Shell will try to modify Chukchi exploration plan


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Shell says it will seek modification of a tight seasonal drilling restriction imposed as a condition to a Chukchi Sea Plan of Exploration approval issued Dec. 16 by the U.S. Bureau of Ocean and Energy Management.

The condition requires Shell to cease drilling 38 days before the earliest expected “ice encroachment” at the drilling site. That date is estimated as Nov. 1 based on five years of weather data. The 38-day requirement means Shell would have to suspend drilling in late September.

The restriction is intended to allow time for Shell to respond to an oil spill before sea ice is expected in the area.

“We’re still looking at this. It essentially takes away one-third of the time we would be able to drill, which means the elimination of one well from our three-well exploration plan. This would have a significant effect,” Shell spokesman Curtis Smith said. “We believe the restriction is unwarranted. There is no such restriction in our approved Plan of Exploration for the Beaufort Sea, and we are confused as to why it would be imposed for the Chukchi Sea.”

Ice conditions are typically more severe in the Beaufort Sea with an earlier date for ice encroachment on drilling.

We’re still looking at this. It essentially takes away one-third of the time we would be able to drill, which means the elimination of one well from our three-well exploration plan. This would have a significant effect. We believe the restriction is unwarranted. There is no such restriction in our approved Plan of Exploration for the Beaufort Sea, and we are confused as to why it would be imposed for the Chukchi Sea. ­— Shell spokesman Curtis Smith
 

The Plan of Exploration would allow Shell to drill three exploration wells, but with the restricted season, only two wells are likely to be drilled because ice conditions in the Chukchi Sea would not allow the drillship to reach the exploration site until July. The company does not expect to begin operations until July 15, Smith said.

Regional BOEM managers in Alaska may have some authority to adjust the restriction, he said.

“Our desire is to extend the time we drill into hydrocarbon zones in the Chukchi Sea to the original date of Oct. 31, the same day we will depart from our Camden Bay leases in the Beaufort Sea,” Smith said.

U.S. Sen. Lisa Murkowski was critical of the BOEM decision during a Dec. 20 press briefing.

“We’re all still trying to understand what exactly the impact will be to Shell with their exploration plan when you take 38 days out of an only three-month exploration period. This is quite significant. I’ve had a conversation with the secretary of the Interior and asked him to work with us,” Murkowski said.

“I plan on sitting down with the secretary and others after the New Year to make sure we really understand this,” she added. “I admit a fair amount of skepticism that it is 38 days from the historical ice coming in. What are we talking about – thin ice? Shore ice moving? Is it big ice or little ice? What if it isn’t a historic year? I have more questions than answers at this point.”

The BOEM decision caught Shell by surprise, Murkowski said.

“It’s my understanding they had not anticipated that the exploration permit would contain this unprecedented limitation, so they’re going back and trying to look critically. The exploration plans that have been presented previously have not had any such limitation. It seems that a relatively arbitrary number was assigned to pull back the exploration activity,” Murkowski said. “Where did we come up with 38 days? Is that a drop-dead, so Sept. 24 they have to be out of the water? My read of the language is that it is. Lots of smart people are looking at that. Permits are generally issued from one point in time to another and have this condition. It was anticipated would be issued until Oct. 31, and it is, but with proviso that they have to be out by Sept. 24.”

Environmental groups also are expected to challenge Shell’s Chukchi Sea exploration plan, similar to a challenge filed for BOEM’s approval of Shell’s Beaufort Sea plan. Challenges must be filed directly with the U.S. 9th Circuit Court of Appeals.

Unless the court orders a stay or an injunction, Shell is able to proceed under the approved exploration plan, Smith said. However, final air quality permits are still awaited from the U.S. Environmental Protection Agency. EPA has issued the permits for drilling in both the Chukchi and Beaufort seas, but environmental groups have appealed those to EPA’s internal Environmental Appeals Board.

Smith said there is no deadline by which the appeals board must make decisions, but the board did review earlier versions of the air permits last year when they were appealed. In those cases the appeals board ordered changes in the permits, which were made.

Shell has yet to make a decision to mobilize its drill fleet for the summer 2012 drilling. The operation will include the drillship Noble Discoverer working in the Chukchi Sea and the Kulluk, a mobile offshore drill structure designed for the Arctic, for drilling in the Beaufort Sea. A group of icebreakers, spill cleanup, anchor handling and other vessels will accompany the drill ships.

Journal reporter Andrew Jensen contributed to this article.

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