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Anchorage Daily News: Beaufort freeze has Shell on its toes

COURT RULING: Company will talk to critics and try to save the drilling season.

By WESLEY LOY
[email protected]

Published: July 24, 2007
Last Modified: July 24, 2007 at 01:38 AM

Dutch oil giant Shell is fighting to salvage its ambitious plan to drill for oil this year in Alaska’s remote Beaufort Sea.

On one front, the company must overcome a court challenge that, for now, has frozen the drilling plan. And the company still must secure key government permits for the campaign.

On another front, the Beaufort will start icing up in fall, ending the drilling season.

But company officials remain upbeat that the snags can be resolved and the exploratory campaign can proceed.

“Certainly the timeline is tight,” said Curtis Smith, a Shell spokesman in Anchorage. “But we’ve got a long-term vision for Alaska. Shell has committed hundreds of millions of dollars to the Alaska project.”

On Thursday, the 9th U.S. Circuit Court of Appeals in San Francisco ordered Shell to suspend its Beaufort Sea exploratory drilling program pending resolution of challenges from environmental groups, Native whalers and the North Slope Borough. The court scheduled an Aug. 14 hearing.

At issue is how to keep noisy exploratory operations from driving away migratory bowhead whales, which Native villagers hunt for food. The challengers also question Shell’s ability to clean up an oil spill in waters chock-full of ice.

The U.S. Minerals Management Service, which regulates offshore drilling, in February approved Shell’s exploration plan with certain restrictions, but the court ruling temporarily blocks that approval.

Shell also is fighting challenges to air quality permits the U.S. Environmental Protection Agency issued in June for the Kulluk and the Frontier Discoverer — the two ships Shell will use for the offshore drilling.

Neither the drill ships nor a fleet of icebreakers and other support ships are in the Beaufort yet, Smith said.

ARMADA BOUND FOR BEAUFORT

According to court papers Shell filed Friday, the ships are now either docked in or headed to a variety of Canadian and Alaska ports including Dutch Harbor, Kotzebue and Prudhoe Bay.

Ultimately, all will converge on Shell offshore leases in or around Camden Bay, where Shell has leases and a prospect called Sivulliq, formerly known as Hammerhead. Based on drilling there in the mid-1980s, the Minerals Management Service estimated Hammerhead contains 100 million to 200 million barrels of oil.

Shell has told government officials it hopes to drill as many as four exploratory wells at Sivulliq this fall, and it also has laid out drilling and testing plans for 2008 and 2009.

The appeals court said in its order last week that the challenge to Shell’s drilling plan “will be resolved on an expedited basis.”

The court scheduled oral arguments for Aug. 14 in San Francisco, with each side getting 20 minutes.

Meantime, Shell representatives plan to keep talking with the North Slope Borough, the Alaska Eskimo Whaling Commission and others to try to come to a resolution and save the drilling season, Smith said.

“We’re optimistic,” he said.

In a statement last week, North Slope Borough Mayor Edward Itta said the industry and the Minerals Management Service need to slow down and listen more closely to concerns raised by scientists and the whalers.

“The bigger issue here is how we can coexist with offshore development,” he said.

E-mail Wesley Loy at [email protected] or call 257-4590.

http://www.adn.com/money/industries/oil/story/9158697p-9075272c.html

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