BOEM updates Chukchi lease sale

The federal Bureau of Ocean Energy Management has tentatively increased its estimate of recoverable oil from certain Chukchi Sea leases, but regulatory hurdles remain before offshore oil development could occur.

The BOEM, part of the Interior Department, released a draft revised supplemental environmental impact statement Oct. 31 for Sale 193.

That sale was conducted in 2008, but development on the leases has not yet occurred, in part because of ongoing litigation. Several environmental groups and representatives of some North Slope communities sued the federal government over the environmental impact statement, or EIS, that formed part of the basis for the lease sale.

Originally, the agency used an estimate for an economically recoverable discovery of 1 billion barrels in the area; the 9th Circuit Court of Appeals ruled earlier this year that the estimate was “arbitrary and capricious” and remanded the issue to Alaska U.S. District Court. A key claim of the plaintiffs challenging the EIS was that the estimate was too low and therefore underestimated the risks of an oil spill. The agency is now producing a revised SEIS for the sale under the remand order.

The new draft SEIS uses an estimate of 4.3 billion barrels of recoverable oil in from a large prospect and smaller satellite developed with Chukchi Sea leases, over a 74-year time frame. The draft SEIS looks at exploration and development of that larger quantity of oil, and updates the anticipated impacts to area resources accordingly.

The document is a draft, however, and that could still change in the final version.

The draft SEIS was published in the Federal Register Nov. 7, according to BOEM’s John Callahan, which triggers a 45-day comment period, including public meetings in seven communities in late November and early December.

The comment period for the draft SEIS ends Dec. 22.

At the end of the comment period, BOEM analysts will take all the comments received into consideration and produce a final SEIS.

After that, and a mandatory 30-day waiting period, it will be up to the Secretary of the Interior to produce a record of decision — either confirming the 2008 sale, confirming the sale with modifications, or vacating the sale. That’s likely to occur in March, under the timeline provided by BOEM to the court.

“We expect this process to conclude in March,” Callahan said.

Shell, ConocoPhillips and Statoil and Repsol bid more than $2 billion in the original sale. Whether or not they can proceed with development will depend, in part, on the record of decision.

Only Shell has attempted to develop its leases, spending more than $6 billion to date; the company drilled two partial exploration wells in 2012 in the Beaufort and Chukchi seas. The company was not allowed to drill to oil-bearing depths because its spill response barge was never cleared for operation in the Arctic. Further complicating its plan was the grounding of the Kulluk drill rig off Kodiak in a storm following the 2012 drill season and required improvements to its other drill rig, the Noble Discoverer.

The Kulluk was deemed a loss and Shell has arrangements with another rig to work alongside the Discoverer in 2015 in the Chukchi should it be allowed to explore again. The company’s plan for 2015 does not include any wells in the Beaufort Sea.

Shell spokeswoman Meg Baldino wrote in an email that the company appreciates the release of the draft and is reviewing it.

Whether work could begin in summer 2015 will depend on Shell, but Callahan said the agency likely can’t move forward with permissions to operate until March.

Before any development could begin, Shell is required to submit an operator plan, which BOEM must review within 15 days, and either deem it submitted or ask for more information. Once BOEM deems it submitted, a more formal review process can begin.

None of that work can occur until the SEIS process is completed, under the terms of the court order. Until then, the agency can only informally go back and forth on the plan with Shell.

“We cannot deem it submitted or approve it until the Secretary issues her record of decision,” Callahan said.

Shell has said previously that for it to resume work in summer 2015, preparations would need to begin in the spring.

Alaska’s congressional delegation praised the October release of the draft SEIS.

In a formal statement, Sen. Lisa Murkowski emphasized the need for quick federal work so that drilling can begin next summer.

“Today’s updated environmental impact statement for the Chukchi Sea is good news. Hopefully this will satisfy the court and allow responsible drilling to resume next summer,” Murkowski said in formal statement. “There’s already been some slippage in the timeline for releasing the revised review. We’re now getting down to the wire and it’s vital that there be no further delay. The leaseholders are under a very tight schedule and have to receive final approval for their drilling plans by early spring in order for there to be drilling next summer.”

Sen. Mark Begich also highlighted the safety of development in Alaska.

“I’ve developed legislation for OCS revenue sharing to give state, local, and tribal governments a share of the revenues.  I also introduced a bill to require the oil to come ashore via pipeline — by far the safest way to move oil — that will help prevent the decline in volume through the Trans Alaska Pipeline System (TAPS),” Begich said in a formal statement. “However, we must always remember the subsistence users who rely on the bounty of this region to feed their families and to maintain their cultural traditions like whaling. I have confidence in Alaskans’ experience and know-how to develop our resources responsibly and safely and I have advocated for more funding to ensure that we invest in the most cutting-edge spill prevention and recovery technology available.”

Environmental groups, however, have asserted that the new document raises additional concerns over Arctic drilling.

Earthjustice Attorney Eric Grafe said the new document shows a greater risk — 75 percent, compared to 40 percent in the prior document— of a spill, which is particularly problematic in the Arctic.

His organization is also concerned that the agency is rushing through the process to help meet Shell’s timeline and desire to drill.

“What the agency ought to be doing is reconsidering the leases on kind of a blank slate after they’ve done an environmental analysis, not sort of taking into account the leaseholders desire to explore on the leases,” he said.

11/18/2016 - 9:25am