Shell decides no drilling in 2014; cites lease sale court ruling

Shell has decided not to do any exploration drilling in Alaska’s Chukchi Sea in 2014, Ben van Beurden, the company’s new CEO, told investors on Jan. 30. Van Beurden said that a recent decision by the U.S. Court of Appeals for the 9th Circuit, invalidating the 2008 lease sale in which Shell purchased its Chukchi Sea leases, had raised substantial obstacles to Shell’s plans for drilling offshore Alaska.

“This is a disappointing outcome, but the lack of a clear path forward means that I am not prepared to commit further resources for drilling in Alaska in 2014,” van Beurden said. “We will look to relevant agencies and the Court to resolve their open legal issues as quickly as possible.”

After a hiatus in the company’s Alaska exploration program, following a series of issues relating to its drilling activities in the Chukchi and Beaufort seas in 2012, Shell had hoped to resume drilling in its Chukchi Sea Burger prospect in 2014.

But the company has faced a significant challenge in ensuring that it would have all of its required permits in place to meet a 2014 drilling timeframe. In December Peter Voser, the company’s outgoing CEO, said that the company hoped to restart drilling in 2014 or 2015, but that the company had not yet made a final decision on this.

On Jan. 22 the 9th Circuit Court upheld an appeal by a North Slope village and a group of environmental organizations against the Department of the Interior’s environmental impact statement, or EIS, for the 2008 lease sale: The case has been remanded to the federal District Court in Alaska for further action. Meantime, the absence of a legally valid EIS for the sale presumably renders the sale itself invalid and raises questions over the legal status of the leases sold to Shell and other companies.

“As a result of uncertainty raised by the recent 9th Circuit Court decision that requires the Bureau of Ocean Energy Management to gather and synthesize additional data related to Chukchi Lease Sale 193, Shell will stop the planned 2014 exploration program offshore Alaska,” Shell said in a Jan. 30 statement.

Shell says that it will continue to work closely with the Department of the Interior to pursue a successful exploration program in the future.

—Alan Bailey