Thursday, October 27, 2011

Shell one more notch closer to getting permits

Tim Bradner
Alaska Journal of Commerce

Shell may be one more notch closer to getting final permission to explore offshore off Alaska’s northern coasts, but environmental organizations and a North Slope tribal group have filed new appeals.

The U.S. Environmental Protection Agency issued a final air quality permit Oct. 21 for Shell’s planned Beaufort Sea exploration program, one of two areas where Shell hopes to explore in 2012 and 2013.

The permit covers activities by the Shell-owned drilling vessel Kulluk and several support vessels. The permit for the Beaufort Sea is a minor source permit, which limits the Kulluk and its support ships to 250 tons of emissions per year. One of Shell’s prime areas of interest is in the Camden Bay areas of the Beaufort Sea east of Prudhoe Bay.

On Sept. 19 EPA issued two final air quality permits for Shell’s Chukchi Sea drilling using the drillship Noble Discover, which is under contract to Shell. The permits for the Discoverer allows that vessel to be used in both the Chukchi Sea and Beaufort Sea. The Kulluk’s permit allows it to be used only in the Beaufort Sea.

However, 10 environmental groups and a tribal organization from Point Hope filed appeals Oct. 24 of both final air quality permits. Earthjustice, an environmental law firm, filed the appeals to the EPA’s internal Environmental Appeals Board, or EAB. It was on behalf of the Native Village of Point Hope, Resisting Environmental Destruction of Indigenous Lands, Alaska Wilderness League, Center for Biological Diversity, Natural Resources Defense Council, Northern Alaska Environmental Center, Ocean Conservancy, Oceana, Pacific Environment, Sierra Club, and The Wilderness Society.

Shell officials were not available for comment but a company spokesman said earlier that appeals of the Kulluk and Discoverer permits to the EAB were expected.

The EAB has previously reviewed draft air quality permits for Shell’s programs. Last year environmental groups appealed an earlier version of the permit to the EAB, which returned a decision last January recommending certain changes. EPA’s Region 10 revamped and reissued the permits, which have now again been appealed to the EAB.

There is no deadline for the appeals board in making its decision. Shell has said previously that it needs to make a final decision in October on whether to mobilize its vessels for the planned 2012 exploration.

EPA had also issued a draft permit to ConocoPhillips for its Chukchi Sea exploration using a jack-up rig, but on Sept. 26 ConocoPhillips withdrew the application with the intention of resubmitting it in December, EPA said in a press release.

“Shell has been in pursuit of a usable air permit for nearly five years. We appreciate that EPA Region 10 has thoroughly evaluated our program and issued a final permit for the Kulluk that is technically and scientifically sound,” Shell spokesman Curtis Smith said. “Shell has gone to great lengths to meet the goal of having no measurable impact on coastal villages, including a retro-fit of the Discover’s catalytic exhaust system and ongoing, multi-million dollar modifications to the Kulluk.”

The EPA air quality permit process was very complex and expensive for both Shell and the agency. One reason is that the Alaska Arctic permits are the first air quality permits worked on by EPA, in this case EPA’s Region 10 office in Seattle, so the agency was doing something for the time, as well as in a new area, the Arctic.

In the U.S. Gulf of Mexico the U.S. Minerals Management Service, now the BOEM, issues and administers air permits but Congress gave authority to EPA for OCS areas outside the western gulf, such as the Alaskan Arctic, the eastern Gulf of Mexico and for any leasing in off the Atlantic and Pacific coasts.

Shell plans to drill up to three wells in the Chukchi Sea using the Discover and up to two wells using the Kulluk in 2012, Smith said. Shell bid for federal Outer Continental Shelf leases in the Beaufort Sea in a 2005 lease sale and in the Chukchi Sea in a 2008 lease sale. Exploration has been held up by a variety of lawsuits and delays in permitting, and despite the appeals the company believes it is now making progress toward a goal of drilling in 2012, Smith said.

On another front, Shell received approval on its Beaufort Sea exploration plan from the U.S. Bureau of Energy Management but the permit has been appealed by a coalition of environmental groups to the U.S. 9th Circuit Court of Appeals. A draft exploration plan for the Chukchi Sea is before the BOEM now, and the agency has only recently been able to begin work on it.

Previously the leases issued in 2008 had been held up by a federal court injunction in a lawsuit brought by environmentalists over claims of defects in the original Environmental Impact Statement for the lease sale. The BOEM has revised the EIS and the injunction has been lifted, but there could be further appeals.

Exploration in the Beaufort and Chukchi Seas is important because both regions are highly prospective for oil and gas. In the Beaufort Sea Shell will drill in an area, near Camden Bay east of Prudhoe Bay, where a previous oil discovery has been made, although it was not economic.

In the Chukchi Sea the company will drill a prospect on which Shell previously had leases, explored in the early 1990s and made a large gas discovery, although also not economic at the time.

Gov. Sean Parnell and other state officials believe the Arctic offshore regions where Shell, ConocoPhillips and other companies want to explore has good prospects for increasing the amount of oil moving through the Trans Alaska Pipeline System, which is now operating at less than a third of its capacity.

The Camden Bay area particularly has potential for additions to TAPS liquids “throughput” because Shell’s prospects are 15 miles to 20 miles offshore and any oil production brought ashore through a subsea pipeline could be moved to TAPS through pipelines that now extend east of Prudhoe Bay.

This article appears in the AJOC October 30 2011 issue of Alaska Journal of Commerce

Republished with the permission of the Alaska Journal of Commerce.