Shell Alaska debates appeal to Beaufort Sea drilling delay

Fairbanks Daily News-Miner

By Rena Delbridge

Published Friday, November 28, 2008

FAIRBANKS — The head of Shell Alaska said the oil giant might appeal a recent court ruling that has indefinitely delayed plans to drill exploratory wells in the Beaufort Sea during 2009.

The Ninth Circuit Court of Appeals sided with environmental groups and others Nov. 20, agreeing that a federal review of the plan fell short of addressing the potential impact on marine mammals and the subsistence lifestyle of people living along the Beaufort shore. The court told the Minerals Management Service, which approves offshore drilling activities, to rework its assessment of Shell’s proposal.

Shell Alaska general manager Pete Slaiby said the decision was a disappointment in light of the $2.5 billion the company spent during the last three years on Outer Continental Shelf leases and operations in Alaska.

“The Ninth Court decision is really a tremendous disappointment,” Slaiby said. “This, in fact, becomes a de-facto moratorium the Ninth is imposing on us, against the will of the nation.”

He said the court decision may force some hard decisions on Shell.

“Any company is going to have to be careful about how they manage the capital of their shareholders,” Slaiby said. “We have a huge investment here. It is becoming a concern.”

The decision could set a precedent as to how exploration of Alaska’s offshore oil is, or is not, permitted.

Robin Cacy is a public affairs officer for Alaska’s OCS region for MMS. She acknowledged the precedent-setting ruling likely will be affected by how MMS and Shell resolve the present issues.

“This is actually the first time, I believe, that we’ve lost a case on this point,” Cacy said. “I certainly don’t remember having an MMS action of this region overturned like this.”

She said the service will address issues raised in the court opinion and will have to see what happens with future exploration plans.

The decision came after Shell wrapped up what it calls the most successful seismic season ever in the Chukchi and Beaufort seas. Officials also touted progress in building on a slim body of knowledge about bowhead whales and other marine mammals through extensive scientific research, some of it in partnership with University of Alaska Fairbanks.

But the court ruled that MMS, responsible for approving Shell’s exploration plan, failed to take a hard look at the effects of development on bowhead whales and subsistence activities. Among the major gaps, according to the court, were how noise from drill ships and icebreakers might disturb the endangered whales, possibly prompting them to deviate from historic migration routes and feeding grounds, in turn forcing native whalers farther from the coast in their search for the mammals.

Betsy Beardsley is environmental justice program director for Alaska Wilderness League, which led the case before the Ninth Circuit.

“There is no proven science that shows that this kind of activity, exploratory drilling, wouldn’t have impacts on the bowhead whales and other species in the arctic,” Beardsley maintained. “We believe this court decision is really sending a message that there needs to be a better understanding of what impacts would occur, should this kind of development happen in the Beaufort or Chukchi sea.”

The impact of development on the Inupiat people and their cultural lifestyle also was of concern to the court.

The North Slope Borough was among those petitioning the court. David Harding, spokesman for North Slope Borough Mayor Edward Itta, said the borough wants MMS to create a legitimate environmental study that includes analysis of potential impacts on people.

“The Arctic Ocean is the cultural heart of the North Slope,” Harding said. “It’s where the bowhead live and migrate, and the Inupiat depend on them for cultural survival as well as nutritional survival.”

Itta opposes offshore development on principle, Harding said, but realizes it may happen anyway and wants companies to be responsible.

“It’s really not anything more than anyone else would ask,” Harding said.

Slaiby, however, said Shell has a proven record as a responsible oil and gas developer, and that the company’s presence in the Beaufort and Chukchi seas is nothing new.

Shell and others drilled exploratory wells in the 1980s and 1990s, although economic conditions didn’t favor development at that time. No noticeable impact was recorded, and seismic and scientific research conducted this summer likewise didn’t appear to adversely effect whales, Slaiby said.

Now, Slaiby said Shell officials are considering their options, which include an appeal. In the meantime, dialogue with North Slope communities will continue in January and February.

The Minerals Management Service also is reviewing the ruling, Cacy said.

“We have a very robust environmental studies program,” she said. “We felt we had a good environmental analysis, that we’d done a very good job.”

The service’s environmental analysis of Shell’s proposal was supported by a 1,596-page Environmental Impact Statement covering the leases off Alaska’s coast and analyzing potential development impacts on wildlife and subsistence. According to an MMS statement, the service has funded almost $300 million in environmental studies of Alaska’s waters during the last 30 years. Since 2000, MMS has performed 30 to 40 environmental studies each year in offshore Alaska, spending more than $45 million.

Those are just not enough to offer basic protections for a sensitive, changing environment that’s home to the endangered bowhead whale, among others, Beardsley said.

“The Arctic is a special place in terms of having a number of keynote species — polar bears, the bowhead whales, ringed seals, walrus,” she said. “Any kind of industrial activity that takes place up there needs to ensure that those species are protected.”

She discounted Shell and MMS’s prompts that the U.S. needs to be more open to drilling to increase the nation’s energy security.

“It’s not like there is nowhere left to drill (onshore),” she said. “The arctic is a changing environment, with impacts from global warming, increased shipping activity, the cumulative impacts of oil and gas development. Until that science is there, we need to take a time out on any offshore activity.”