In the six years since Shell returned to Alaska with ambitions to explore in the high-potential but remote Arctic outer continental shelf, the company has submitted several exploration plans for government agency approval, only to be thwarted by appeals and litigation over permitting decisions. But the Aug. 4 conditional approval of the company’s Beaufort Sea exploration plan by the Bureau of Ocean Energy Management, Regulation and Enforcement, coming in the shadow of the fallout from the Deepwater Horizon disaster in the Gulf of Mexico, marks a significant step towards the company finally being able to sink a drill bit into the shallow seafloor off Alaska’s North Slope.
In the wake of the Gulf of Mexico disaster BOEMRE has significantly tightened its safety rules for offshore drilling and Shell’s plans are subject to the requirements of these rules.
“We base our decisions regarding energy exploration and development in the Arctic on the best scientific information available,” said BOEMRE Director Michael Bromwich when announcing his agency’s approval decision for Shell’s plan. “We will closely review and monitor Shell’s proposed activities to ensure that any activities that take place under this plan will be conducted in a safe and environmentally responsible manner.”
Reactions to decision
The BOEMRE decision was met with considerable enthusiasm from Alaska politicians.
“Approval of this exploration plan is fantastic news for Shell, for Alaska’s oil and gas industry and is a welcome shot-in-the-arm for Alaska’s long-term economic good health,” said Sen. Mark Begich. “I’m confident this will ultimately be the first of many developments to keep oil flowing through Alaska’s economic lifeline, the trans-Alaska oil pipeline. Development of natural gas in Alaska’s coastal waters also is key to our state’s long-awaited natural gas pipeline project.”
“Shell has been working to secure approval of this plan for over five years,” said Sen. Lisa Murkowski. “This is another positive step forward, and I’m hopeful that they will soon be able to move forward with exploration and production in the Beaufort. If this plan is allowed to advance this time, it could help address many of our most pressing challenges, creating tens of thousands of new jobs, generating hundreds of billions of dollars in new tax revenues, reducing our dependence on foreign oil, and improving our trade balance.”
However, organizations opposed to Arctic offshore oil development reacted with horror.
“The U.S. Department of the Interior took a dangerous and disappointing leap towards drilling in the remote and fragile waters of America’s Arctic Ocean today,” said Earthjustice on Aug. 4 on behalf of more than a dozen environmental organizations. “Shell’s drilling risks a major oil spill, and neither Shell nor the government could respond adequately to such a catastrophe. It risks harming the endangered bowhead whale, a species central to Alaska Native subsistence traditions. Today’s decision to rubber-stamp Shell’s drilling ignores many of the lessons of the Gulf tragedy and the recommendations of government scientists and puts the Arctic Ocean and its coastal communities at great risk.”
Two prospects
Shell’s Beaufort Sea plan involves drilling two wells in its Sivulliq prospect and two wells in its Torpedo prospect, starting in 2012 and probably using the company’s Kulluk floating drilling platform. Both prospects are located on the west side of Camden Bay, east of Prudhoe Bay. Sivulliq is the location of a known oil field, previously called Hammerhead.
The Kulluk is a conical shaped vessel, held to the seafloor by 12 anchors and designed to be able to drill in moving ice up to four feet thick, with the ability to withstand more severe ice conditions if supported by ice management vessels, according to the BOEMRE environmental assessment of Shell’s plan.
Drilling a well at a Torpedo drill site will likely take 44 days, with a Sivulliq well taking 34 days to drill, the environmental assessment says.
And exploration plan approval is contingent on Shell complying with a series of stipulations attached to the company’s Beaufort Sea leases, including the need for a bowhead whale monitoring program and an agreed plan of cooperation with local subsistence hunters. Shell has agreed to suspend its operations and remove its vessels from the region of the Nuiqsut and Kaktovik subsistence bowhead whale hunts while those hunts are in progress.
No significant impact
A finding of no significant impact in the environmental assessment that BOEMRE has conducted for Shell’s plan is the basis for the agency’s conditional approval of that plan — under the terms of the National Environmental Policy Act, were the agency to have determined a significant impact from Shell’s planned activities, it would have had to prepare an environmental impact statement, a procedure that could take perhaps a couple of years to complete.
BOEMRE did in fact prepare an EIS for the Beaufort Sea lease sale in which Shell purchased its leases and, under the agency’s procedures, the findings of that EIS carry forward, or “tier,” into the environmental assessment for Shell’s plan. In effect, BOEMRE’s approval of Shell’s plan indicates that the agency has found no significant impacts beyond the impacts already considered in the lease sale EIS.
But, with the Deepwater Horizon disaster having happened since the Beaufort Sea lease sale and its EIS, many have questioned the oil spill risks associated with Arctic offshore drilling.
In its assessment of Shell’s Beaufort Sea plan, BOEMRE has concurred with Shell’s view that drilling under the shallow waters of the Beaufort Sea poses a much lower well blowout risk than drilling into a high-pressure reservoir under the deep waters of the Gulf of Mexico. BOEMRE says that the Torpedo H well, the well with the highest potential oil flow rate of the four wells that Shell wants to drill, would be drilled to a depth of 10,000 feet in water depths of about 120 feet, with anticipated oil reservoir pressures of 3,600 pounds per square inch. That compares with a drilling depth of 18,000 feet, a 5,000-foot water depth and an 11,856-pound-per-square-inch reservoir pressure for BP’s ill-fated Gulf of Mexico Macondo well.
Worst case scenario
According to a BOEMRE evaluation, a worst case flow rate from a Torpedo well would be 2,498 barrels per day, a lower figure than the 9,468 barrels per day that Shell had estimated for the same well. Estimates for the rate of oil discharge during the Gulf of Mexico Macondo well blowout range from 53,000 to 62,000 barrels per day.
Moreover, BOEMRE has concluded that there is no likelihood of a major oil spill as a result of Shell’s drilling activities. This conclusion is based in part on the very low incidence of well blowouts in recent decades; the small number of wells that Shell plans to drill; and the fact that no previous wells drilled in the Arctic OCS have caused oil spills. The agency says that it has also taken into account new drilling safety rules that it has introduced since the Deepwater Horizon incident, including new blowout preventer inspection requirements and the required placement of BOEMRE inspectors on offshore rigs during drilling operations. Also factoring into the BOEMRE decision was Shell’s commitment to implement new well capping and containment technology, in the light of experience from the Macondo well.
A significant concern expressed by some is the lack of an Arctic support infrastructure, were it to become necessary to launch a major oil spill response in the offshore. Shell says that it has addressed this issue by assembling a self-contained oil spill response fleet to be stationed offshore ready to swing into action, should the need arise. The fleet includes ice-strengthened oil spill response vessels and an ice-strengthened tanker for storing recovered oil. Shell has also made arrangements for nearshore and onshore oil spill protection and cleanup.
Regional response plan
BOEMRE is still reviewing Shell’s oil spill prevention and contingency plan but, in its environmental assessment of the company’s exploration plan, BOEMRE says that Shell’s contingency plan is a “regional oil spill response plan that demonstrates Shell’s capabilities to prevent, or rapidly and effectively manage, oil spills that may result from exploratory drilling operations”
“The BOEMRE analysts found that none of the (public) comments or questions (relating to oil spill prevention and response) contained credible new information … that would bring into question whether the proposed action would likely result in no more than minimal to minor, at most cases below measurable, effects,” wrote James Kendall, BOEMRE director of the Alaska Outer Continental Shelf Region, in his official notice of a finding of no significant impact. “While there is public controversy over the issue of very large oil spills, there is no scientific controversy or scientifically supported challenge to the fact that very large oil spills remain extremely low probability events.”
Permits needed
However, Shell still needs to cross some significant permitting hurdles before finally seeing a clear way ahead clear for drilling in 2012.
Top of the hurdle list is the Environmental Protection Agency’s air quality permit for the operation of the Kulluk floating drilling platform and the support fleet for the drilling operations. With previous attempts by Shell to obtain air permits for its planned drilling mired in appeals and litigation, a new air permit for the Kulluk and its attendant fleet is making its way through the regulatory process — on July 22 EPA published a draft permit for public review, with comments due by Sept. 6.
Other permitting requirements include an EPA approval to include discharges from the drilling fleet within the terms of a general National Pollutant Discharge Elimination System permit for offshore oil and gas operations — as part of its Beaufort Sea exploration plan Shell has agreed to transport the bulk of its waste discharges out of the region, rather than disposing of the waste into the ocean. Shell will also require a U.S. Army Corps of Engineers permit for its drilling operations. In addition, the company will need authorizations from the National Marine Fisheries Service and from the U.S. Fish and Wildlife Service for the incidental harassment of marine mammals.
And, prior to drilling any well, Shell will require a drilling permit from BOEMRE.
