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Petroleum News: Commissioner to make final consistency decision for Shell’s Beaufort drilling

NSB issues challenge
By Alan Bailey
Vol. 12, No. 26  Week of July 01, 2007

The clock continues to tick toward Shell’s planned start for its summer 2007 drilling program at its Beaufort Sea Sivulliq prospect, which is on the western side of Camden Bay off Alaska’s North Slope.

But on June 25, in a new twist in the regulatory process, the North Slope Borough asked the commissioner of the Alaska Department of Natural Resources to formally review a June 19 proposed finding by DNR’s Permitting Office of Project Management and Permitting, which had deemed Shell’s program consistent with the Alaska Coastal Management Plan.

“The NSB requests the commissioner’s personal attention to this elevation (of the ACMP response) because of the seriousness of the issues raised, the potential impact to human health and the environment and the potential to set a long-term precedent for how Alaska Coastal Management Program reviews will be conducted for OCS projects,” said Johnny Aiken, director of the North Slope Borough Planning Department, in a letter to OPMP Acting Director Ed Fogels.

Three-year period

The proposed ACMP concurrence statement covers Shell Beaufort Sea drilling activities planned over a three-year period from 2007 to 2009 and provides a detailed analysis of why OPMP finds the Shell program compliant with the ACMP.

According to the project description in the concurrence statement, Shell plans to mobilize the Kulluk drilling platform and the Frontier Discoverer drilling vessel by Aug. 1 for the drilling at Sivulliq, which used to be called Hammerhead. A total of 16 vessels, including various support vessels would be involved in the 2007 program, which also includes some geotechnical boring to test seafloor soil conditions. Beaufort Sea seismic survey activities planned by Shell during that same timeframe fall under U.S. Minerals Management Service geological and geophysical permits, and are outside of the scope of the ACMP review.

Shell is planning a major program of wildlife monitoring and environmental impact mitigation for its Beaufort Sea operations. But the North Slope Borough has long opposed offshore oil and gas exploration and development, because of borough concerns about the potential impact on subsistence hunting and the Arctic environment.

ACMP consistency required

In a letter accompanying the June 19 proposed finding, Randy Bates, deputy director of OPMP, told Shell and ASRC Energy Services RTS that OPMP found the proposed project to be consistent with the applicable ACMP policies (ASRC Energy Services RTS is managing Shell’s offshore oil spill response arrangements).

“Based on an evaluation of your project, OPMP proposes to concur with your certification that the project is consistent with the ACMP,” Bates said.

Certification of consistency with ACMP would enable final approval by MMS of Shell’s Beaufort Sea exploration plan, oil discharge prevention and contingency plan, and any necessary permits to drill because MMS approval depends on a finding of consistency. (MMS conditionally approved the exploration plan and the oil discharge prevention and contingency plan in February.)

But under Alaska statutes Shell, the North Slope Borough or any state agency could challenge the proposed finding and thus elevate the ACMP response to the DNR commissioner. And, with the borough having filed this type of challenge, the commissioner must now make a final ACMP consistency determination within 45 days.

DNR will first convene a meeting of all interested parties to seek a means of resolving the borough’s objections, Bates told Petroleum News June 26. The commissioner will use the results of that meeting in making his determination.

Numerous comments

During the public review period for the coastal management plan consistency review the North Slope Borough filed numerous comments on the OPMP review. Those comments included concerns about waste disposal from the industrial operations and the potential for an oil spill or fuel spills from vessels in the Shell Beaufort Sea fleet. The borough also criticized the exclusion of planned seismic activities from the scope of the review, and said that activities associated with federal effluent discharge and air quality permits had not been reviewed for ACMP consistency.

In general, the borough claimed that Shell’s environmental mitigation measures are “inadequate to demonstrate consistency with the ACMP enforceable policies.” And the borough said that a lack of specific information from Shell about where wells will be drilled also makes it impossible to determine ACMP consistency.

“Shell has failed to provide site-specific information about the project,” the borough said. “It is unclear how many wells will be drilled, when they will be drilled and the specific locations of the well sites.”

The borough also said “many of the measures, documents and agreements currently available apply only to the 2007 drilling program.” A lack of this type of information for the two other years of the program makes it impossible to determine ACMP consistency for the entire program, the borough said.

Conflict avoidance agreements

The ACMP consistency determination depends on some documents and agreements that are not yet available, the borough said. In particular, “Shell relies heavily on conflict avoidance agreements that were not available during the consistency review. We understand these agreements will not likely be completed for the 2007 season.”
OPMP failed to consider the impact of Shell’s activities on “coastal resources and uses” within the outer continental shelf, rather than in just the coastal zone, the borough said. And, in its review, OPMP denied borough requests for the designation of subsistence use areas, other than “two limited bowhead whale subsistence areas,” the borough said.

The borough also said that OPMP should have designated natural hazard areas to consider the potential impact of hazards such as sea ice on Shell’s operations.

As part of its review, OPMP decided that Shell’s planned Beaufort Sea program complied with the North Slope Borough’s enforceable policies for oil and gas development. However, OPMP also said that the borough’s enforceable policies were in fact null and void because they overlap with state and federal regulations (Bates has told Petroleum News that under the terms of 2003 and 2005 state statutes that changed the administration of the ACMP, the borough needs to modify its enforceable policies for those policies to be valid). However, the borough has asserted that OPMP has misinterpreted the legislative intent of the state statutes.

The Trustees for Alaska and the Northern Alaska Environmental Center, each representing several environmental organizations, have also questioned several aspects of the ACMP consistency review.

In response to the elevation of the ACMP consistency determination, Shell spokesperson Terzah Poe told Petroleum News June 28 that, “The regulations provide an opportunity for a commissioner-level elevation, and we and the state agency anticipated this since the start of the permit review process. Shell believes the agency determination will be upheld by the commissioner. The agency engaged in a thorough review process and its determination is fully supported by a comprehensive administrative record.”

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