Shell appeals decision not to extend leases

On Dec. 11 Shell appealed to the Department of the Interior over an October decision by the Bureau of Safety and Environmental Enforcement to deny a request for lease suspensions for the company’s Beaufort and Chukchi sea leases. The suspensions would, in effect, extend the terms of the leases by five years. The leases are currently due to expire between 2017 and 2020. In its request for lease suspensions, submitted in July 2014, Shell had argued that circumstance beyond its control, including regulatory restrictions, regulatory uncertainty, court challenges and the limited availability of appropriate drilling rigs had delayed its exploration efforts in the leases.

In September of this year, following disappointing drilling results in its Chukchi Sea Burger prospect, Shell announced that it was ceasing its multibillion-dollar exploration activities in offshore Alaska for the foreseeable future.

In its October ruling over Shell’s lease suspension request, BSEE said that, given Shell’s withdrawal from further drilling activities in the Chukchi or Beaufort seas, and given the lack of a plan for resuming or commencing leaseholder activities, Shell had not shown a justification for the lease suspension request.

In appealing that October ruling, with the appeal presumably heading for the Interior Board of Land Appears, Shell has obviously flagged its desire to hold onto its Alaska leases. But the company also says that it stands by its September decision to bring its Alaska exploration program to an end.

“We believe (lease) suspensions are warranted for reasons outlined in our original request submitted in July 2014,” Shell spokesman Curtis Smith told Petroleum News in a Dec. 15 email. “The appeal does not affect our recent decision to stop exploration offshore Alaska for the foreseeable future.”

- ALAN BAILEY