Shell scraps its 2014 Chukchi drill season


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Shell has scrapped its planned 2014 Chukchi Sea exploration program. The decision was made because of uncertainties raised by a Ninth Circuit Court of Appeals decision in a lawsuit over environmental reviews of a 2008 federal Outer Continental lease sale in which Shell and other companies won leases in the Chukchi Sea.

“As a result of uncertainty raised by the recent Ninth Circuit Court decision that requires the Bureau of Offshore Energy Management to gather and synthesize additional data related to Chukchi Lease Sale 193, we have made the decision to stop the planned 2014 exploration program offshore Alaska,” Shell spokesman Curtis Smith wrote in an email.

“The lack of a clear path forward and an associated timeline makes it impossible to commit the resources needed to explore safely in 2014,” he wrote.

 A three-judge panel of the Ninth Circuit Court held that the U.S. Mineral Management Service, the predecessor agency to the U.S. Bureau of Offshore Energy Management, had used an improper, conservative estimate as a basis for environmental review in the environmental impact statement, or EIS, for the lease sale. The agency had assumed an initial find of one billion barrels of recoverable reserves in the Chukchi sale area.

A coalition of environmental groups and two Alaska Native organizations filed a lawsuit claiming the agency should have used a higher figure in the EIS.

ConocoPhillips spokeswoman Natalie Lowman said her company understands Shell's decision. “It is essentially the same one we made in April 2013. We remain concerned about the impact of ongoing litigation and its potential impact on our ability to operate in the Chukchi Sea.

Gov. Sean Parnell reacted strongly to the announcement.

“This news is extremely disappointing for Alaska, but certainly understandable given the recent Ninth Circuit Court ruling,” Gov. Sean Parnell said. “Multiple years of federal regulatory delay, litigation delay, and one year of operational issues have created barriers to Alaskans’ near-term economic prospects.

“This is a textbook example of how the federal framework can negatively impact our economy, and how it can actually slow the progress of technology and innovation, harming key national interests,” Parnell said.

Shell has made major investments in Arctic offshore exploration technology, Parnell said, but the court of appeals ruling applied to regulatory processes used in 2008 by the Department of the Interior in issuing leases to Shell. 
Alaska’s two U.S. senators also voiced concerns.

Alaska U.S. Sen. Lisa Murkowski, a Republican, said, “I am disappointed that Shell will not be able to move forward with exploration this summer, but am not surprised. I expect the administration to work quickly to address the deficiencies identified by the court in its analysis of lease sale 193.”

Alaska’s other senator, Democrat Mark Begich, said, “It is simply unacceptable that judicial overreach is getting in the way of letting Alaskans develop our own natural resources.” 

“I’ll be talking with Interior Secretary Sally Jewell today and expect her agency to move quickly to address the court's questions and concerns and do everything possible to get this process back on track. As Shell suggested in its announcement this morning, this is a temporary setback and I believe the prospects for Arctic development remain strong. I’m confident that this project will move forward.” 

Environmental groups cheered Shell’s announcement, however.

Greenpeace International Arctic oil campaigner Charlie Kronick said, "Shell’s decision to gamble on the Arctic was a mistake of epic proportions. The company has spent huge amounts of time and money on a project that has delivered nothing apart from bad publicity and a reputation for incompetence. The only wise decision at this point is for (Shell CEO Ben Van Beurden) to cut his company's losses and scrap any future plans to drill in the remote Arctic Ocean,” Kronick said in a statement.

 

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

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