Shell defers drilling plan to 2012; still needs air quality permit

Faced with continuing permitting uncertainty following the Environmental Appeals Board remand of the U.S. Environmental Protection Agency’s air quality permit for its planned Beaufort Sea drilling, Shell has abandoned its plan to drill in the Beaufort in the summer of 2011, deferring that plan into 2012.

“This is not an environmental issue,” said Pete Slaiby, vice president for Shell Alaska, in a Feb. 3 media briefing about Shell’s drilling decision. “We have made significant and voluntary capital improvements in the air emissions technology we have applied to the entire (drilling) program that will allow us to have almost no material impact on the Arctic air shed. It is an issue of processing a permit application in a timely way. We have been in this process, trying to achieve an air permit, now for five years.”

Slaiby said that as a result of the deferral of its Beaufort Sea drilling, Shell expects to farm out in 2011 most of the assets earmarked for the drilling operation.

800 jobs

The 2011 drilling program would have resulted in about 800 jobs in Alaska, while deferral of the program will further delay the prospect of bringing more oil into production, delaying the creation of thousands more jobs in the future, Slaiby said.

In October Shell applied to the Bureau of Ocean Energy Management, Regulation and Enforcement for an application to drill a single well in its Beaufort Sea Sivulliq prospect in 2011. BOEMRE is still processing that application together with a revised version of Shell’s Beaufort Sea exploration plan — the agency has also been conducting a supplemental environmental assessment for Shell’s plan.

“We’re working very, very well with the BOEMRE,” Slaiby said. “They’re not only working on that (the supplemental environment assessment), they’re working judiciously right now on our application for a permit to drill. So we’re guardedly optimistic that we’re going to see all this work fall into place with the BOEMRE.”

But Shell also needs an EPA permit for air emissions from the Beaufort Sea drilling operation.

Litigation

In 2009, following litigation over a previous attempt to obtain air permits for Arctic outer continental shelf drilling, Shell applied for major permits rather than minor permits for its planned Chukchi Sea and Beaufort Sea drilling in the summer of 2010. But following issuance of these permits by EPA in April 2010, the Native Village of Point Hope and eight environmental organizations, including Resisting Environmental Destruction on Indigenous Lands (or REDOIL), appealed the permit approval to the Environmental Appeals Board, the panel of judges with final authority over EPA decisions.

On Dec. 30 the Environmental Appeals Board remanded Shell’s Beaufort Sea permit back to EPA, finding fault with the EPA definition of a stationary emissions source and saying that the permit should have taken account of a new rule for the emissions of nitrogen oxides. The EAB rejected one of the other arguments against the permit but also said that it had not reached any view on several other claims in the appeal.

On Jan. 21 EPA filed a petition with the EAB, requesting some clarification of EAB’s Dec. 30 ruling and asking the EAB to either rule on all claims in the appeal or to exclude the unresolved claims from the remand of the permit. EPA is concerned that the lack of resolution of all appeal claims will lead to continuing delays in the permitting process.

“We maintain that the board’s remand order erred in its treatment of the other issues addressed in this case and that, if left unaddressed, these errors will lead to further uncertainty, inefficiency and delay in resolving the Shell OCS-PSD Permits,” EPA wrote in its petition.

And in the interests of dealing with the permit in an expedient manner, EPA also requested a ruling that any appeal over the revised permit should proceed direct to federal court, rather than go back to the EAB.

—Alan Bailey

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Begich, Murkowski, Young, Parnell slam feds

All released statements critical of the Obama Administration and the U.S. Environmental Protection Agency.

“I put the blame for this squarely on the EPA and the Obama Administration who have taken virtually every opportunity to block responsible development of Alaska’s resources,” said Sen. Mark Begich, a Democrat.

“The actions taken by this administration will result in all of us paying more for gasoline — not to mention the loss of jobs and revenue that responsible development bring,” said Sen. Lisa Murkowski, a Republican.

Congressman Don Young, a Republican, said: “We are making it near impossible for companies to do business in the U.S.; where’s the incentive? It is absurd and foolish and completely indicative of an Administration that has no interest in responsible resource development or a thriving economy.”

Alaska Gov. Sean Parnell, a Republican, speaking at a press availability, called it “just another example of the federal government dragging its feet, killing jobs and making us even more reliant on oil from the Middle East and elsewhere, where as we can see from the situation in Egypt it’s very unstable.”

Begich said he has “talked to EPA Administrator Lisa Jackson multiple times, and will continue to make the case for Shell to be able to move forward with exploration.” He said Shell hopes to get the air permits it needs for 2012, and said he would continue to work with the company and EPA to make that happen.

“It is shameful to see another season lost,” Begich said.

Murkowski, the ranking member of the Senate Energy and Natural Resources Committee, said, “The EPA’s refusal, or simple inability, to issue key permits in a timely fashion is indefensible,” and called on the administration to review EPA’s handling of Shell’s permit applications.

She said the inability of the federal government “to process a straightforward air permit calls into question its willingness to support a rational energy policy.”

Young said “any attempt at project development is shut down by the EPA,” called the administration’s talk about jobs just lip service and said the country is being crippled. “They won’t be happy until we’ve run all business out of the country and we’re back to traveling on dirt roads in covered wagons.”

“It’s unfathomable that a company … can buy federal leases but can’t get onto them,” Parnell said. “It’s also unfathomable that they cannot get an air permit after five years of time that they can get in the Gulf of Mexico in a matter months.”

—Kristen Nelson