Friday, July 27, 2012

Nip and tuck for Shell season

Tim Bradner
Alaska Journal of Commerce

It is now nip and tick for Shell’s 2012 summer Arctic exploration plans.

The company is already challenged by difficult sea ice conditions off northern Alaska, and the schedule could be pushed further by delays in getting final U.S. Coast Guard approvals on modifications to a spill response barge in Seattle.

Shell is officially sticking to its plan to be drilling in the first week of August but that may have to change. Once the barge clears inspections in Seattle it will take 12 to 18 days for it to move to the Arctic, Shell spokesman Curtis Smith said.

“This will be tight,” he said.

The “Arctic Challenger” spill response barge, which will contain Shell’s new special undersea containment system, is to be positioned between Shell’s planned drilling locations in the Chukchi Sea and the Beaufort seas, which are hundreds of miles apart.

Without the barge being on station in the Arctic the U.S. Interior Department will likely not issue final drilling permits to Shell.

“We are working very closely with the Coast Guard on this. We’re going to make sure this is done right, and we’re not going to take it to the Arctic until it is ready,” Smith said.

There is also a second wrinkle. The U.S. Environmental Protection Agency has yet to approve modifications to air quality permits for Shell’s two drilling vessels, which are now waiting in Dutch Harbor, a port in the Alaskan Aleutian Islands.

The modifications are minor, a matter of how the permit is worded in the case of the Kulluk, one of the vessels, but the changes must be approved by EPA before the permits are valid.

Smith said Shell is “on track” to get compliance orders on the modifications.

Environmental groups are seizing on the air permits as an opportunity to push for more delays, which could place Shell’s 2012 drilling in further jeopardy.

Lindsey Hajduk, an organizer who works on the Sierra Club’s Arctic program, said the EPA should allow the public to be heard through public hearings in the permit modifications.

Shell’s fleet, consisting of the drillship Noble Discoverer as well as the Kulluk and various support vessels, are all waiting in Dutch Harbor. Shell has spent about $4.5 billion on its Arctic program so far including over $2 billion spent acquiring leases in a 2008 federal Outer Continental Shelf lease sale in the Chukchi Sea.

The company’s Beaufort Sea leases were acquired earlier, in OCS sales in 2006 and 2007.

Shell has had to leap hurdles for years on its planned program. The company mobilized a two-drillship fleet in its first exploration initiative in 2007, planned for the Beaufort Sea, but was stopped by a court injunction after lawsuits were filed by environmental groups and the North Slope Borough, who sued on behalf of Inupiat Eskimo whalers.

Shell reached an accommodation with the borough and the whalers with an agreement to withdraw its ships from the area during the annual fall whale migration.

When the company proposed its plan again the Ninth Circuit Court of Appeals unanimously rejected the environmental lawsuits. This time the North Slope Borough did not join the lawsuit.

But then, in 2010, BP’s offshore well in the Gulf of Mexico blew out and caused the U.S. Interior Department to put a hold on all offshore exploration drilling in federally-owned waters including in Alaska.

Shell developed its plans again under new federal rules, and lawsuits were again rejected by the courts. Now the fleet is mobilized again but there are new hurdles, including the ice and delays on the spill barge.

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