In the Beaufort Sea, Shell would choose alternative prospects to those the company planned to drill in 2007 and 2008, and which are currently dependent on litigation and an injunction ordered by the US 9th Circuit Court of Appeals in San Francisco.
Pete Slaiby, general manager for Shell’s Alaska operations said the company has numerous other interesting prospects on its Beaufort Sea leases that can be tested whereas the court thinks about the lawsuit on the wells planned two years ago. The contested prospects are in an area 15 miles to 20 miles offshore from Point Thomson, east of Prudhoe Bay, and in the path of migrating bowhead whales.
Environmental groups and Inupiat whalers filed suit to block Shell’s drilling on those sites. The appeals court originally issued a decision canceling the US Minerals Management Service’s permits for the drilling, but then in an unusual move, voided its own decision earlier in 2009. The court has not yet issued a latest ruling.
Slaiby also said issues raised in a separate decision issued earlier in April 2009 by the 5th US Court of Appeals in Washington, do not influence Shell’s Beaufort Sea leases, even though they could affect the Chukchi Sea.
The 5th Circuit Court’s decision faulted the US Minerals Management Service on its study of environmental effects of drilling, and that affects the US outer continental shelf (OCS) five-year leasing program starting in 2005, which wraps six lease sales in the US Gulf of Alaska in addition to the Chukchi Sea sale.
Shell hopes that concerns affecting the Chukchi Sea will be resolved before the company’s wells are to be drilled, Slaiby said.
Shell has spent hundreds of millions of dollars in preparations for its Alaska exploration programs, as well as over $2 billion spent in bonus bids for federal OCS leases in the Chukchi Sea.
The company had a false start in 2007, when it marshaled a fleet of two drillships and numerous support vessels to drill the three prospects north of Point Thomson, and then was stopped by the litigation.
Slaiby said Shell has reduced its exploration plans to one drilling vessel, partly because of difficulty in getting government permits for the more ambitious two-rig exploration program the company had initially planned.
Air quality permits required by the U.S. Environmental Protection Agency have been a particular source of frustration, he said. Shell has spent $13 million over three years attempting to get EPA’s approval on permits for the Beaufort wells.
Part of the problem is that the agency’s air permit program is geared more for onshore than offshore operations. For example, a requirement in regulations for fencing is obviously unneeded and impractical offshore, he said.
Another problem has been that EPA’s Region 10 offices in Seattle, which administer permits for the Alaska region, has been understaffed, Slaiby said.
An exploration program in 2010 or 2011 would still engage a small flotilla of support vessels. Slaiby said an oil spill response vessel constructed by Arctic Slope Energy Services for work in Arctic regions and under long-term charter to Shell, will be on hand including a spill response barge and a tanker competent of holding oil recovered if a spill were to occur.
The most difficult problem, however, is that the environmental assessment and permitting procedure mandated by the National Environmental Protection Act sets out a minefield for potential litigation.
“The regulators are professionals, and the NEPA process has been in place since the 1970s and it is managed by professionals, but lawsuits are costing companies like Shell to waste hundreds of millions of dollars due to delays,” Slaiby said. “It’s ironic that people who oppose offshore development don’t seem to be concerned about our increasing reliance on oil imported from overseas, or that even the best-run tanker systems are five times more prone to an oil spill than an offshore producing platforms.”
