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BOEM Grants Shell Conditional Approval for Chukchi Drilling

The Interior Department's Bureau of Ocean Energy Management (BOEM) gave conditional approval Monday for a subsidiary of Royal Dutch Shell plc to explore Alaska's Chukchi Sea and drill up to six offshore wells, after concluding a 30-day review of the project.

In a letter, BOEM Regional Supervisor David Johnston outlined a list of 18 conditions that Shell Gulf of Mexico Inc. must meet in order to drill in the Burger prospect, located in the shallow waters of the Chukchi Sea Outer Continental Shelf off the northwest coast of Alaska. The list includes a requirement that Shell obtain all necessary state and federal permits, including from the Bureau of Safety and Environmental Enforcement and other authorizations under the Marine Mammal Protection Act.

Shell will also be barred from commencing drilling operations until all biological opinions under the Endangered Species Act have been issued, and its operations must comply with the terms and conditions established in those opinions.

"We have taken a thoughtful approach to carefully considering potential exploration in the Chukchi Sea, recognizing the significant environmental, social and ecological resources in the region and establishing high standards for the protection of this critical ecosystem, our Arctic communities, and the subsistence needs and cultural traditions of Alaska Natives," BOEM Director Abigail Ross Hopper said in a statement Monday. "As we move forward, any offshore exploratory activities will continue to be subject to rigorous safety standards."

Shell first filed plans to explore the Chukchi in May 2009, but submitted a revised exploration plan in March, the same month Interior upheld a disputed federal oil and natural gas auction that was held in 2008 (see Daily GPIMarch 31). Shell was awarded most of the leases in that auction. The super major made bids totaling $2.1 billion, but has spent an estimated $7 billion on its Alaska offshore program, which so far has yet to create any commercial production (see Daily GPIApril 10).

The revised exploration plan calls for Shell to drill up to six wells in the Burger Prospect, in approximately 140 feet of water about 70 miles northwest of the village of Wainwright, AK. Specifically, Shell plans to drill in Posey Area Blocks 6714, 6762, 6764, 6812, 6912 and 6915, at Drill Sites F, S, A, R, J and V, respectively. All of the blocks are located within the territorial waters of Chukchi Sea Lease Sale 193. Shell plans to deploy the ship Discoverer and the semisubmersible Polar Pioneer to perform the drilling.

"The review of this exploration plan was a team effort," said BOEM Alaska Regional Director James Kendall. "We'd like to thank the experts in our cooperating agencies, the tribal government representatives who took time out from their busy schedules to do government-to-government consultations and of course the many members of the public and stakeholder organizations who provided us with valuable comments during the review process."

Shell spokesman Curtis Smith told Daily GPI that BOEM’s approval “is an important milestone and signals the confidence regulators have in our plan. However, before operations can begin this summer, it’s imperative that the remainder of our permits be practical, and delivered in a timely manner.

“In the meantime, we will continue to test and prepare our contractors, assets and contingency plans against the high bar stakeholders and regulators expect of an Arctic operator.”

U.S. Sen. Lisa Murkowski (R-AK), who chairs the Energy and Natural Resources Committee, applauded BOEM’s decision.

“Interior’s approval of the exploration permit is a key step, but more needs to be done in the coming weeks to ensure that Shell’s exploration program proceeds this summer,” Murkowski said Monday. “There is a total of seven permits that Shell must receive before it can resume drilling.

“Continued collaboration by the responsible federal agencies to ensure those outstanding permits are not saddled with unworkable conditions will be critical. With this latest milestone, I am cautiously optimistic and stand ready to continue working with the agencies to ensure exploration is conducted safely for the maximum benefit of Alaskans and our nation.”

Environmental groups voiced disappointment over the decision.

“Once again, our government has rushed to approve risky and ill-conceived exploration in one of the most remote and important places on Earth,” Susan Murphy, deputy vice president for the environmental group Oceana, said in a statement Monday. “Shell’s need to validate its poorly planned investment in the U.S. Arctic Ocean is not a good reason for the government to allow the company to put our ocean resources at risk.

“Shell has not shown that it is prepared to operate responsibly in the Arctic Ocean, and neither the company nor our government has been willing to fully and fairly evaluate the risks of Shell’s proposal.”

The current estimated recoverable oil and gas in Chukchi is 4.3 billion boe, four times more than in 2008 (see Daily GPINov. 3, 2014).

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