One regulatory hurdle cleared for Arctic OCS drilling

Shell is officially one step closer to resuming exploration in the Chukchi Sea. On Thursday the U.S. Bureau of Ocean Energy Management released its final supplemental environmental impact statement for a 2008 Chukchi Sea Outer Continental Shelf Lease Sale.

It is a move that is hoped to clear legal and regulatory hurdles facing Arctic offshore drilling.

The document was published on schedule after the draft SEIS was completed last fall. A Record of Decision will likely be issued in 30 days, which will allow BOEM to resume work on Shell’s revised exploration plan for the Chukchi Sea, BOEM said in a statement.

 “Alaska is a critical component of our nation’s energy portfolio, and the Chukchi Sea has substantial oil and gas potential, as well as sensitive marine and coastal resources that Alaska Native communities depend on for subsistence,” Interior Secretary Sally Jewell said in the statement.

“The updated analysis is a major step toward resolving the 2008 oil and gas leases that have been tied up in the courts for years. We remain committed to taking a thoughtful and balanced approach to oil and gas leasing and exploration in this unique, sensitive and often challenging environment.”

Environmental groups reacted harshly to the EIS release.

“It is unconscionable that the federal government is willing to risk the health and safety of the people and wildlife that live near and within the Chukchi Sea for Shell’s profits Friends of the Earth climate campaigner Marissa Knodel. There is no such thing as safe or responsible drilling in the Arctic Ocean — Shell’s record of recklessness and the federal government’s own environmental analysis show that approval of Lease Sale 193 would be unsafe, dangerous and irresponsible.”

Shell said it was encouraged by the action.

“We appreciate the release of the Final SEIS and are reviewing it. It’s our understanding it will be posted to the Federal Register sometime next week,” Shell spokesman Curtis Smith said. “Our 2015 exploration plans for offshore Alaska remain dependent on a number of factors, including our own readiness and legal and regulatory certainty.”

Shell drilled two partly-completed wells in 2012 on its Arctic leases, one in the Chukchi and one in the Beaufort Sea.

After that, however, the U.S. Ninth Circuit Court of Appeals ruled that the environmental impact statement for Lease Sale 193 in 2008 was defective because its assumption of a possible discovery — 1 billion barrels — was unreasonably low.

A coalition of environmental groups had filed suit earlier, challenging the estimate.

Alaska U.S. District Court Judge Ralph Beistline ordered the BOEM to resolve the problem, triggering the agency’s action to do a supplement to the EIS with revised estimates.

BOEM’s new estimate, release last fall in the draft SEIS, is that 4.3 billion barrels of recoverable oil and 2.33 trillion cubic feet of recoverable natural gas are likely to be discovered in the Chukchi.

In the draft SEIS, BOEM said the agency’s geologists had the benefit of actual bids by companies in a lease sale, which it did not have in 2008, as well as access to more geologic data. The revised estimate assumes a discovery of one large field as well as a smaller “satellite” accumulation nearby.

Based on a better understanding about existing geologic structures in the region and improved information about where industry operators are likely to focus their development activities, BOEM evaluated a higher exploration and production scenario than in its previous analyses, the Interior Department said in its statement.

Shell and other companies bid more than $2 billion for the OCS leases in 2008 when Sale 193 was held, with the bulk of the bids tendered by Shell. The company has faced a series of setbacks including operational issues that prevented the drilling of complete wells in 2012.

Shell has since given a higher priority to resumed exploration in the Chukchi Sea because of the greater potential for major discoveries in the area, the company has said.

Shell now hopes to drill in 2015 but once its Sale 193 leases cleared legally with the new SEIS there could yet be other roadblocks. A set of new special Arctic OCS drilling rules from the Interior Department has yet to be issued, although those are expected soon.

Meanwhile, there are other lawsuits pending from environmental groups including one challenging the Interior Department’s approval of Shell’s Arctic oil spill containment and cleanup plan.

Also, other companies that bid in the 2008 sale, such as ConocoPhillips, have put their exploration plans on hold until they see Shell making progress in getting final permission to drill.