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Shell starts moving fleet north for Chukchi drilling; permits slot into place

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Screen Shot 2015-06-11 at 19.31.15The season approaches: Shell starts moving fleet north for Chukchi drilling; permits slot into place

Alan Bailey: Petroleum News: Week of June 21, 2015

Elements of Shell’s Chukchi Sea fleet are on the move, heading north in preparation for drilling during this season’s Arctic open water season.

The barge Arctic Challenger, holding Shell’s Arctic oil containment system, a part of the company’s oil spill response capability, arrived in the Aleutian Islands port of Dutch Harbor on June 14, Shell spokeswoman Megan Baldino told Petroleum News in a June 16 email. The semi-submersible drilling platform Transocean Polar Pioneer is en route for Alaska, having left Seattle on the U.S. West Coast at around 6 a.m. on June 15, Baldino said. Shell’s other drilling vessel, the Noble Discoverer, remains at the Port of Everett to continue its load out, she said.

Shell now has in place most of the permits that it needs for its drilling program but is still waiting for a letter of authorization from the U.S. Fish and Wildlife Service for the unintended disturbance of some marine mammals during drilling operations, and the company has yet to obtain approved permits to drill in the Chukchi, Baldino said.

In May the Bureau of Ocean Energy Management approved Shell’s Chukchi Sea exploration plan.

Burger prospect

Shell has previously said that it hopes to move its fleet into the Chukchi Sea in early July. The company wants to operate its two drilling vessels concurrently, drilling exploration wells in the Burger prospect, about 70 miles northwest of the Chukchi coastal village of Wainwright.

“We remain committed to operating in a safe, environmentally responsible manner and look forward to exploring our Chukchi leases in the weeks to come,” Baldino said.

In 2012 Shell drilled the top hole section of the Burger A well before having to suspend the drilling operation because the company’s oil containment system was not ready for use. The company had planned to re-enter and complete that well when its drilling program restarted. However, in May of this year Ann Pickard, Shell’s executive vice president for the Arctic, told the Houston Chronicle that the company now plans to drill two new wells in 2015, targeting the southwestern and southeastern edges of the Burger prospect. The Burger A well was closer to the center of the prospect, Pickard said. Pickard told the Chronicle that the decision to drill the two new wells was based on the results of recent seismic data processing and that Shell had determined that the new wells were more likely to prove out an oil find than the Burger A well.

Strategic play

With the Chukchi Sea having the attributes of a world-class petroleum basin, Shell sees its Arctic venture as a long-term strategic play to establish a future source of major oil resources. The company says that, despite the challenges of operating in such a remote region, the drilling in relatively shallow water will be straightforward and safe, with multiple oil spill prevention procedures and technologies in place. The company has assembled a major set of assets for responding to any oil spill emergency, including the containment dome, a well capping stack, oil spill response vessels and a tanker for collecting any spilled oil.
But environmental organizations and their supporters remain adamantly opposed to Shell’s plans, saying that Arctic offshore oil exploration and development pose unacceptably high risks to the fragile Arctic environment.

Environmental activist organization Greenpeace said that its vessel Esperanza had launched an inflatable boat carrying an activist from the indigenous community ahead of the Polar Pioneer as the drilling unit left Seattle, while two Greenpeace swimmers had accompanied the small protest boat. Earlier, a fleet of kayakers had assembled in the Seattle port, in protest at Shell’s plans.

On May 8 District Court Judge Sharon Gleason ordered a preliminary injunction imposing a number of restrictions on Greenpeace, including banning people associated with the organization from interfering with or boarding 29 specified vessels. Gleason also imposed exclusion zones around the vessels. Greenpeace has since appealed the preliminary injunction to the Court of Appeals for the 9th Circuit. In a June 12 order rejecting a Greenpeace motion to dismiss Shell’s request for the injunction, Gleason commented on the Greenpeace boarding of the Polar Pioneer in early April while the drilling rig was being transported across the Pacific Ocean. Gleason said that this action was “sufficiently akin to piracy” to justify court jurisdiction on the high seas, outside U.S. territorial waters.

Contingency plan upheld

In a crucial court decision, on June 11 a majority of a three-judge panel in the Court of Appeals for the 9th Circuit rejected an appeal against the approval by the Bureau of Safety and Environmental Enforcement of Shell’s Chukchi Sea oil spill prevention and response plan. Had the court upheld the appeal, Shell would presumably have had to place its Chukchi Sea drilling plans on hold.
A group of 10 environmental organizations had originally launched the appeal in federal District Court in Alaska in 2012, claiming that Shell’s plan overestimated the quantity of oil that could be recovered following an oil spill; that the plan did not adequately consider the impact of sea ice in trapping oil; and that Shell had not described its Arctic oil containment system. The appeal also claimed that BSEE should have conducted an environmental analysis under the terms of the National Environmental Policy Act in conjunction with its review of the plan.

After the District Court dismissed the appeal in August 2013, the plaintiffs elevated the appeal to the 9th Circuit.

In rejecting the appeal, the panel of 9th Circuit judges said that the plaintiffs had misinterpreted language in the contingency plan regarding oil recovery rates, and that BSEE had not acted arbitrarily in approving the plan. The panel majority said that, because Shell’s plan met statutory requirements, BSEE had to approve it. And, given the non-discretionary nature of this approval, the agency did not have to call for a consultation under the Endangered Species Act, nor was a review under the National Environmental Policy Act required.

Judge Dorothy Nelson dissented from the majority decision, saying that BSEE had discretion to approve or disapprove Shell’s plan and, thus, should have initiated an Endangered Species Act consultation and an environmental review.

Meantime, a group of environmental organizations is continuing an appeal against the legality of the 2008 Chukchi Sea lease sale in which Shell purchased its leases. On June 17 federal District Court Judge Ralph Beistline approved a new schedule for the case, with all briefs required by Oct. 9.


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