(Corrects to billion barrels from million barrels, paragraph10)
By Timothy Gardner
WASHINGTON, April 1 (Reuters) - For a leader who has madefighting climate change a priority, President Barack Obama'sdecision to approve Royal Dutch Shell's return to oiland gas exploration off Alaska was seen by manyenvironmentalists as a contradiction.
On Tuesday, his administration upheld a 2008 Arctic leasesale, clearing an important hurdle for Shell.The Interior Department will now consider the company's drillingplan, which could take 30 days. But Shell, which has alreadyspent about $6 billion exploring the Arctic, expects to returnto polar waters this summer and is already moving oil rigs toAlaska.
Meanwhile, environmentalists pointed to Shell's mishaps inthe region in 2012 when a massive rig ran aground and thecompany was fined for pollution, raising questions about Obama'sdecision:
Isn't Obama opposed to oil extraction in sensitive areas?
While his administration has championed renewable energy,Obama has never disavowed the need for oil and gas in the U.S.energy mix. His approach has been to balance new regulations onhigh-carbon industries with an appreciation for the economicbenefits of the domestic oil and gas boom.
To counter critics, Obama can point to his January proposalto prohibit drilling on 1.4 million acres of the Alaska NationalWildlife Refuge. In addition, drilling offshoreAlaska is in relatively shallow waters and would need lesspressure than deepwater drilling in the Gulf of Mexico, home tothe 2010 BP Deepwater Horizon oil spill.
The special U.S. envoy to the Arctic, Robert Papp, said thisweek that Shell understands the importance of taking necessaryprecautions after its Kulluk rig ran aground in 2012. "Theyshould be OK," Papp said.
With global crude prices low, why is Shell going to a remoteregion in search of hard-to-extract oil and gas?
While oil prices have fallen by more than half since lastsummer, offshore Arctic drilling may not produce substantial newreserves for decades - when onshore shale deposits may start towane.
The fracking revolution in North Dakota and Texas has led tothe highest U.S. oil output since the early 1970s, but nobodyknows how long shale will continue to produce at high rates.
"The trick of Arctic energy development is that the timehorizons are extraordinary long, some 10 to 30 years from whencompanies start these complex deals to even seeing when thoseresources would get to market," said Heather Conley, an analystat the Center for Strategic and International Studies.
Shell will conduct tests to see how much oil and gas are inthe Chukchi and Beaufort Seas. The Arctic is estimated tocontain about 20 percent of the world's undiscovered oil andgas, 34 billion barrels of oil in U.S. waters alone. Only Russiahas bigger deposits. The National Petroleum Council, a group ledby oil companies that advises the Energy Department, said in anassessment of Arctic potential last week that the region willboost U.S. energy security. (http://bit.ly/1Fe08jp)
Won't this add to carbon emissions at the same timeWashington is trying to get the world to cut them?
If fracking in the continental United States declines, thegovernment could argue that it is simply replacing barrels itused to produce elsewhere. The Arctic also has a lot of gas thatis lower in emissions when burned. Depending on how marketsshape up, energy companies could be drilling for more gas thanoil in the Arctic.
Could Obama be acting for strategic reasons?
Other countries are present in the Arctic. Russia is exploring its northern waters, although Western sanctions haveforced Shell competitor Exxon Mobil to withdraw frompartnerships there. China and India are also interested injoining partnerships to drill in the Arctic.
But the United States has a major infrastructure advantage:Due to a decline of Alaskan oil output, the Trans Alaskanpipeline is only operating at 25 percent of capacity and couldserve as a conduit for new oil finds. "The Alaska pipeline wouldbe ecstatic to get another customer," said Lou Pugliaresi,president of the Energy Policy Research Foundation, noting thatthe Russian Arctic's lack of infrastructure could make projectsslower to develop. (Reporting by Timothy Gardner; Editing by Bruce Wallace andLeslie Adler)
