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Vol. 23, No.16 Week of April 22, 2018
Providing coverage of Alaska and northern Canada's oil and gas industry

AEX leases extended

BSEE grants suspension of operations for 21 expiring Beaufort Sea leases

Alan Bailey

Petroleum News

The federal Bureau of Safety and Environmental Enforcement has agreed to defer the expiration of Beaufort Sea leases that Arctic Slope Regional Corp. Exploration acquired from Shell in 2016. The leases, in the Camden Bay region of the Beaufort, comprise the 20-lease Taktuk unit and one additional lease. Most of the leases had been due to expire around October 2017, but AEX had requested a suspension of operations, in particular on the grounds that an environmental analysis of proposed offshore operations is needed.

A suspension of operations puts leases on hold, pending completion of some agreed work program at a future date.

Under the terms of the approval, AEX must report quarterly to BSEE, to demonstrate that the company is meeting required milestones in the company’s schedule of environmental work. The company must file an exploration plan with the Bureau of Ocean Energy Management in 2023, BSEE says.

Known prospects

Camden Bay straddles an area north of the boundary between state North Slope land and the Arctic National Wildlife Refuge. The Sivulliq and Torpedo oil prospects are both in the western part of the bay, approximately north of the Point Thomson field. According to BSEE documentation, the Taktuk unit includes the Sivulliq prospect, which was previous called Hammerhead. Sivulliq contains a known, modest-sized oil pool penetrated by the Hammerhead Nos. 1 and 2 wells, drilled by Unocal in 1985 and 1986.

In 2012 Shell started drilling an exploration well at Sivulliq but was only able to complete the top hole section of the well, because a containment dome required for spill response contingencies was not available in time for drilling into hydrocarbon bearing zones.

In November 2016, after Shell had abandoned its Beaufort Sea exploration program, AEX acquired 21 leases from Shell, all on the federal outer continental shelf of the Camden Bay area, about 8 to 25 miles off the coast of the North Slope. And in February 2017 AEX filed requests to BSEE to unitize the leases and to obtain a suspension of operations approval.

In July 2017 BSEE approved forming 20 of the 21 leases into the Taktuk unit. The agency did not allow one lease on the eastern side of the lease block to be included in the unit, because, the agency said, AEX had not submitted sufficient seismic data to warrant including the lease in the unit.

The case for suspension

AEX argued for a suspension of operations on the grounds that further environmental analysis is needed for potential offshore operations, and that the suspension would be in national and national security interests. National interests include a mandate for the expeditious and orderly development of OCS resources, and the need to address declining oil throughput in the trans-Alaska pipeline, AEX said.

BSEE rejected the argument that national interests justify a suspension - the national interest line of argument only applies to a situation where development is planned following an oil discovery, the agency said. And national security issues are not at play, since resources in the leases have no relevance to any war, national emergency or national defense requirement, the agency said.

Work schedule filed

However, BSEE did uphold AEX’s claim of the need for further environmental analysis, saying that AEX had provided descriptions of the environmental work to be carried out, including a schedule of proposed activities.

“No wells have been successfully drilled in this area for approximately 30 years,” BSEE wrote. “BSEE acknowledges the unique challenges to OCS exploration presented by the extreme environmental conditions, sensitive and vibrant ecosystems, lack of existing infrastructure, the presence and migration patterns of protected marine mammals, and cultural and socioeconomic resources present in the Arctic.”

BSEE also commented on the impact of seasonal sea ice on the carrying out of offshore activities.

And AEX’s desire to carry out a thorough environmental analysis work program also provides justification for approving the suspension of operations, BSEE said. Regulations for an approval of this type require a schedule of work that will be carried out while the suspension is in effect - AEX’s proposed work schedule increases the likelihood that oil and gas exploration will occur in the area of the leases safely and in an environmentally and culturally responsible manner, BSEE said.

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