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Obama administration OKs review of Shell Oil's Arctic sea project

WASHINGTON -- The U.S. Interior Department will resume reviewing Shell Oil's plans to drill for oil in the Beaufort Sea next summer and will consider other Arctic drilling plans even as the Obama administration on Wednesday scaled back new offshore exploration in other parts of the country.

Shell's drilling plan will be evaluated under the heightened safety and environmental standards "with utmost caution," Interior Secretary Ken Salazar said.

Shell in 2008 spent $2.1 billion on leases in federal waters of the Beaufort and Chukchi seas off Alaska's northern coast. The government estimates its Arctic waters could hold 19 billion barrels of oil and up to 74 trillion cubic feet of natural gas. If so, the Arctic waters would be a major new oil province for Alaska and the nation.

Salazar said he recognized that "cautious, limited exploratory activities can help develop critical information about the Arctic and its resources," but added that any exploratory activities in the region "must be conducted safely and with strong oversight."

The Arctic Alaska announcement came as the government also said the Atlantic Coast and the eastern Gulf of Mexico will remain closed to offshore oil and gas drilling through 2017, in what's considered a major recalibration of the nation's offshore drilling priorities after this spring's catastrophic BP oil spill in the Gulf of Mexico.

Salazar said Wednesday his department had "raised the bar in the drilling and production stages" since the April 20 Deepwater Horizon explosion. As the government continues to develop new, stricter safety and environmental standards, Salazar said, the administration will focus offshore activity on areas that are already leased for drilling, rather than offer new waters for exploration.

Shell's spokesman for Alaska operations, Curtis Smith, said Wednesday's announcement about the Arctic was "a positive one for Alaska and acknowledges that responsible oil and gas exploration can take place in the Arctic."

Shell continues to make plans to drill next summer, Smith said, but "a final decision on our Beaufort Sea drilling permit is needed soon for Shell to continue to pursue 2011 exploration drilling."

The director of the U.S. Bureau of Ocean Energy Management, Regulation and Enforcement was quick to emphasize, though, that his agency will not be pressured by industry-dictated deadlines. The bureau, rebuilt by the Interior Department in the wake of this year's Gulf of Mexico spill, was criticized for its close ties to industry and for rubber-stamping some environmental reviews.

"We understand that Shell needs a decision, and when we've completed the review and analysis, we'll be in a position to make our decision," said Michael Bromwich. "But we're not going to be constrained by any artificial deadline."

North Slope Borough Mayor Edward Itta said Wednesday's decision makes sense. "The plan that's on the table is closer to something we can live with," he said, and Shell deserves "to have some certainty on their plan for the upcoming year."

But he continues to have concerns about how oil spills will be avoided and how Shell will respond if a spill occurs, adding that input from locals "will be key to any successful ongoing development program."

"You can't take shortcuts when it comes to something as fundamental to our survival as the health of the ocean," he said

Gov. Sean Parnell said he is "pleased that the department will honor existing leases in the Beaufort and Chukchi seas, but I remain concerned about how future requests to explore or develop will be treated."

The state's congressional delegation had urged the White House to consider Arctic oil development, saying the resources could be developed responsibly.

Wednesday's announcement revises much of the Obama administration's original offshore drilling schedule that included lease sales off the Atlantic coast, announced just weeks before the Deepwater Horizon explosion that killed 11 people and fouled the Gulf of Mexico.

The revisions mean the area in the eastern Gulf of Mexico off of Florida as well as the Atlantic seaboard remain closed to development through 2017, Salazar sad.

The western and central Gulf of Mexico will continue to be considered for potential lease sales.

In Alaska, Cook Inlet and the Chukchi and Beaufort seas also will be studied, but there are no lease sales planned. The Interior Department will continue to honor existing Beaufort and Chukchi leases, such as those Shell and Conoco Phillips acquired in 2008. However, only Shell has filed drilling plans.

Salazar said Wednesday that the Gulf spill, response to it and weaknesses in federal oversight required a rethinking of the plan.

Many environmental groups applauded the administration's new, cautious approach but say they remain concerned about what will happen in the Arctic.

"The Arctic is the next big test for the administration," said Vikki Spruill of the Ocean Conservancy. "Too little is known about the impacts offshore drilling would have on the region's unique ecosystem, and (spill) response capacity remains almost nonexistent. The BP disaster has demonstrated the enormous cost of not doing our scientific homework before we drill, so we are encouraged that the administration has stressed the importance of basing Arctic decisions on sound science."

Others, including the Center of Biological Diversity, said they thought the administration should extend an offshore ban to the Arctic.

"There is no excuse for continuing to consider drilling in polar bear critical habitat off the coast of Alaska," said Brendan Cummings, senior counsel at the center. "If the risk of an oil spill is too great for Florida, it is also certainly too great for Alaska."

The Alaska Oil and Gas Association, though, called the move a "step in the right direction" for a state where offshore drilling has strong support.

"It's better than some of the other places in the United States who were just told thanks but no thanks. The door's still open," said Kara Moriarty, the organization's deputy director. "We just have to prove to the Department of Interior that any project -- whether Shell's in Beaufort or other projects in the Chukchi or even in the Cook Inlet -- that the projects will be analyzed on their merits."

Barbara Barrett and Lesley Clark of the McClatchy Washington Bureau contributed to this report.