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December 2009

Vol. 14, No. 50 Week of December 13, 2009

Shell’s Chukchi exploration plan gets conditional MMS OK

The Minerals Management Service has conditionally approved Shells’ proposed Chukchi Sea outer continental shelf 2010 exploration plan.

But it’s basically approval for data gathering — drilling won’t be allowed until litigation over lease sale issues is resolved. The company also needs federal and state permits.

In a Dec. 7 letter of conditional approval of Shell’s exploration plan, MMS said because the 2007-12 five-year oil and gas leasing plan was vacated and remanded by the U.S. Court of Appeals for the District of Columbia, the Secretary of the Interior told the court: “MMS will act upon exploration plans for Chukchi Sea leases, but will suspend activities under any approved plan pending the Secretary’s reconsideration decision on the remanded program, thereby halting all but data gathering ancillary activities on those leases.”

MMS said it would direct a suspension of operations and said no exploration drilling activities can be conducted under the exploration plan until the suspension of operations has been terminated.

Shell said in a Dec. 7 statement that the approval was another positive step toward the company’s goal of drilling in 2010.

The company said the conditional approval of the Chukchi exploration plan adds significance to the fact that the Environmental Protection Agency has not yet issued an air discharge permit for the drilling rig. Shell said it is critical that it receives that permit in a timely manner “to enable a go-ahead decision on our 2010 program.”

Responsible exploration

“A key component of reducing our country’s dependence on foreign oil is the environmentally responsible exploration and development of America’s renewable and conventional resources,” Secretary of the Interior Ken Salazar said in a statement on the conditional approval. “By approving the Exploration Plan, we are taking a cautious but deliberate step toward developing additional information on the Chukchi Sea.”

Shell paid $2.1 billion for Chukchi Sea leases in an MMS outer continental shelf lease sale in 2008.

The exploration plan — approved but stayed — is for drilling up to three exploration wells during the July-October open water drilling season.

Shell plans to use one drillship, one ice management vessel, an ice-class anchor handling vessel and oil spill response vessels.

The 2007-12 OCS plan is undergoing review in response to an order of the appeals court which required additional environmental analysis. Interior said the decision on the remaining plan “is forthcoming.”

No significant impact

In a finding of no significant impact for the 2010 exploration drilling program at Burger, Crackerjack and SW Shoebill, MMS said drilling activities using the M/V Frontier Discoverer are planned to begin about July 4.

Shell Alaska Vice President Pete Slaiby said in a statement: “Shell believes the Chukchi Sea could be home to some of the most prolific, undiscovered hydrocarbon basins in North America. We will continue to work closely with regulators, local communities and the State of Alaska as we move closer to responsibly exploring for oil and gas reserves that could ultimately lead to tens of thousands of jobs, extended life for the trans-Alaska pipeline and increased domestic energy security for decades to come.”

Appeal pending

In addition to pending litigation against the 2007-12 OCS lease sale program, Shell’s exploration plan is also an issue in an appeal by the Native Village of Point Hope, the Inupiat Community of the Arctic Slope and 12 environmental organizations against the 2008 Chukchi lease sale. Briefing in the case is on hold pending issuance by MMS of an amended lease sale environmental assessment which the agency is preparing at the direction of the appeals court in the ruling against the 2007-12 OCS lease sale program.

MMS told the court in mid-November that it had made substantial progress but had not yet completed the required work; another status report on the work is due in mid-December.

Shell has indicated that it needs to make a go-or-no-go decision on its 2010 Chukchi drilling plans by early in 2010.

—Kristen Nelson






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