Obama Auctions Alaska's Oceans to Shell Oil -- As Shell Knew He Would
April 3, 2015
Jennifer A. Dlouhy / FuelFix.com
The Obama administration has delivered a major victory to Shell Oil Co. by approving plans to resume exploratory drilling in Alaska's Chukchi Sea this summer. Even before the decision was announced, Shell Oil started moving its drilling rigs to the region. Shell's previous Arctic venture in 2011 was marred by mishaps, including higher-than-permitted air pollution and the forced beaching of a drilling unit on an Alaskan island.
Shell's Arctic Drilling Plans on Track as
Obama Administration OKs Lease Sale
Jennifer A. Dlouhy / FuelFix.com
WASHINGTON (March 31, 2015) -- The Obama administration reaffirmed a 2008 government auction of Arctic drilling rights on Tuesday, delivering a major victory to Shell Oil Co. as it aims to resume exploratory drilling in the Chukchi Sea this summer.
In validating the seven-year-old auction, Interior Secretary Sally Jewell stressed that the Arctic "is an important component of the administration's national energy strategy."
"We remain committed to taking a thoughtful and balanced approach to oil and gas leasing and exploration offshore Alaska," Jewell said in a statement. "This unique, sensitive and often challenging environment requires effective oversight to ensure all activities are conducted safely and responsibly."
The move illustrated anew the balancing act the Obama administration has taken toward oil and gas development amid steep environmental opposition, coming the same day the White House formally pledged greenhouse gas emission cuts ahead of international climate talks.
It also marked the second time the Obama administration has affirmed the Chukchi Sea lease sale in response to a court order and a long-running legal challenge that began even before the auction took place in February 2008.
The decision keeps the door open for Shell to return to the Chukchi Sea this summer and drill wells into its Burger Prospect about 70 miles from Alaska's shoreline.
It is far from the final regulatory step for Shell, which still must secure individual drilling permits and win the Bureau of Ocean Energy Management's approval of its broad exploration plan. But Jewell's formal "record of decision" affirming the disputed lease sale was a critical hurdle for Shell's 2015 Arctic ambitions.
Most immediately, it allows the ocean energy bureau to begin formally reviewing Shell's Arctic exploration plan as soon as a new version is filed with the agency. Once the bureau deems the plan complete, it has 30 days to decide on the drilling blueprint.
"Above all, it means we can continue making plans to drill this summer," said Shell spokesman Curtis Smith, though he noted that the company's planned exploration program "remains contingent on achieving the necessary permits, legal certainty and our own determination that we are prepared to explore safely and responsibly."
The company's previous Arctic venture, in 2012, was marred by mishaps, including higher-than-permitted air pollution from a drillship while in the Chukchi Sea and the beaching of its Kulluk drilling unit on an Alaskan island weeks after exploration ended for the year.
Shell has already begun moving its two contracted drilling units to the United States in anticipation of operations this summer.
The company also just conducted drills of its emergency containment system for the Arctic, demonstrating the equipment in waters off Washington state for officials with the Interior Department and US Coast Guard.
A Bureau of Safety and Environmental Enforcement spokesperson confirmed agency officials witnessed the successful deployment of the system.
"BSEE continues to work with Shell during its preparations for possible exploration activities to ensure that all activities meet safety standards and are in compliance with federal regulations," the spokesperson said.
Although Tuesday's decision was widely expected, it still disappointed environmentalists who have pushed the Obama administration to rule out Arctic drilling and have long questioned the validity of the 2008 auction.
"The Obama administration has steadfastly refused to fully and fairly evaluate the risks of selling leases in the Chukchi Sea and, instead, treats the leases sold in 2008 as if they're set in stone," said Susan Murray, Oceana's deputy vice president for the Pacific. "Rather than once again committing to a risky, poorly justified decision to sell leases in the Chukchi Sea, the government should wipe the slate clean and start over."
The Chukchi Sea lease sale has long been under a legal cloud. The Interior Department previously was ordered to redo its environmental analysis in 2010 after an Alaska-based federal district court found deficiencies with the review. The Interior Department issued a new environmental impact statement and validated the auction a year later, paving the way for Shell's 2012 Arctic drilling campaign.
But the sale entered legal jeopardy again after the 9th Circuit Court of Appeals last year faulted the Interior Department's initial calculation of how much crude would be extracted from the Chukchi Sea leases.
Previously, regulators had said up to 1 billion barrels of oil were economically recoverable from the available leases.
In a final environmental impact statement unveiled in March -- as well as a draft released last October -- the bureau produced a new estimate: 4.3 billion barrels of oil and 2.2 trillion cubic feet of natural gas.
The agency said the new, higher prediction is based on better information about where oil companies' interests lie and a deeper understanding about geologic structures in the region. In revising its estimate, the bureau also relied on actual bidding data from the disputed 2008 auction, which brought in a record $2.6 billion in high bids. Most of them -- $2.1 billion worth -- came from Shell, which joined six other companies in nabbing Chukchi Sea drilling rights.
The new analysis also says there is a 75 percent chance of at least one large spill that releases more than 1,000 barrels of oil over 77 years of drilling and development on those Chukchi Sea leases.
The plaintiffs -- including more than a dozen conservation organizations and Alaska native groups -- did not say Tuesday whether they planned to keep fighting the lease sale in federal court.
They broadly faulted the Interior Department for issuing a final environmental impact statement less than two months after receiving hundreds of thousands of comments on the earlier draft -- a timeline they said showed the administration was catering to Shell Oil's drilling desires.
"We are disappointed in Interior's rushed lease sale decision," said Erik Grafe, a staff attorney with Earthjustice, which filed the lawsuit. "Interior still has time to make a better decision when evaluating Shell's drilling plan, and we sincerely hope it says no to Shell's louder, bigger, and dirtier tactics, loaded with potential environmental harm."
The Fix Is In?
As Obama Administration Weighs Arctic Drilling,
Shell Moves Oil Rigs to Region
Jennifer A. Dlouhy / FuelFix.com
WASHINGTON (March 24, 2015) -- The Obama administration is set to announce within days whether it will reaffirm a 7-year-old government auction of oil leases in the Chukchi Sea -- a decision critical to Shell's plans to resume drilling in those Arctic waters this summer.
Even before the pending decision, Shell Oil Co., has begun moving its drilling rigs to the region, marking the clearest sign yet that the firm expects to be boring new Arctic wells this summer.
Interior Secretary Sally Jewell is tasked with deciding whether to affirm, modify or void the 2008 lease sale at which Shell spent $2.1 billion buying its existing drilling leases, following years of legal challenges to the auction.
The Bureau of Ocean Energy Management recommended Jewell validate the 2008 Chukchi Sea auction and all of the oil and gas leases sold during it in a court-ordered environmental analysis released last month. That triggered a 30-day waiting period before Jewell could issue her "record of decision" on the sale.
Even if Jewell okays the sale, Shell must secure drilling permits and other regulatory approvals as part of its quest to return to the Chukchi Sea north of Alaska, where it drilled the first part of one well into its Burger prospect in 2012.
The company isn't waiting on the approvals to mobilize its fleet of drilling rigs and support vessels.
Both of Shell's contracted drilling rigs -- the drillship Noble Discoverer and the Polar Pioneer, a Transocean semi-submersible drilling rig -- are now traveling through waters near the Philippines en route to Seattle, where they are sure to get a chilly reception from local Arctic drilling opponents.
Activists with Greenpeace are in a boat trailing the Polar Pioneer, which does not have its own propulsion and is being heaved across the ocean via the Blue Marlin, a heavy-lift ship designed to transport massive cargoes.
Shell has already submitted a broad exploratory plan to the ocean energy bureau, outlining its ambitions to drill up to six wells on its Burger prospect over several years. By putting two rigs to work at the same time on separate wells about 70 miles off the Alaska coast, the company hopes to maximize the short window when the waters are free of ice and exploratory drilling is permitted.
Environmentalists opposed to offshore drilling fear that federal regulators will feel added pressure to approve Shell's plans once its rigs are in the region -- well in advance of an open-water exploratory drilling season that could begin as early as July.
"There's no reason to rush," said Michael LeVine, senior Pacific counsel for the conservation group Oceana. "The pressure that's been put on the regulatory agencies and the company is what leads to poor analysis, poor decisions and problems. There's no reason for this compressed timeline."
The ocean energy bureau has 30 days to approve, deny or request changes to Shell's exploration plan once the agency deems it formally "submitted" -- a declaration that can not happen before the Interior Department issues its record of decision on the disputed 2008 lease sale.
Even then, the agency is expected to take public comments on both the plan itself and the scope of a required environmental analysis pegged to the proposal.
Separate drilling permits also are required from the Bureau of Safety and Environmental Enforcement. And government inspections are expected for Shell's drilling rigs, following work in Asian shipyards.
Environmentalists have made a last-ditch appeal against Arctic drilling, asking Jewell to invalidate the 2008 Chukchi Sea lease auction.
In comments filed with the ocean energy bureau on March 18, Greenpeace faulted the agency's newly revised environmental analysis for failing to calculate all of the greenhouse gas emissions associated with the oil and gas that could be extracted from the Chukchi Sea. The analysis focuses on emissions tied to exploration, development and production of those fossil fuels, but Greenpeace said the calculation should wrap in greenhouse gases that would be released downstream, when the extracted oil and gas is later consumed.
The Seattle City Council voiced its opposition in a March 23 letter, insisting that Jewell should suspend Arctic oil and gas activities in order to "carefully reassess whether and how offshore drilling in the Arctic Ocean is possible or prudent."
"Carbon dioxide released Arctic drilling will contribute to rising sea levels," including the waters that lap Washington state, the council members write.
The Seattle City Council is probing whether Shell's plans to stash about eight vessels at the Port of Seattle violate a permit granted to the permit two decades ago.
And environmental groups are challenging the Port of Seattle's decision to lease a terminal to Foss Maritime Co., which in turn plans to accommodate Shell's Arctic fleet, saying the environmental impacts of the move should have been studied first.
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