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Vol. 14, No. 43 Week of October 25, 2009
Providing coverage of Alaska and northern Canada's oil and gas industry

OK for Shell plan

MMS approves Beaufort Sea 2010 drilling if permitting requirements met

Alan Bailey

Petroleum News

On Oct. 19 Shell passed another major milestone in its multiyear quest to start exploration drilling on Alaska’s Arctic outer continental shelf, when the U.S. Minerals Management Service approved the company’s new Beaufort Sea exploration plan, a plan involving the drilling of two exploration wells during the 2010 open water season using a single drillship, the Frontier Discoverer.

“The Minerals Management Service is committed to developing offshore energy resources responsibly,” said MMS Director Liz Birnbaum. “Now that we have approved Shell’s plan and reached this important milestone, we will continue to work with Shell to ensure that all activities are conducted in a safe and environmentally responsible manner.”

Plan approval is subject to Shell obtaining all required permits and authorizations, including MMS permits to drill.

Scaled down

Shell’s exploration plan, much scaled-down in comparison with a now-withdrawn 2007-09 plan that had run aground on a barrage of litigation, envisages drilling one well in the company’s Sivulliq prospect and another well in the Torpedo prospect, both prospects being located on the west side of Camden Bay, north of the eastern end of the North Slope. The company has said that this limited two-well program, involving just a single drillship, takes account of concerns voiced in particular by North Slope communities, worried about the cumulative impact of offshore oil and gas activities on subsistence hunting and the marine environment.

According to MMS, Shell’s drilling would occur between July and October, but operations would cease during the fall subsistence bowhead whale hunts by the Native villages of Kaktovik and Nuiqsut. That break in drilling operations would start on Aug. 25 and would continue until the whale hunts end for the season; the drillship and all vessels involved in the drilling would proceed to the northwest or entirely leave the Beaufort Sea during the break, MMS said.

“This is another positive step towards the goal of drilling in 2010,” said Pete Slaiby, Shell’s Alaska general manager, in response to MMS approval of Shell’s plan. “There is still work to be done before we reach that goal, including obtaining all required permits and continued engagement with stakeholders. At this point we are still planning for success, and that means putting the blueprints in place for a successful open water season in 2010. We sincerely believe this exploration plan addresses concerns we have heard in the North Slope communities which have resulted in the programs being adjusted accordingly.

“These opportunities in the Beaufort Sea together with other opportunities in the Chukchi Sea have the potential to positively impact North Slope Borough residents, the State of Alaska and the nation in a material way.”

Efforts recognized

The North Slope Borough, one of a number of organizations that appealed MMS approval of Shell’s ill-fated 2007-09 Beaufort Sea plan, has recognized Shell’s efforts to scale back its planned operations, while still expressing caution about offshore safety and environmental protection.

“Shell made a substantial effort to reduce impacts and shrink the footprint of its 2010 exploration work in the Beaufort Sea, and I appreciate that,” North Slope Borough Mayor Edward Itta told Petroleum News Oct. 20 in response to the MMS announcement. “We will continue to work with them to achieve the safest possible operation in these sensitive waters. We’ll also be watching to see if state and federal regulators do their part in assuring safe operations too.”

But a raft of environmental organizations issued an Oct. 19 press release condemning the MMS decision.

“This decision is very disappointing,” said David Dickson, Western Arctic & Oceans program director at Alaska Wilderness League. “Once again, MMS approved a drilling plan without a full analysis of the potential consequences.”

“The reality of offshore oil drilling is that accidents will happen. And when oil spills in Arctic ice, there is no cleaning it up,” said Chuck Clusen, director, national parks and Alaska projects, at the Natural Resources Defense Council. “A blow-out like the one that recently despoiled waters off the coast of Australia would leave oil in the waters off the coast of the Arctic National Wildlife Refuge for decades, killing whales, seals, fish and birds and turning irreplaceable spawning and feeding grounds into an ecological wasteland.”

Announcement welcomed

On the other hand, Alaska’s two U.S. senators welcomed the MMS announcement.

“Today’s announcement from the Minerals Management Service, approving Shell’s plan of exploration for the Beaufort Sea, is an encouraging sign that Alaska’s oil and natural gas resources will continue to play a major role in America’s energy security,” said Sen. Lisa Murkowski. “… I will continue to work with the administration to ensure that environmentally responsible exploration is also allowed to move forward in the Chukchi Sea, and to secure revenue sharing for Alaska.”

“This decision shows Secretary Salazar and the Obama administration recognize the importance of Alaska’s abundant offshore oil and gas resources, and it brings us one step closer to environmentally responsible development offshore of Alaska,” said Sen. Mark Begich. “They are getting the balance right: including safeguards for important subsistence resources and allowing drilling to go forward.”

Shell has said that it sees its 2010 drilling plan as an opportunity to demonstrate safe drilling in the Arctic offshore. A minimum of six support vessels will provide ice management, anchor handling, oil spill response capability, refueling and the servicing of drilling operations.

The company has said that modern well planning, real-time monitoring and state-of-the-art drilling techniques make an oil spill during exploration drilling extremely improbable. However, a four-vessel oil spill response fleet accompanying the drilling operation will include the Endeavor oil spill response barge and a 500,000-barrel-capacity oil spill response tanker — the tanker will be stationed at a location within a 24-hour sailing time of the drilling operations, with the on-site response vessels having sufficient storage capacity to support an oil spill cleanup until the tanker arrives.

Permits needed

However, Shell must still obtain a U.S. Environmental Protection Agency air quality permit for its offshore operations. And, following litigation over minor air quality permits that it has obtained in the past for Beaufort Sea drilling, Shell has applied for a major air quality permit for its 2010 Beaufort Sea program. EPA is processing that application.

Shell has also said that it will make a $25 million modification to the Frontier Discoverer, to install catalytic reducers to scrub the engine exhaust and reduce the emission of pollutants from the vessel by more than 90 percent.

The company’s Beaufort Sea exploration plan is also undergoing a review by the Alaska Department of Natural Resources for consistency under the Alaska Coastal Management Program.

Shell is also planning to drill a single exploration well in the Chukchi Sea in 2010. The company has submitted a separate exploration plan for MMS approval, as well as applying for the appropriate permits, for its planned Chukchi Sea operation.

And time is of the essence for completion of the permitting for both the Beaufort and Chukchi Seas: The company has said that it needs it to be in a position to make a go-or-no-go decision on the 2010 drilling at the start of that year, given the expense and effort involved in ramping up for any Arctic outer continental shelf drilling activity.

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MMS has Shell’s Chukchi plan under review

The Minerals Management Service said in an Oct. 20 letter to Shell Offshore Inc. that it has reviewed the company’s 2010 exploration drilling program for the Chukchi and will make a decision within 30 calendar days on whether to approve, disapprove or require modification of the plan.

Shell said in the plan that it has identified seven lease blocks within three prospects — Burger, Crackerjack and Southwest Shoebill — for its 2010 Chukchi Sea exploration plan. The company said it has identified five possible drill sites, three in Burger and one each in Crackerjack and Southwest Shoebill.

If conditions are favorable, Shell said, it plans to drill exploration wells at three of the five sites, and said that to allow for operational flexibility, all five sites will be permitted for drilling in 2010.

See story in Nov. 1 issue.

—Petroleum News