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Shell Receives Fed's OK -- With Conditions -- to Begin Summer Exploration Offshore Alaska

The Department of Interior's Bureau of Safety and Environmental Enforcement (BSEE) on Wednesday granted a Royal Dutch Shell plc unit conditional approval of two permits for limited exploratory drilling activities in the Chukchi Sea offshore Alaska, but it is limited to drilling only the top sections of wells and barred -- for now -- from drilling into oil-bearing zones.

"Shell currently is not permitted to drill into oil-bearing zones because to do so BSEE requires that a capping stack be on hand and deployable within 24 hours," said Director Brian Salerno. The capping stack is emergency response equipment designed to shut in a well in the event of a loss of well control. Shell's capping stack, N/V Fennica, was damaged en route to Alaska and was re-routed to Portland, OR for repairs.

"If and when the M/V Fennica is capable of being deployed in the Chukchi Sea and Shell is able to satisfy the capping stack requirement, the company may submit an application...and request to have this restriction reconsidered," BSEE noted.

"Without question, activities conducted offshore Alaska must be held to the highest safety, environmental protection, and emergency response standards," said Salerno. "Without the required well control system in place, Shell will not be allowed to drill into oil-bearing zones. As Shell conducts exploratory activities, we will be monitoring their work around the clock to ensure the utmost safety and environmental stewardship."

Receiving the permits “signals the completion of the permitting process and allows us to resume exploration at our Burger prospect in the Chukchi Sea,” spokeswoman Kelly op de Weegh told NGI. “Once we have determined the area is clear of sea ice, support vessels are in place, and the Polar Pioneer is safely anchored over the well site, drilling will begin. We remain committed to operating in a safe, environmentally responsible manner and look forward to evaluating what could potentially become a national energy resource base.”

Federal officials have “confirmed that drilling can proceed without the capping stack so long as it does not extend into hydrocarbon zones,” she noted. “Having the Fennica vessel and the capping stack in the area, while exploring hydrocarbon zones, is a condition of our approved exploration plan. At this time, the Fennica should be in the Chukchi when it is required and before we will drill into hydrocarbon zones.”

In addition to restricting Shell's ability to work in oil-bearing zones, the applications for permits to drill, or APDs, also define limitations related to marine mammal protection that are required by the U.S. Fish and Wildlife Service (USFWS). A USFWS letter of Authorization (LOA) issued in late June requires Shell to maintain a minimum spacing of 15 miles between active drill rigs during exploration activities to avoid significant effects on walruses in the region (see Daily GPI,July 1).

"Under the limited permits granted...Shell may proceed with drilling the top sections of two wells at the Burger Prospect, Burger J and V as described in the company's exploration plan (EP), which are located less than 15 miles apart," BSEE noted. "As such, Shell is prohibited from conducting simultaneous drilling activity at these wells. Specifically, Shell must plug and abandon the top section of the first well before proceeding with any drilling activity at the second well site."

The Burger prospect is in about 140 feet of water, 70 miles northwest of the village of Wainwright. Shell first plans to explore the Burger J exploration prospect, said op de Weegh. “This is an important approval...and we look forward to advancing exploration in the weeks ahead,” she added.

Under the LOA, Shell is required to have trained wildlife observers on all drilling units and support vessels to minimize impacts to protected species. In addition, Shell has to stay within "explicitly outlined vessel operating speeds and report daily regarding all vessel transits," BSEE noted.

"The APDs were approved only after careful review of the adequacy of Shell's ice management plans in the absence of the M/V Fennica as well as the consistency of the plans with protections in place for marine mammals," said federal officials. "In addition to redundancy provided by other ice management support vessels, Shell will employ aerial reconnaissance over flights, satellite imagery and other measures to monitor ice floes to fulfill the operational goals of the ice management plan in terms of early detection and site safety. The use of these enhanced technologies will allow Shell to meet its operational requirements for ice management, while conforming to the Hanna Shoal Walrus Use Area restrictions identified by the USFWS."

BSEE's review of the APDs also included a "thorough analysis" of information submitted by Shell that included well casing design, equipment design, testing procedures, safety protocol, third party certifications of key equipment and rig information for technical adequacy, safety, and environmental compliance. Shell was required to address issues and inadequacies before the APDs were approved.

BSEE safety inspectors plan to be onboard the drilling units Noble Discoverer and Transocean Polar Pioneer 24 hours a day, seven days a week "to provide continuous oversight and monitoring of all approved activities." If required, the inspectors could shut down all activities.

Officials said their "close oversight of drilling operations in the Chukchi Sea this year is consistent with its continuing efforts over the past five years to upgrade safety standards to improve the safety of offshore oil and gas development." In addition, they noted that they are "building on the lessons" learned from Shell’s 2012 drilling operations in the offshore Arctic and incorporating recommendations by the Interior Department.

The Bureau of Ocean Energy Management, BSEE's sister agency, in May provided conditional approval of Shell's Arctic drilling program and established several safety requirements to be met before Shell could drill into oil-bearing zones.

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