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Obama Administration Asks to Revise EIS for 2008 Chukchi Lease Sale

The Obama administration, joined by Royal Dutch Shell plc, has asked an Alaska district court to allow the U.S. Department of Interior to revise an environmental impact statement (EIS) used to support the Chukchi Sea lease sale in 2008.

The U.S. Court of Appeals for the Ninth Circuit in January ruled that Chukchi Sea Lease Sale 193 held in 2008 may have used inadequate information regarding available reserves and environmental risks (see Daily GPI, Jan. 23; Feb. 8, 2008). The ruling reinstated a 2008 ruling against the government that favored several conservation groups and Alaska stakeholders.

The Justice Department earlier this month filed a request with the U.S. District Court for the District of Alaska proposing to remand the matter to Interior's Bureau of Ocean Energy Management (BOEM) for analysis. Justice also asked that BOEM be allowed to review drilling requests in connection with the 2008 lease sale. Shell lawyers backed the request, indicating the producer wanted to provide the "best approach for a thorough, yet expeditious remand process that would preserve the possibility of a 2015 drilling season."

The Ninth Circuit ruled earlier this year that the 1 billion bbl estimate of oil reserves in Chukchi that was part of the EIS was "chosen arbitrarily" and claimed federal officials didn't provide an "adequate explanation" for its selection. Of the estimated $2.7 billion received in high bids for the 2008 sale, Shell submitted close to $2 billion. ConocoPhillips' high bids totaled $1.1 billion; offers also were made by Repsol E&P USA Inc., Eni Petroleum U.S. Inc. and Statoil USA E&P Inc.

Shell to date is the only producer that has conducted a short-lived summer exploration program in Chukchi regarding the 208 leases. ConocoPhillips and Statoil also are working together on federal approval to begin exploration. Neither Shell nor ConocoPhillips plan to drill this summer offshore Alaska.

Shell in its brief supporting the Justice proposal noted that nongovernmental organizations have filed almost 20 different actions to directly target and prevent the producer from offshore exploration in Alaska. The producer "has now begun planning for its 2015 season in the event the [BOEM] reaffirms the lease sale" for 2008. "However, as this court is familiar, planning and contracting for an Arctic exploration season is a time-consuming and costly process, and the costs increase as the season approaches...For that reason, every day leading up to the season is critical."

Separately, Shell on Wednesday issued its annual sustainability report, assuring shareholders that its safety and management operations are stronger than ever. The report came a week after the U.S. Coast Guard criticized Shell over its handling of the 2012 New Year's Eve grounding of its Alaska-focused drillship Kulluk (see Daily GPI, April 4). The sustainability report includes comments by Shell Executive Vice President Ann Pickard, who helms Arctic operations.

Shell has improved its "containment system, detailed contractor management procedures, focused audit and review plans," Pickard said. The producer today "is better prepared for any spill than any other company in the world...No other company has ever deployed immediate, onsite response resources similar to ours." Alaska's Chukchi and Beaufort seas are "among the most promising undeveloped hydrocarbon basins in the United States."

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