Key decisions due at end of March for Shell

A key federal decision is shaping up for Shell at the end of this month.

The U.S. Bureau of Ocean Energy Management, or BOEM, expects to issue a final decision by March 31 on a revised environmental impact statement of the Chukchi Sea 2008 Outer Continental Shelf lease sale that has been contested in court by environmental groups, the director of the agency said March 13.

Abigail Hopper, director of the BOEM, said a Record of Decision on a revised supplemental environmental impact statement, or SEIS, is to be issued.

That will enable the agency to begin its formal review of a plan submitted by Shell for 2015 summer exploration in the Chukchi Sea, she said.

Hopper also said Shell will likely not have to submit a revised oil spill containment and cleanup plan developed in 2012 and approved by the BOEM. That plan was reviewed and approved again in 2014, she said.

“However, we are reviewing it again to see if any changes might be needed,” she said.

Although a decision in late March puts Shell on a tight timetable, the company hopes to get its drill fleet to the Arctic in time for the open-water drill season.

“We are planning to drill in Alaska in 2015,dependent of course on successful permitting, clearing any legal obstacles and our own determination that we are prepared to explore safely and successfully,” Shell spokeswoman Meg Baldino said. “We look forward to a ROD (record of decision).”

Shell plans to bring two drill vessels, a drillship and a semi-submersible drilling vessel, to the Chukchi Sea this summer along with a flotilla of support vessels.

In a related development, Brian Salerno, director of the U.S. Bureau of Safety and Environmental Enforcement, or BSEE, said his agency is still in a public review period for proposed special Arctic OCS drilling rules, but the rule is expected to be finalized and published in final form soon.

Salerno joined Hopper in a meeting with Alaska reporters March 13 after spending a week in Alaska meeting with state and local officials, and interested groups, on the new Arctic rule. The public comment period for the rule, now in draft form, closes April 27.

Shell drilled two partially-complete Arctic exploration wells in 2012, one in the Chukchi Sea and one in the Beaufort Sea, but did not return to the Arctic in 2013 and 2014 after being blocked by federal court order. That was over a lawsuit brought by environmental groups who contested the estimated probable size of a discovery in the Chukchi Sea in the environmental impact statement prepared for the lease sale in 2008.

U.S. District Court Judge Ralph Beistline ordered the BOEM to reconsider the estimate, which was that 1 billion barrels might be discovered. The agency initiated a supplemental EIS, revising the estimate upward. That process will conclude with the issuing of the ROD on March 31.

Salerno and Hopper said the proposed Arctic drilling rule mainly puts into regulations provisions Shell had agreed to in 2012 as conditions to its permits, such as having a stand-by rig in the region to assist in a Deepwater-Horizon-type emergency, and having an undersea well blowout capping system and oil retrieval and storage facility on hand.

“There are a lot of similarities in the draft rule compared with the 2012 permit requirements but the difference is that these are now being codified so they apply to all operators, not just Shell,” he said.

“The existing drilling rules apply to the OCS anywhere, but we now recognized that conditions in the Arctic are far different than the Gulf of Mexico. This rule says you bring what you need with you,” such as a backup drill rig for a relief well.

However, the rule doesn’t mean the backup rig can’t also be drilling another well, which Shell plans to do in 2015, or that a rig working for one operator can’t be considered the backup rig for another company in an emergency, Salerno said.

One difference is that Arctic operators will have to submit “holistic” operations plans that include not just drilling but all elements, including transportation, from the start of the project to the completion. One of the most important “lessons learned” from Shell’s 2012 experience was that Shell had no integrated plan, he said.

A post-season review by the U.S. Department of the Interior on Shell’s 2012 drilling season, “showed that not all elements of the operations were synchronized. The need for better coordination, such as between the company and contractors, was one of the lessons learned in 2012,” Salerno said.

That may have contributed to management decisions leading to the loss of the Kulluk drill ship when it lost its tow and ran aground off Kodiak Island in a Gulf of Alaska storm in late 2012, he said.

Hopper said the integrated operations plan is not something that will have to be approved by the BOEM but having one will be required. “It will allow the company to receive feedback at an early stage,” if potential problems are seen, she said.

Salerno said the Arctic drilling rule will not be overly “prescriptive,” meaning that it not specify in detail the equipment to be used.

“We will specify that specific types of equipment are needed,” such as spill capping and containment systems, he said.

There will still be flexibility to propose new solutions and technology.

“We don’t want to shut the door on innovation. We want to be open to it,” he said.

However, the agency will want to be involved in monitoring when new technologies are tested, Salerno said.