Petroleum News: Court hears oral arguments on Shell Beaufort Sea exploration

Vol. 12, No. 49  Week of December 09, 2007

On Dec. 4 a three-judge panel of the U.S. Court of Appeals for the 9th Circuit heard oral arguments in the appeals by the North Slope Borough, the Alaska Eskimo Whaling Commission and several environmental organizations against U.S. Minerals Management Service approval of Shell’s oil and gas exploration plans in the U.S. Beaufort Sea.

The 9th Circuit Court judges must now rule in the case. It is not clear how long it will be before that ruling will appear.

Shell had planned a multi-year exploration drilling program in the Beaufort Sea and had assembled a fleet of vessels to drill three wells in its Sivulliq prospect on the western side of Camden Bay in the summer of 2007. The company planned further drilling in subsequent years, with precise drilling plans for those years dependent on the results of the 2007 drilling.

On Aug. 14 the court placed a temporary injunction on Shell’s drilling activities until the appeals against the exploration plan approval were resolved, thus eliminating any realistic possibility of Shell starting its drilling program in 2007.

The oral arguments presented on Dec. 4 revolved in part around the question of whether the MMS lease sale environmental impact statement considered in enough detail the types of activity described in Shell’s exploration plan, or whether the exploration plan should have triggered a new EIS.

Tiered approach

Under the terms of the National Environmental Policy Act, MMS uses a tiered approach to environmental permitting, in which a broad EIS prior to starting an offshore lease sale program determines whether lease sales should proceed. Further EISs may be done subsequently, targeting specific exploration or development activities that might have a significant environmental impact not fully considered in the earlier, broader EIS. A proposal to develop an offshore oilfield, for example, would almost certainly trigger the need for a new EIS specific to that development.

MMS had published a multi-sale EIS for its Beaufort Sea oil and gas leasing program. Then, when Shell submitted its Beaufort Sea exploration plan, MMS conducted an environmental assessment that concluded that the company’s planned operations came within the scope of the multi-sale EIS and could proceed.

Not so, said the appellants.

“Here you have a cursory EA (environmental assessment for Shell’s exploration plan) that, fails to assess the actual drilling proposals effects on whales and completely refuses to analyze the potential for a crude oil spill and its effects on that environment,” Dierdre McDonnell, the attorney representing the Alaska Wilderness League and environmental organization REDOIL, told the judges during oral arguments. “… The multi-sale EIS … looks at general past information and studies about the effects of noise on bowhead whales. What that information shows is that those effects can be significant.”

The environmental impact mitigation measures spelled out in the leasing program EIS do not support the MMS decision to forgo an EIS specific to Shell’s drilling program, Christopher Winter, attorney for the North Slope Borough and Alaska Eskimo Whaling Commission told the judges.

“The Minerals Management Service simply does not know enough about the potential impact on the Arctic environment to approve a three-year exploration plan and environmental assessment,” Winter said. The noise from drill ships and icebreakers would deflect bowhead whales from their normal migration routes, thus creating a major safety risk to whaling captains and crews and threatening a key source of food for North Slope communities, he said.

Winter said that in its EIS and environmental assessment MMS had concluded that Shell’s exploration activities may have a significant impact on the subsistence hunt of bowhead whales. To avoid the need for a further EIS MMS must demonstrate that specified mitigation measures would prevent those significant impacts, he said.

“In this case the Minerals Management Service cannot make that showing,” Winter said. “MMS has not imposed any specific mitigation measures on Shell as a part of this project.”

MMS: specific mitigation

But MMS has imposed very specific mitigation measures through the terms of its leases, said David Shilton, attorney for MMS. One of those measures is the requirement for a conflict avoidance agreement with the subsistence hunters, he said.

“Shell must sit down with the subsistence whalers and hammer out an agreement to protect their subsistence hunting, and that is something that has been done over the years successfully,” Shilton said. “… This year there was a conflict avoidance agreement which would have had Shell pull all of their assets off of the drilling for the time that whale hunters were out there.”

Shell also has to obtain an incidental harassment authorization from the National Marine Fisheries Service, Shilton said. NMFS applies a very strict standard that requires Shell to demonstrate that it will have a negligible effect on the stock of whales.

“The mitigation is specific, it’s been tested, it was evaluated in the multi-sale EIS and found to be effective,” Shilton said.

Shilton also commented that the analysis in the multi-sale EIS considered the type of activities that Shell plans to carry out.

As part of their challenge to the adequacy of the multi-sale EIS, attorneys for the appellants questioned how the broad multi-sale EIS could apply to Shell’s drilling plans without considering the specific location and timing of the drilling. Not only that, but MMS had approved the exploration plan without specific information about where the drilling would take place after 2007, the attorneys said.

The multi-sale EIS says that the time and location of activities need to be considered in evaluating potentially significant impacts on bowhead whales, MacDonnell said.

“This is what needed to be considered the EA, but it was not,” she said.

“As MMS stated in the multi-sale EIS it’s extremely important, especially with respect to subsistence, to consider the site-specific nature of exploration activities,” Shilton said. “… It’s the specific timing and location which can interfere with the subsistence hunt.”

The bowhead whale migration route is very broad, so that the precise location of drilling activities would have little bearing on bowhead migration, countered Hilton. Not only that, but knowing where Shell’s leases are located, it is possible to assess the Shell’s potential drilling locations within an area of just a few square miles, he said. Also, Shell has to apply for drilling permits each year and the applications to drill give MMS the opportunity to fully evaluate the impact of drilling at specific sites.

Shell: transitory activity

Shell attorney Kyle Parker characterized Shell’s planned drilling as a transitory activity to gather information about oil and gas prospects.

“Our exploration project is limited in time. … We’re not going to leave any permanent facilities on location,” Parker said. “That is why the agency (MMS) has adopted this program … whereby we do the comprehensive environmental impact statement prior to the (lease) sale. It covers all of the anticipated activities. … Provided the activities we’re proposing were analyzed … they’ll approve our plan of exploration and allow us to go forward with our work.”

The multi-sale EIS adequately includes an analysis of all of the issues raised by the organizations appealing the exploration plan approval, he said.

In the past, 30 exploration wells have been drilled in the Beaufort Sea, with 12 of those wells drilled near the Sivulliq prospect, Parker said.

“All of the data related to the drilling of those wells, all of the data related to the interactions with the whaling, all the data related to the ice management activities that took place during those open water drills, all of that is encompassed in the three-volume, multi-sale EIS,” Parker said. “That forms the basis for our plan approval.”

Shell identified four specific well locations for the first year of its drilling program. The MMS director determined that there was sufficient information about Shell’s drilling plans in subsequent years to approve the exploration plan, provided that Shell submits an amended plan once it has determined where specifically to drill next, Parker said.

“In fact he is obligated at that point to go through an analysis and determine whether something we’ve proposed in years two and three falls outside the analysis that was done in the multi-sale EIS,” Parker said.

—Alan Bailey

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