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Shell moves closer to OK for offshore drilling


Oct 6, 2011 – 08:29 AM AKST

By Tim Bradner, Alaska Journal of Commerce

Step by step, Shell is moving closer to gaining final permission to drill exploration wells in offshore Arctic waters next summer. But, environmental groups aren’t giving up on court challenges.

Earth Justice has filed with the U.S. 9th Circuit Court of Appeals a new appeal of Shell’s exploration plan for the Beaufort Sea.

In recent developments, the U.S. Department of the Interior filed a record of decision approving a revised supplemental environmental impact statement for the Chukchi Sea OCS Lease Sale 193 with a federal district court in Alaska.

The court had ordered the agency to submit its decision on Oct. 3, which was done. As expected, Interior upheld the sale based on the new SEIS. The court will decide whether the document meets objections raised in July 2010.

All actions on the Chukchi Sea have been on hold until the litigation over the original Sale 193 EIS filed by environmental groups is resolved by the court. Once a decision is made, the Bureau of Ocean Energy Management, a part of the Interior Department, can begin work on a draft plan of exploration for the Chukchi filed by Shell.

“We believe the Chukchi plan we submitted in May is technically and scientifically sound, and we look forward to exploring this critical part of our Alaska portfolio in 2012,” Shell spokesman Curtis Smith said.

Meanwhile, BOEM has given approval for Shell’s Beaufort Sea exploration plan, but that has now been appealed to the 9th Circuit appeals court. Earth Justice filed a simple notice of appeal that will be followed up by a brief.

In May 2010 the 9th Circuit court upheld a previous exploration plan for the Beaufort that is similar to the current plan, with the exception that Shell has added additional improvements, particularly subsea oil capture and containment systems that will be in place in the event of an undersea blowout, Smith said.

The U.S. Environmental Protection Agency has also issued air permits for Shell’s drilling vessels planned to be used in the Beaufort and Chukchi seas, and those could still be appealed by drilling opponents to the EPA’s internal Environmental Appeals Board.

Smith said Shell in increasingly optimistic.

“We like the milestones we are achieving, and those are tracking our own internal goals,” he said.

Shell won’t order a mobilization for 2012 until a final “go, no-go” decision, expected later this month, but the company has already spent “tens of millions” in advance preparation work, Smith said.

The engineering and construction of the new undersea oil capping and containment system will involve an expenditure of several hundred million dollars, he said.

Shell’s Beaufort Sea primary targets are in an area near Camden Bay, east of Prudhoe Bay. The company plans to drill in an area where oil has previously been discovered, although not developed. Beaufort Sea oil is considered to be the best prospects for near-term additions of throughput for the Trans-Alaska Pipeline System because Shell can take advantage of existing pipelines built east from Prudhoe Bay to Badami.

By the time Shell possibly finds and develops oil in the area, a new pipeline will be built farther east from Badami to the Point Thomson area, where ExxonMobil, BP and Chevron are working to develop a gas cycling and condensate production project.

In the long run, the Chukchi Sea has prospects for much larger discoveries but extensive infrastructure will be needed, including a pipeline built from TAPS across the National Petroleum Reserve-Alaska and an undersea pipeline built 60 miles or farther into the Chukchi Sea.

However, Shell is also drilling where oil and gas have previously been discovered. ConocoPhillips, Statoil and Repsol also have leases in the Chukchi Sea and are planning exploration.

Tim Bradner can be reached at [email protected]

This article appears in the October 2011 issue of Alaska Journal of Commerce

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