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Shell’s Arctic drilling plans may hit permitting snag

Screen Shot 2015-06-13 at 22.02.09Screen Shot 2015-06-13 at 09.26.53Shell’s Arctic drilling plans may hit permitting snag

June 23, 2015 | By Jennifer A. Dlouhy

WASHINGTON — Shell’s plans to bore two wells in the Arctic Ocean this summer may be jeopardized by an obscure permitting requirement that effectively bars drilling operations close to each other in waters off Alaska.

The restriction highlighted by environmentalists opposed to Shell’s Arctic drilling campaign could be a major stumbling block for the company, which has spent $7 billion and seven years pursuing oil in the region.

The provision is embedded in the government’s rules for obtaining a “letter of authorization” allowing companies to disturb walruses, seals and other animals in the region — among the last permits Shell needs to launch activities in the Chukchi Sea next month. Under a 2013 Fish and Wildlife Service regulation, those authorizations are precluded for drilling activities happening within 15 miles of each other.

The two wells Shell wants to drill this summer are about 9 miles apart.

A coalition of environmental groups insisted Tuesday that the requirement should block Shell’s planned Arctic drilling and force the Obama administration to rescind earlier approvals.

Any letters of authorization issued to Shell “would violate an explicit condition of the governing regulations, the organizations said in a letter to Interior Secretary Sally Jewell. They noted that Interior Department regulators only considered a two-well drilling program when they evaluated the environmental impacts of Shell’s broad exploratory plan for the Chukchi Sea before approving it earlier this year.

Related story: Obama administration gives thumbs up to Shell’s Arctic drilling plans

The decisions to approve that two-well exploration plan and conclude it would have no significant impact on the environment “are predicated on a presumed drilling scenario that is unlawful,” the organizations said.

The groups, including the Natural Resources Defense Council, Oceana and the Sierra Club, suggested that if the Obama administration allowed Shell to drill even one of its planned wells in the Chukchi Sea it would not be “lawful or “defensible,” because of the limited scope of that earlier environmental analysis.

The letter — sent by San Francisco-based Earthjustice on behalf of 10 environmental organizations — is a warning shot, signaling that any letters of authorization are likely to be battled in court. Environmentalists opposed to Arctic drilling have repeatedly challenged the government’s handling of the issue.

Shell has asked federal regulators for permission to drill two exploratory oil wells into its Burger prospect about 70 miles off the coast of Alaska this summer, with more possibly next year. It has lined up two drilling rigs for the job, including the Transocean Polar Pioneer that is now sailing toward Dutch Harbor, Alaska.

Related story: Shell drilling rig leaves Seattle for Alaska waters

Shell needs four more government approvals before it can launch work in the Chukchi Sea: Two well-specific drilling permits from the Interior Department’s Bureau of Safety and Environmental Enforcement and the two letters of authorization from the Interior Department’s Fish and Wildlife Service.

Shell appeared to be aware of the Fish and Wildlife Service’s prohibition on contemporaneous drilling activities as far back as February 2013, when it sent a letter to the agency objecting to the then-proposed rule.

“There is no basis for concluding that activity separation distances are necessary to avoid adverse impacts on walruses and their availability for subsistence uses by Alaska Natives,” Shell said at the time.

On Tuesday, Shell spokesman Curtis Smith said the company continues “to consult with regulators on the terms of a letter of authorization.”

Interior Department spokeswoman Jessica Kershaw said the Fish and Wildlife Service “is reviewing Shell’s program to ensure compliance with all applicable laws.”

“Their review will ensure that measures are in place to minimize potential disturbances to walrus and other marine mammals,” Kershaw said.

Letters of authorization are generally straightforward — in contrast to typically more thorny permits involving specific drilling plans and expected air pollution.

Environmentalists implored the Obama administration to seize on the requirement and block Shell’s proposed drilling.

“The Obama administration must hold Shell to the law and not let an oil company make up its own rules in the Arctic,” said Annie Leonard, executive director of Greenpeace USA. “It’s time for President Obama to take control of this situation before catastrophe strikes.”

Spokesmen for the Interior Department and its Fish and Wildlife Service did not immediately comment on the letter.

There are several possible outcomes.

Regulators could allow Shell to bore just one of its planned Burger wells — even though the government’s analysis of Shell’s now-approved exploration plan focused on a two-well program. Even if the company is allowed to drill only one well at a time, regulators insist a second rig must be nearby to bore a relief well in case of an emergency. And while Shell already has two rigs under contract, it is not clear whether the company would be willing to go forward with a single-well program.

Shell also could look to Capitol Hill for relief, asking lawmakers for a legislative change that would permit simultaneous nearby drilling.

Such congressional intervention has happened before. After air pollution permits issued by the Environmental Protection Agency (and successful legal challenges) thwarted Shell’s previous drilling plans, Congress shifted that oversight responsibility to the Interior Department.

But any possible action on Capitol Hill is unlikely to happen swiftly.

Conservationists said both the restriction and any last-minute scramble to overcome it reveal a lapse in planning and oversight.

“The company submitted a plan that it knew — or certainly should have — does not comply with the rules,” said Michael LeVine, Pacific senior counsel for Oceana. “This is not an isolated incident for Shell or for the federal regulators that approved the faulty (exploration) plan. Shell has a long history of problems, and the government appears incapable of making good decisions about exploration in the Arctic Ocean.”

Shell’s Arctic ambitions have been curtailed by permitting problems and legal challenges before — sometimes even when the company was on the verge of drilling. For instance, in February 2011, Shell scrapped Arctic drilling it had planned for that summer after two essential EPA-issued air quality permits were revoked by the federal Environmental Appeals Board.

The company also iced its Arctic drilling plans in 2014, after a federal appeals court invalidated the government’s 2008 auction of Chukchi Sea oil leases to Shell and other firms. In March, the Interior Department affirmed that 2008 sale after redoing the environmental analysis that underpinned the auction.

Shell’s sole exploration campaign was three years ago. The 2012 effort was marred by high-profile mishaps, including the drifting of one contracted drillship before it was sent to the Chukchi Sea, and the grounding of its Kulluk drilling rig after an attempt to tow it through stormy seas to Seattle.

The company bored two “top holes” penetrating about 1,500 feet — with one in the Chukchi Sea and another in the neighboring Beaufort Sea.

Oil companies must work within a limited exploration season that is curtailed both by water conditions and regulatory restrictions. If Shell has two drilling rigs in the Chukchi Sea, the Interior Department is requiring the company to halt exploratory drilling on Sept. 28. That allows about a month before ice is expected to encroach on the site for relief well drilling in case of an emergency. If Shell’s second rig is about 1,000 miles away, in Dutch Harbor, Alaska, the cutoff date is Sept. 24.

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