July 20, 2007 --- Vol. 13, No. 66July 2007

9th Circuit Court of Appeals stays Shell Beaufort Sea drilling plan

On July 19 the U.S. Court of Appeals for the 9th Circuit temporarily stayed the U.S. Minerals Management Service approval of Shell’s exploration plan for the Beaufort Sea. The North Slope Borough and the Alaska Eskimo Whaling Commission have appealed the MMS approval — the court wants time to resolve a motion by the borough and AEWC to suspend the exploration plan until the court rules on the case.

Shell had planned to start drilling the Sivulliq prospect, formerly Hammerhead, on the western side of Camden Bay, at some time after Aug. 1. But the court has ordered Shell to suspend its Beaufort Sea exploratory drilling program until the court resolves the motion.

“Vessels currently located in the Beaufort and Chukchi Seas shall cease all operations performed in furtherance of that program, but need not depart the area,” the court said.

The court is expediting resolution of the motion and has scheduled oral arguments for Aug. 14. Meantime the court has ordered the parties in the case to file statements regarding the status of some environmental mitigation measures. Those measures include incidental harassment authorizations from the National Marine Fisheries Service and the U.S. Fish and Wildlife Service, and a site-specific bowhead whale monitoring program. The court also wants MMS’s final determination of the adequacy of Shell’s measures to avoid conflicts with subsistence hunting “in the light of the parties’ failure to reach a Conflict Avoidance Agreement.”

“We had to do something,” North Slope Borough Mayor Edward Itta said in response to the court order. “When the bowheads are forced to go farther offshore, our whalers are put at greater risk out in the Arctic Ocean. We stand the chance of losing our whaling crews and the traditional food that feeds our families.”

And the borough said that MMS had approved Shell’s exploration plan “over the objections of its own scientists, who concluded that the exploration activities would threaten bowhead whales and endanger the lives of the subsistence hunters.”

MMS maintains that has taken the appropriate actions to ensure safe and environmentally responsible offshore exploration.

“MMS diligently performs all appropriate environmental reviews and meets all statutory requirements when preparing for any offshore leasing activity,” MMS spokeswoman Robin Cacy told Petroleum News July 20. “MMS will continue to work closely with all constituents and maintains a strong commitment to safe energy production.”

Two other appeals, both by groups of environmental organizations, against MMS approval of the Shell exploration plan are going through the 9th Circuit Court of Appeals. The court has issued a consolidated briefing schedule for all of the cases. That schedule indicates that the court will not rule on the cases until at least early October.

FEX to shoot Smith Bay seismic next winter, evaluate prospects

Tim England, senior manager of exploration for Calgary based Talisman Energy, says the company’s Alaska subsidiary FEX will be acquiring new 3-D seismic in the Smith Bay area this winter.

FEX, which drilled three exploration wells south of Smith Bay in the Northwest planning area of the National Petroleum Reserve-Alaska this past winter, has a “two-fold” purpose for the $25 million seismic program, England told Petroleum News July 20.

“One, we’re looking to complete our subsurface coverage over existing discoveries and, two, if we get a good ice year, we’ll continue to shoot into Smith Bay,” where the company has State of Alaska leases.

In addition to shooting new seismic on and offshore Smith Bay, FEX will be evaluating technical data on all of its five project areas in northern Alaska this coming year, with the goal of identifying drillable prospects for the following winter’s drilling season.

When asked where FEX was most likely to drill in the winter of 2008-09, England said, “It’s difficult to know without a crystal ball, but the focus of our effort is currently in NW NPR-A. We need to complete our evaluations of the other areas as well and build up the subsurface picture to recommend the next phase in exploration of those leases. That may be acquiring more seismic or going straight to the drilling stage. In the exploration game we develop the rationale and the arguments to support a proposal to drill and then the company acts on it” if the investment stacks up against opportunities elsewhere in the world.

FEX, which recently announced it and NPR-A partner Petro-Canada Alaska had two significant oil discoveries in NW NPR-A, is “very excited about getting back to the area” with testing and drilling equipment. “We’re very excited about Smith Bay, but that doesn’t preclude drilling in other parts of NPR-A or the North Slope,” England said.

To date, FEX has invested $185 million in drilling and seismic and acquired more than 950,000 net acres in northern Alaska since entering the state as Fortuna Exploration in 2003.

Editor’s note: See full stories in July 29 issue of Petroleum News.

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