shell the permit to drill in the Arctic was the wrong decision, and this fight is far from over. The people will continue to call on President Obama to protect the Arctic and our environment.”

If Shell discovers oil or natural gas, it must apply for additional permits to produce the oil, a process that could take a decade or more. Shell has been pursuing drilling in the Arctic Ocean since 2007, though hasn’t yet discovered any oil or natural gas.

A 2012 drilling attempt faltered amid bad weather and mechanical failures, leading to an agreement between Shell and the government for future drilling to take place with tighter restrictions. The Anglo-Dutch company plans to invest over $1 billion in its Arctic project this year, adding to the $7 billion the company has already spent over the past eight years.

No energy company currently is drilling in the U.S. portion of the Arctic Ocean, including the Chukchi and Beaufort seas, where companies own leases. ConocoPhillips and StatoilASA also own leases in the Arctic, though neither company has immediate plans to drill there. Shell also owns leases in the Beaufort Sea, east of the Chukchi, though it doesn’t have immediate plans to drill there.

According to 2011 Interior Department data, federal waters in these two seas hold 22 billion barrels of technically recoverable oil and 93 trillion cubic feet of natural gas. The U.S. is currently producing about 9.5 million barrels of oil a day and about 90 billion cubic feet of gas a day, increasingly from tight shale-rock formations in places like North Dakota and Texas.

Write to Amy Harder at amy.harder@wsj.com


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