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With Decision, Shell Eyes Offshore Alaska in 2012
The U.S. Department of Interior (DOI) has filed its record of decision (ROD) on a 2008 federal oil and natural gas lease sale in the Chukchi Sea offshore Alaska, affirming the sale to Shell Oil Co. over the objections of challengers.
Meanwhile, a U.S. affiliate of Royal Dutch Shell plc is hopeful that the federal government will allow it to begin drilling for oil and natural gas in the Alaskan Outer Continental Shelf (OCS) next year, and believes that moving forward with exploration and production would boost the Trans-Alaska Pipeline and make the case for construction of a pipeline to transport natural gas.
The DOI’s decision affirms the sale of 487 leases covering 2.8 million acres under Lease Sale 193. In that sale Shell paid $2.1 billion for leases. However, the sale was challenged by environmentalist groups and affected Alaskans, which maintained that the Minerals Management Service [predecessor to today’s Bureau of Ocean Energy Management (BOEM)] failed to follow the law on environmental requirements.
The ROD affirms the lease sale but does not grant approval for operations to begin in the Chukchi Sea. Despite this, Pete Slaiby, vice president of Shell Alaska, told attendees at the United States Energy Association’s Annual Energy Supply Forum in Washington, DC, that the company hoped to begin drilling in the Beaufort and Chukchi seas in 2012.
“There is a prize there,” Slaiby said, adding that Shell believes the Alaskan OCS holds 25 billion bbls of oil and 127 Tcf of natural gas. “The offshore is hugely significant in the Alaskan gas story and in any kind of pipeline project. These are all molecules that will be essential to anybody making the big bet on a potential pipeline [to transport natural gas].”
Slaiby said the company has a predominant position in Alaska — with 275 leases in the Chukchi Sea and 137 leases in the Beaufort Sea — making Shell the largest leaseholder in the Alaskan OCS. He added that the company’s drilling plan for 2012 is to drill up to three wells in the Chukchi and up to two wells in Beaufort, with two drilling rigs working in parallel.
Shell was awarded conditional approval by the DOI to drill up to four exploratory wells over two years in the Beaufort Sea, where it has invested more than $3.5 billion in leases and predevelopment (see NGI, Aug. 8).
Under the ROD all of the leases are subject to a series of conditions to mitigate operational and environmental risks, including protection of biological resources; orientation programs to familiarize personnel with environmental, social and cultural issues; environmental requirements regarding the placement of pipelines; precautionary action to mitigate potential oil spill impacts; and measures to minimize the effects to Spectacled and Steller’s eiders, BOEM said.
Lease Sale 193, held in February 2008, was contested in U.S. District Court. In 2010 the court remanded the sale to the bureau to address specific concerns related to the National Environmental Policy Act (NEPA) analysis conducted prior to the sale. The then-Bureau of Ocean Energy Management, Regulation and Enforcement completed a supplemental environmental impact statement (SEIS) last August.
The SEIS, in accordance with the court order, provides additional analysis to supplement the NEPA review originally completed in 2007 for Lease Sale 193, BOEM said. The bureau analyzed the potential impacts of natural gas development and further reviewed the relevance and importance of information identified as missing or unavailable in the 2007 analysis. The SEIS also analyzed the environmental impacts of a hypothetical “very large oil spill scenario” in light of the 2010 Deepwater Horizon well blowout in the Gulf of Mexico.
BOEM has also required specific mitigation measures for the corridor of leases closest to the coastline, including a corridor 52 miles from the shore in which no lease activity will take place, a site-specific monitoring program to assess behavioral effects on a number of marine mammals and polar bears, and conflict-avoidance mechanisms to protect subsistence harvesting activities, it said.
“We would not be in Alaska if we did not believe we could do it safely,” Slaiby said. “We have been there before. We were the largest operator on those offshore wells in the 80s and 90s and we believe that we can repeat the success we had.”
The Environmental Protection Agency recently issued the final air quality permits necessary for Shell to conduct oil and gas exploration drilling in Alaska’s Arctic region (see NGI, Sept. 26).
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