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Vol. 12, No. 33 Week of August 19, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Court nixes drilling

9th Circuit order kills Beaufort drilling this year, Shell reviewing options

Alan Bailey

Petroleum News

Shell has crossed several major hurdles in its attempt to start an exploration drilling program in the Beaufort Sea during the 2007 open water season. But the latest obstacle, an Aug. 15 court order from the U.S. Court of Appeals for the 9th Circuit, may well prove to be a showstopper — the court has extended a stay on Shell’s Beaufort Sea activities until the court has ruled on an appeal by the North Slope Borough and the Alaska Eskimo Whaling Commission against the U.S. Minerals Management Service’s approval of Shell’s Beaufort Sea exploration plan. MMS gave provisional approval of the plan in February.

Shell has been assembling a fleet of vessels, including the drillships Kulluk and Frontier Discoverer, to drill three wells in its Sivulliq prospect on the western side of Camden Bay.

Revised schedule

As part of its Aug. 15 order, the 9th Circuit Court of Appeals issued a revised schedule for the appeal case. That schedule says that opening briefs are due on Sept. 5, respondent’s answering brief is due Oct. 5, respondent-intervener’s brief is due Oct. 16 and petitioner’s optional brief is due Nov. 5. The court will “calendar this case with the first available panel during the week of Dec. 3, 2007, through Dec. 7, 2007,” the order says.

The drilling schedule in Shell’s exploration plan envisages Beaufort Sea drilling activities ending by early December, by which time winter ice will likely cover the ocean. So, the new schedule for the court case would seem to nix the possibility of Shell doing any drilling in 2007. The company had planned to start drilling in August.

Two other appeals against MMS approval of the Shell exploration plan are also progressing through the 9th Circuit Court of Appeals on the same schedule. One of those other appeals is from the Alaska Wilderness League, the Natural Resource Defense Council and the Pacific Environment and Resources Center. The other appeal is from Resisting Environmental Destruction on Indigenous Lands, the Center for Biological Diversity and the Sierra Club.

These environmental groups say that noise and the potential for oil spills from offshore drilling would threaten various marine animals. Earth Justice, a legal firm representing several of the groups, expressed satisfaction with the court’s decision.

“We’re pleased that the court is stopping these harmful activities,” Earth Justice attorney Deirdre McDonnel told Petroleum News Aug. 15.

But Shell is still assessing its options.

“The court has ruled and Shell will abide by the ruling,” Shell spokesman Curtis Smith told Petroleum News Aug. 15. “We will continue to comply with the court order and continue our engagement with the North Slope communities. We are still reviewing all implications of the decision for this year’s exploration plan.”

Meantime, Alaska Gov. Sarah Palin has expressed her concern at the court decision.

“I am very disappointed in the 9th Circuit Court of Appeals ruling blocking Shell Oil Company from drilling in the Beaufort Sea,” Palin said Aug. 15. “This is the second development project with costs exceeding $200 million to be blocked by an action by this court. Decisions such as these pose a threat to our economic future. Nevertheless, I remain committed to help responsible parties develop Alaska’s resources in a manner that protects our way of life.”

NSB opposition

The North Slope Borough has consistently opposed offshore development in the Beaufort and Chukchi seas because of the borough’s concerns about potential environmental impacts. Among other issues, no one has successfully demonstrated technologies for cleaning up an oil spill in Arctic waters, the borough has said in the past.

Mayor Edward Itta of the borough has said that the borough wants to work with industry to find solutions to the borough’s concerns but that industry is trying to move too fast into offshore developments that could impact the Native way of life, including subsistence hunting.

“We need you to understand that you cannot separate the ocean from us. … We are tied in intricately,” Itta has said.

And, without tax jurisdiction over the Alaska outer continental shelf, the borough has also said that it sees OCS oil and gas development as likely to disrupt subsistence hunting activities without bringing significant benefits to the North Slope communities.

Mitigation measures

Shell has been communicating with North Slope communities and planning for the mitigation of impacts on the natural environment and subsistence hunting.

In a February interview with Petroleum News, Rick Fox, Shell’s asset manager for Alaska, described some of the environmental mitigation measures that Shell plans in association with its Beaufort Sea activities.

Those measures include the deployment of passive acoustic arrays at intervals out from the coast, the use of about 70 locally recruited marine mammal observers, use of aerial wildlife monitoring and the operation of communications centers, manned by local residents, in all North Slope villages.

“The Alaska Eskimo Whaling Commission and Shell and various other parties during the season will be talking every day,” Fox said. “… We’re committed to good communications and constant dialogue with the people representing the whaling captains and with the agencies. … We’ll be adjusting and adapting all the time. … If communications are there you can work through a lot.”

And, although Shell has emphasized its oil spill and well blowout prevention measures, the company has commissioned a new oil spill response vessel to support its Beaufort Sea operations. According to the company’s oil discharge and prevention plan, the company’s Beaufort Sea spill response equipment inventory includes skimmers that Shell says are capable of removing oil from the sea in icy conditions.

Conflict avoidance agreements

On July 24, after months of negotiations, Shell signed a conflict avoidance agreement with the Alaska Eskimo Whaling Commission for the company’s 2007 open water exploration program. That agreement included a commitment by Shell to take measures to avoid disturbing the Cross Island hunt for bowhead whales near the drilling area. Under the agreement, Shell would only move one of its drill ships, the Frontier Discoverer, into the Sivulliq area prior to the Cross Island hunt. The Frontier Discover would cease drilling operations on Aug. 25, move out of the Sivulliq area within two days and return with the Kulluk drill ship after the end of the hunt, to continue the drilling program.

Hard on the heels of the signing of the conflict avoidance agreement came a final determination by Tom Irwin, commissioner of the Alaska Department of Natural Resources, that Shell’s Beaufort Sea exploration plan was consistent with the Alaska Coastal Management Plan. The North Slope Borough had challenged an initial consistency determination by Alaska’s Office of Project Management and Permitting.

But there’s no word yet on the outcome of an appeal by the North Slope Borough and several environmental organizations to the Environmental Appeals Board against Shell’s air quality permits, issued by the U.S. Environmental Protection Agency for the Beaufort Sea drilling.

And neither the National Marine Fisheries Service nor the U.S. Fish and Wildlife Service have yet issued authorizations to Shell for the accidental disturbance of marine mammals in the company’s Beaufort Sea program.



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