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BOEM Approves Eni's Plans to Drill Four Test Wells in Beaufort Sea

The Interior Department's Bureau of Ocean Energy Management (BOEM) gave conditional approval for a subsidiary of Italy's Eni SpA to drill four exploratory wells on an artificial island in the Beaufort Sea, on leases the company acquired back in 2005.

BOEM said its staff spent 30 days "carefully evaluating" an exploration plan by Eni US Operating Co. Inc., which calls for drilling the wells on Spy Island, one of four artificial islets in Alaska's offshore. The bureau said an environmental assessment (EA) of Eni's plan, which the company submitted in June, found no significant impact to the environment.

"Eni brought to us a solid, well-considered plan," said Walter Cruickshank, BOEM's acting director. "We know there are vast oil and gas resources under the Beaufort Sea, and we look forward to working with Eni in their efforts to tap into this energy potential."

Eni acquired 104 exploration leases in northern Alaska from Armstrong Oil & Gas for an undisclosed amount in 2005. At the time, the company said the leases held more than 170 million boe.

On its website, Eni says it holds interests in 43 exploration and development blocks in Alaska, of which Eni is the operator for 27 blocks. The company serves as operator and holds a 100% working interest (WI) in the Nikaitchuq field, which the four new wells will target. Eni also owns a 30% WI in the Oooguruk field. Net production from both fields totaled approximately 24,000 b/d in 2016, the company said.

According to the BOEM, Eni will only conduct drilling during the winter months. The drilling is scheduled to begin in December. The bureau said Eni must still meet 13 conditions before it can commence drilling, including obtaining approval of an oil spill response plan from Interior's Bureau of Safety and Environmental Enforcement (BSEE).

The company must also obtain approval from the Alaska Department of Environmental Conservation over a revised oil discharge prevention and contingency plan, as well as an application for permit to drill from the BSEE.

In a separate statement, the Center for Biological Diversity (CBD) said Eni's leases would have expired at the end of the year had the company not acted on them. The environmental group also criticized the Trump administration for only providing 21 days for the public to review and comment on the company's plans, and 10 days to comment on scoping for the EA.

"Approving this Arctic drilling plan at the 11th hour makes a dangerous project even riskier," said Kristen Monsell, an attorney with the CBD. "An oil spill here would do incredible damage, and it'd be impossible to clean up. The Trump administration clearly cares only about appeasing oil companies, no matter its legal obligations or the threats to polar bears or our planet."

Before leaving office, then-President Obama removed the Beaufort and Chukchi seas from the BOEM's five-year offshore oil and gas leasing program last November. The next month, Obama withdrew 115 million acres of the Arctic Ocean from future oil and gas leasing, but the withdrawal did not include existing leases or nearshore areas of the Beaufort Sea. Eni's leases were also not included in the withdrawal.

Last April, President Trump signed an executive order (EO) calling for annual lease sales in the Western Gulf of Mexico (GOM), Central GOM, Beaufort Sea, Chukchi Sea, Cook Inlet, Mid-Atlantic and South Atlantic planning areas. A coalition of environmental groups, including the CBD, sued over the EO in May.

Spy Island, located about 15 miles northwest of Prudhoe Bay, is one of four oil- and gas-producing artificial islands in the shallow waters of the Beaufort Sea. The others are Northstar, Endicott and Oooguruk islands.

Endicott and Northstar islands were completed by Alaska Interstate Construction LLC in 1987 and 2000, respectively, and were subsequently used by units of BP plc and Hilcorp to produce North Slope oil, targeting the Endicott and Northstar oilfields. Hilcorp purchased all of BP's interests in Endicott and Northstar in 2014.

Meanwhile, Pioneer Natural Resources Co. completed Oooguruk Island in 2008, then sold its Alaska unit to Caelus Energy Alaska LLC in 2013. Oil began to flow from Spy Island in 2011.

In December 2015, Hilcorp proposed building a fifth artificial island, which would be called Liberty Island, about 15 miles east of Prudhoe Bay in Foggy Island Bay. The water depth at the construction site is about 19 feet. BOEM said Hilcorp's proposal to build Liberty Island was still under review by federal agencies.

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