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Vol. 17, No. 23 Week of June 03, 2012
Providing coverage of Alaska and northern Canada's oil and gas industry

Shell preparing

Kulluk upgrade nearly complete as court rejects appeal over Beaufort plan

Alan Bailey

Petroleum News

Shell is continuing to progress its plans for drilling in Alaska’s Chukchi and Beaufort seas this year, bolstered by a May 25 decision by the U.S. Court of Appeals for the 9th Circuit to reject an appeal against the approval of the company’s Beaufort Sea exploration plan.

“It’s welcome news,” Shell spokesman Curtis Smith told Petroleum News May 29. “We were confident going into that particular (permitting) process, but any time the court validates the process that was used … it gives us tremendous confidence that we’re going to finally be drilling this year.”

On May 29 the 9th Circuit court rejected a parallel appeal against the approval of Shell’s Chukchi Sea exploration plan.

Also on May 29 the federal District Court in Alaska issued a revised injunction against Greenpeace, banning the environmental activist group from interfering with Shell’s vessels participating in the company’s planned 2012 exploration.

Meantime a nearly $100 million upgrade to the Kulluk, the floating drilling platform that Shell plans to use in the Beaufort, is almost complete, Smith said.

Capping and containment system

And Shell anticipates demonstrating its new well capping and containment system in Puget Sound within the next two to three weeks, he said. The new system, similar in concept to the technology used to finally seal the Macondo well in the Gulf of Mexico, forms part of Shell’s Arctic outer continental shelf oil spill prevention and response arrangements, with testing of the technology being required as part of the company’s approved oil spill contingency plan.

Shell has also applied to the Bureau of Safety and Environmental Enforcement for drilling permits for its planned wells, although the company does not anticipate decisions on those permits until after the capping and containment system demonstration, Smith said.

And an unusually heavy pack ice in the Chukchi Sea may delay Shell’s planned July 1 start for its Chukchi Sea operations.

“We are not going to break in,” Smith said. “We’re going to wait for that ice to move off naturally.”

BOEM approval upheld

In its May 25 ruling in the Beaufort Sea exploration plan appeal, a panel of three 9th Circuit judges said that the petitioners against Shell’s plan had failed to demonstrate that the Bureau of Ocean Energy Management, or BOEM, had erred in approving the plan. The petitioners, consisting of the Native Village of Point Hope and 10 environmental organizations, had claimed that Shell’s exploration plan had failed to reference an approved oil spill response plan; that it did not contain an adequate description of Shell’s new well capping and containment system; that it did not reconcile conflicting evidence concerning Shell’s capping and containment system and relief well plan; and that it was approved despite being subject to further as-yet unmet conditions.

Deferring to BOEM’s technical expertise in areas such as the adequacy of Shell’s explanation of its capping and containment system, the court found that the agency had complied with federal statutes and regulations in approving Shell’s plan.

The court presented similar arguments in denying the appeal against BOEM approval of Shell’s Chukchi Sea exploration plan.

Greenpeace injunction

The District Court’s new injunction against Greenpeace is an amended version of an injunction that the court issued in March, banning the environmental activist organization from occupying any of a list of 19 vessels that Shell plans to use. The injunction remains in force until Oct. 31. The original injunction only applied while the vessels are located in U.S. ports and waters, with the court deferring a ruling over whether court jurisdiction applies to the U.S. exclusive economic zone, or EEZ, and to certain facilities in the town of Barrow.

Shell’s planned drilling sites are in the EEZ, while the company will need to use onshore facilities in support of its operations.

The amended injunction extends the original injunction to include the EEZ, as well as to include a hangar and a passenger terminal at the Barrow airport. The court has also banned Greenpeace activists from the airspace below 3,000 feet within a half nautical mile of Shell vessels with helidecks, and from the same airspace around any other vessel when a helicopter hoisting operation is in progress.

At the end of April Greenpeace appealed the original injunction to the 9th Circuit Court, but that appeal has yet to be resolved.

In February a group of Greenpeace activists occupied the drillship Noble Discoverer in harbor in New Zealand, to try to prevent the drillship from leaving New Zealand for Alaska. Greenpeace has also tried to prevent the departure of the icebreaker Nordica from Finland to join Shell’s fleet.

Shell plans to use the Noble Discoverer for drilling in the Chukchi Sea.

The Kulluk

Shell’s floating drilling platform the Kulluk has been in Seattle since last summer undergoing a refit, in preparation for this year’s planned Beaufort Sea operations. The vessel now has four new main generator engines; new catalytic converters for cleaning engine exhaust; and a new system for recovering drilling mud and cuttings, Smith said.

The company originally refurbished the Kulluk after buying the vessel in Canada in 2006.

Shell needs the new system for dealing with mud and cuttings to comply with a commitment to remove Beaufort Sea drilling waste and waste water from the Arctic, rather than discharge the waste into the ocean, Smith explained. The new engines and catalytic converters will enable the Kulluk to meet the emissions limits set in its air quality permit.

Spill response exercises

Smith said that Shell has also been conducting on-water oil spill response training in Valdez, in readiness for its planned outer continental shelf operations.

And the company has held a spill response table-top exercise in Anchorage, to simulate the activation of its spill response plans. The company brought in Shell personnel for that exercise, which involved 250 people including personnel from the U.S. Coast Guard, the Bureau of Safety and Environmental Enforcement and the Alaska Department of Environment Conservation, Smith said. Shell also plans to conduct an on-water exercise in Valdez to demonstrate its oil spill response capabilities to regulatory agencies and the Coast Guard, he said.

Focused on drilling

Overall, with some court cases now having been resolved in its favor and various permits slotting into place, Shell is hopeful that its planned Alaska Arctic drilling can now proceed after several years of delay.

“We are totally focused on drilling this summer and we obviously feel good about that,” Smith said. “We feel that we’re as ready as we ever could be and now it’s time to get to work and start exploring.”

In addition to the unresolved appeal against Shell’s Chukchi Sea exploration plan, the 9th Circuit Court has yet to rule on two other appeals: an appeal over the air quality permit for the Noble Discoverer drillship and an appeal against the legality of the Chukchi Sea lease sale in which Shell purchased its leases.

And Shell has filed lawsuits in the federal District Court in Alaska to pre-empt further appeals by asking that court to rule on the validity of Shell’s oil spill response plans and on the validity of authorizations issued by the National Marine Fisheries Service for the incidental disturbance of marine mammals.

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Average Arctic ice extent in April

Shell has been commenting that unusually heavy ice in the Chukchi Sea may slightly delay the start of its planned drilling operations in that sea this summer.

Meantime, the National Snow and Ice Data Center has reported an April Arctic sea ice extent that is close to the average for the 34 years since satellite ice observations began. But, although at first sight this recent data might appear to buck the trend towards an ever shrinking Arctic ice cap, the center cautioned that a plot of April data over that 34 year period still indicates an ice cover decline at a rate of 2.6 percent per decade. And although this year’s ice cover is relatively broad, the ice is relatively thin, so that the ice will likely melt quite quickly as Arctic temperatures rise during the spring and summer.

The center attributes this April’s relatively large sea ice extent to a combination of unusually low temperatures and persistent winds that pushed the ice south. The April ice cover in the Bering Sea was especially extensive, the center said.

—Alan Bailey