As Shell edges toward drilling in the Alaska Arctic outer continental shelf, or OCS, the stakes are high in the standoff between the proponents of offshore development and those who view the Arctic seas as an unduly risky venue for oil drilling at present.
But what are the perspectives of people on different sides of the OCS development debate? At the Seminar Group’s Permitting Strategies in Alaska seminar on Jan. 19 a Shell executive and a leading environmental attorney exchanged views on this difficult issue.
Government policy
Susan Childs, sustainable development manager for Shell in Alaska, told the seminar that Shell’s participation in lease sales for the Beaufort and Chukchi seas since 2005, and the company’s expenditure of about $4 billion on its Alaska OCS program, followed U.S. government policy decisions to hold those lease sales.
But Shell’s planned OCS exploration has been stymied as a consequence of a series of appeals against permits that the company needs in order to progress with exploratory drilling.
“It took us six years and about $70 million to get the two air permits that are now final,” Childs said. “I will tell you that it is our perspective that the permitting process is being abused by groups who don’t like the policy platform put forth by the federal government.”
Oil development in the Alaska offshore is vital to the U.S. economy and can extend the life of the trans-Alaska oil pipeline, to the benefit of everyone in Alaska, Childs said. And Shell enjoys a 50-year history of safe drilling in the Alaska offshore, including participation in the early development of Cook Inlet, and the drilling of exploration wells in the Beaufort and Chukchi seas a number of years ago, she said.
Shell now plans to finally start its new Arctic Alaska drilling program in the summer of 2012 by drilling up to two wells in the Beaufort Sea and up to three wells in the Chukchi.
Avoid ice
To be able to drill in open water, avoiding encounters with sea ice, drilling would start around July 15 in the Chukchi and a little later in the Beaufort, ending by Oct. 31.
“Those are the statewide standards that we recognize and respect,” Childs said.
Rear Admiral Colvin of the U.S. Coast Guard 17th District has commented on a previous history of safe exploration drilling in the Beaufort and Chukchi seas and on the fact that Shell’s planned wells would be drilled in “very shallow water” during the summer when there is plenty of daylight, Childs said. And drilling in the shallow waters of the northern Alaska seas is very different from drilling in the deep water, high reservoir pressure environment of the Gulf of Mexico, she said. The wells that Shell plans for Alaska over the next few years will be simple to drill, she said.
Shell also plans to continue collecting environmental data, in anticipation of the need to prepare an environmental impact statement prior to any field development that results from exploration activities.
Community meetings
Shell has earned its “license to operate” in the Alaska OCS through activities such as the more than 450 meetings that the company has held with people in North Slope communities over the past five years, Childs said.
“These are the folks who are going to benefit in the very beginning of our project and these are also the folks who have to have confidence in our company, that they will not feel negative impacts from something that we do unintentionally,” Childs said.
Finding common ground is paramount, she said.
Following concerns expressed by the North Slope Borough about the size of Shell’s original drilling plans, the company has scaled back its proposed drilling operations, Childs said. And the company has agreed to cease drilling during Beaufort Sea subsistence whale hunting. Moreover, as a consequence of discussions with the Alaska Eskimo Whaling Commission Shell has agreed to remove from the region all of the discharges from its Beaufort Sea drilling operations.
Unprecedented capabilities
Shell will have unprecedented oil spill response capabilities when it starts drilling, Childs said. Experience from the Gulf of Mexico oil spill disaster has impacted oil spill contingency planning, with Shell now planning to deploy a containment system to gather escaping oil in the highly unlikely event of a well blowout, for example. And a dedicated relief well drilling rig will be available. The Bureau of Safety and Environmental Enforcement is currently reviewing Shell’s oil spill contingency plans and the company is hopeful of plan approval, Childs said.
“It is necessary for the government to take a hard, close look, so they don’t make mistakes and we don’t make mistakes,” Childs said.
However, government permitting agencies are struggling to deal with permits, given the short time that they have to write good permits and given the probability that the permits will be appealed and litigated.
“There’s just got to be a different, more productive, less protracted way to get permits,” Childs said.
100 years of research
Childs said that scientific research programs relating to the Arctic OCS, sponsored by both the federal government and by the oil industry, have now amassed data representing about 100 years of research activity, probably more data than has been gathered for the Gulf of Mexico. However, this research tends to exist as a series of individual reports that need synthesis into a more general framework. Shell has been documenting the research that has been carried out and is working with the U.S. Geological Survey on synthesizing the research results.
“We believe that we have enough science today to be able to go forward with a short term exploration program,” Childs said.
Shell has established a joint science program with the North Slope Borough, allowing North Slope communities to participate in decisions over what science needs to be done. And Shell, ConocoPhillips and Statoil have also signed a memorandum of understanding, agreeing to share their scientific data with the National Oceanic and Atmospheric Administration, Childs said.
Insufficient knowledge
Peter Van Tuyn, an attorney with Bessenyey and Van Tuyn who has represented conservation groups, Native Alaska groups and others in court cases relating to the regulation of the Alaska oil and gas industry, told the seminar that in his view there is still insufficient knowledge of the Chukchi and Beaufort environment to safely proceed with offshore exploration. Baseline data is needed on the life cycle of animals living in the region, with that data likely taking another five years to collect, he said. Van Tuyn also questioned the high dependence on Shell for oil spill response capabilities, saying that the government also needs its own response resources.
Van Tuyn argued for what he calls the “precautionary principle” in the permitting of industrial operations. Under this principle, activities should not be allowed if there is some possibility of serious, adverse environmental impacts.
Objective science
Characterizing various events and trends since the start of the Obama administration as “good,” “bad,” or “ugly” in comparison to the application of that precautionary principle, Van Tuyn said that the administration’s commitment to scientific integrity and its use of objective science fitted on the “good” side of the environmental regulation balance sheet.
“There’s a policy through a secretarial order at the Interior department. There’s a commitment to bring objective principles of scientific and scholarly integrity to that agency,” Van Tuyn said. That contrasts with the State of Alaska’s efforts to prevent state scientists from expressing views that diverge from state policies, he said.
Van Tuyn also commended the Obama administration for its efforts at a holistic approach to environmental management in initiatives such as the national ocean policy.
“Let’s see if we can’t get a handle on all human interactions with that environment,” he said.
The cancellation of remaining Arctic lease sales in the Department of the Interior’s 2007-12 OCS lease sale program, the cancellation of the North Aleutian basin sale in that program and the subsequent withdrawal of the North Aleutian basin from subsequent sales all exemplify the precautionary approach to regulation, Van Tuyn said.
Van Tuyn commented that the interagency permitting task force that the president has established for Arctic Alaska may help expedite future permitting without losing necessary environmental protections. However, from a state perspective, the loss of the Alaska coastal management program has removed a helpful means of one-stop shopping for state permits, he said.
Law of the sea
On the bad side of the balance sheet, Van Tuyn criticized the federal government for not ratifying the U.N. Convention on the Law of the Sea.
“I think this is the most fundamental ‘bad’ … for environmental policy in the United States today,” Van Tuyn said, commenting that this convention defines the rights and responsibilities of nations in their use of the world’s oceans, and includes a framework for defining maritime boundaries between Arctic states. He also criticized the lack of funding for U.S. icebreakers, a situation that he characterized as a missed opportunity for the United States.
Also bad is the government’s failure so far to implement some of the recommendations from investigations following the 2010 Gulf of Mexico oil spill disaster, Van Tuyn said. For example, there are as yet no blowout prevention certification rules or margin of safety rules for drilling, he said.
And when it comes to federal agency decisions that appear to run counter to the precautionary principle, the Department of the Interior’s approval of Shell’s Beaufort and Chukchi sea exploration plans seems based on the idea of trying to understand the risks associated with an risky activity by simply proceeding with the activity, Van Tuyn said.
Dangerous path
“That’s a dangerous path to proceed (on),” he said. “If you want to dip your toe in the water, as (Interior) Secretary Salazar says he wants to do here, then do it carefully. Have a really structured one- or two-hole drilling program and give yourself time to understand how it operated. … Don’t just approve massive exploration projects in two different oceans.”
The government approved these plans without first approving Shell’s oil spill contingency plans, Van Tuyn said. And, although Shell has committed to deploy a containment system for capturing oil from a blown out well, that system has yet to be tested in Arctic waters, he said. What happens if tests of the system fail after Shell’s drilling fleet has already been deployed, he asked. Are they going to send the drilling fleet back to base?
“That’s not fair to Shell and it’s not fair to anybody else,” he said.
Arctic lease sales
Van Tuyn also slammed the Department of the Interior’s decision to uphold the 2008 Chukchi Sea lease sale, in response to an appeal against the sale in the federal District Court in Alaska. The environmental impact statement for that lease sale includes a massive list of missing environmental data, he said. He also criticized the inclusion of Beaufort and Chukchi sea lease sales in the Bureau of Ocean Energy Management’s proposed 2012-17 OCS lease sale program. The Arctic has less support infrastructure than the Atlantic OCS, yet BOEM has decided not to schedule lease sales in the Atlantic region on the grounds of insufficient infrastructure, he said.
As “ugly” events that Van Tuyn said resulted from decisions counter to the precautionary principle he cited the recent blowout of a Chevron natural gas well in shallow water offshore Nigeria, and a recent Shell oil spill, also offshore Nigeria.
And Van Tuyn also classified as “ugly” the recent transfer of Arctic offshore air permitting authority from the Environmental Protection Agency to the Department of the Interior, an action which he said had eroded public participation and public rights by eliminating the Environmental Appeals Board from the permitting process.
Sea ice
But, when it comes to OCS oil exploration and development, a major concern of Arctic communities that depend on marine subsistence resources is the potential for the oil fouling of sea ice, Van Tuyn said.
“To the people of the Arctic it’s not just about whether their coast is soiled, but whether the ice gets soiled,” he said. “That is what drives the ecology of the Arctic Ocean.”
A Norwegian oil spill incident in February 2011 demonstrated the impossibility of cleaning spilled oil in sea ice conditions, he said.
On the other hand, people’s addiction to the use of oil will at some point have to come to terms with the fact that oil will eventually run out, Van Tuyn said.
“We should be asking the question from a policy perspective ‘what should we do to plan for that future?’” Van Tuyn said. “If we can craft a vision for Alaska that provides a smooth transition beyond oil and at the same time protects our environment and communities, I think that we’re going to secure a pretty bright future for Alaska and in my opinion that is the underlying promise of the precautionary principle.”
