From Upstream, oil and gas newspaper:
Shell faces Alaska ‘drilling hurdle’
Steve Marshall, News Wires
23 January 2014 08:22 GMT
Shell’s bid to restart its exploration drilling effort off Alaska this summer has reportedly run into a potential legal obstacle after a US court ruling has cast doubt on the legitimacy of lease awards in the Chukchi Sea.
A three-judge panel of the Ninth US Circuit Court of Appeals decided on Wednesday that the US’ Interior Department wrongly awarded the oil leases off Alaska without considering the full range of environmental risks from drilling in the Arctic, Reuters reported.
The ruling represents a victory for Native Alaska tribes and environmental groups in a dispute that pits them against the federal government and energy companies, with the matter now returned to a US district judge in Anchorage for review.
Shell is a major leaseholder in the Chukchi Sea after gaining acreage in a 2008 lease sale in which it stumped up nearly $2 billion out of $2.66 billion bid by oil companies, with other blocks picked up by ConocoPhillips and Statoil.
The Anglo-Dutch supermajor intends to resume drilling work in the area between July and November this year using the upgraded drillship Noble Discoverer to spud a well at the Burger prospect, with Transocean semi-submersible Polar Pioneer to be used as a back-unit.
It follows an earlier abortive bid in 2012 that was dogged by a number of technical issues and ended with the grounding of the drilling barge Kulluk.
The impact of the court decision on the planned drilling effort was not immediately clear, with a Shell spokeswoman saying: “We are reviewing the opinion.”
A spokeswoman for the Interior Department declined to comment, saying the agency does not discuss pending legal matters.
However, the plaintiffs’ Juneau-based attorney, Mike LeVine, said: “It’s unlikely that the government could authorise drilling activities on leases the court says were improperly awarded.”
He said the court ruling supports the plaintiffs’ argument that the leases should never have been granted six years ago because the federal government failed to consider the full scale of the project and associated risks.
The court determined that the Interior Department leases in question, opening nearly 30 million acres to exploration drilling, were based on a flawed estimate of 1 billion barrels of economically recoverable oil for the scope of production.
The appeals court called that estimate “arbitrary and capricious” and ruled the government had failed to base its analysis on the full range of likely potential oil production from the acreage, as required under the National Environmental Policy Act.
LeVine said: “This tells me that the time has come for the federal government to stop trying to provide justification for a poor decision that was made in 2008.”
Environmental group Greenpeace described the court ruling as another setback for Shell in its bid to exploit the eco-sensitive Arctic, calling it a “massive blow” for the company after newly installed chief executive Ben van Beurden issued a profit warning last week.
The group, which has staged a number of high-profile stunts to prevent Arctic drilling, claims Shell has now ploughed about $5 billion into Arctic exploitation “with not a single cent in return”.
Shell shelves plan to drill in Alaskan Arctic this summer: Guardian: here.