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Web posted Friday, March 5, 2010

Shell could face more delays on offshore plans

By Tim Bradner
Alaska Journal of Commerce

Shell Oil faced a new disappointment Feb. 26, when the U.S. Department of the Interior delayed submitting a revised environmental assessment of Chukchi Sea exploration to a Washington, D.C., court.

The new date for the data to be submitted is March 29, an Interior Department attorney told the court.

Shell said its $300 million plan for exploring outer continental shelf leases in the Chukchi and Beaufort seas this summer are still on, although the delay puts the company in a tighter position in a final decision to mobilize a drillship and supporting vessels.

A lawsuit filed against the Mineral Management Service by environmental groups last year caused the D.C. court to invalidate the environmental assessment supporting the five-year leasing plan under which Shell, ConocoPhillips and other companies bid more than $2 billion for Chukchi Sea leases. Until the issue is resolved, Shell faces uncertainty as to the validity of the leases.

"There's no question the delay in making the five-year plan whole further shrinks the timeline in which we have to make critical resource decisions," Shell spokesman Curtis Smith said.

For now the plan to explore the Beaufort Sea, where Shell's leases are secure, are proceeding, Smith said, although Shell must still secure a final air quality permit from the U.S. Environmental Protection Agency.

The Beaufort Sea exploration plan also faces an environmental lawsuit, however, which is scheduled to be heard by the U.S. 9th Circuit Court of Appeals this spring, Smith said.

"We are disappointed with the Department of the Interior as this puts us in the familiar position of waiting for clarity in an upcoming drilling season," Smith said. "We believe the work requested of MMS by the D.C. Circuit (on the environmental assessment) was well bounded as this court found all other aspects of the MMS 2007-2012 sale schedule robust. Work on this particular aspect of the (environmental) sensitivity study has been ongoing now for 10 months and should have been completed more expeditiously.

"We remain hopeful that the secretary will convey the completed scientific data the court requested in time to move our program forward," Smith said.

Shell plans to use the drillship Frontier Explorer and a small armada of supporting icebreakers, anchor-handling tugs and spill response vessels to drill one to two wells in the Beaufort Sea and one to two wells in the Chukchi Sea. Prospects the company plans to test are adjacent to areas where previous discoveries have been made, in the Chukchi Sea by Shell itself, which were uneconomic when the tests were drilled.

Tim Bradner can be reached at

tim.bradner@alaskajournal.com.

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