Royal Dutch Shell plc (ADR) (NYSE:RDS.A) Ocean Drilling Continues To Face Hurdles


Dallas, Texas 06/24/2015 (Financialstrend) – Royal Dutch Shell plc (ADR) (NYSE:RDS.A) is facing major environmental hurdles in its pursuit of regulatory approval to be able to drill two wells in the Arctic Ocean this summer. A requirement that bars drilling operations close to each other in Alaska could thwart the company’s drilling plans. Environmentalists are running a campaign against the company’s plans even though $7 billion has already been spent on pursuing oil in the region.

Raised Concerns

Royal Dutch Shell plc (ADR) (NYSE:RDS.A) push to obtain a letter of authorization continues to elicit concerns over the potential impact of drilling operations on marine life. Environmentalists are raising concern that drilling two wells close to each other could disturb walruses, seals and other marine life.

Under the 2013 Fish and Wildlife Service regulation, companies are prohibited from drilling oil wells within 15 miles of each other. The proposed Royal Dutch Shell plc (ADR) (NYSE:RDS.A) wells are 9 miles apart falling short of the current regulation.

Environmental groups are already mounting pressure on the Obama administration to rescind earlier approvals. Royal Dutch Shell plc (ADR) (NYSE:RDS.A) has a tough road ahead on its push for drilling permits as it still needs four more regulatory approvals.

The company seemed to have acknowledged the burden of regulatory approval as early as February 2013 when it sent letters objecting the then-proposed rule. At the time, the company had argued that there was no sufficient evidence to concede that separation distances were necessary to prevent adverse impact on marine life in the area.

Possible Terms of Approval

The company is currently engaged in talks with regulators as it seeks to find an amicable solution on the terms of the authorization. A possible outcome could see Royal Dutch Shell plc (ADR) (NYSE:RDS.A) being allowed to drill one well even though the earlier analysis was based on a two-well program. Under such an arrangement, the company will be required to drill a second drill that would act as a relief well in case of an emergency. A push to drill second oil would require the company to seek intervention from Congress, something that has happened in the past.

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