Shell obtains Alaska offshore drilling permit

OREANDA-NEWS. US offshore regulators granted Shell permits to drill two wells in the Chukchi sea off northern Alaska, but the company cannot drill to depth because of previous equipment damage.

An icebreaker carrying a capping stack Shell would need to contain oil in the event of a blowout suffered a hull breach earlier this month. The Interior Department's Bureau of Safety and Environmental Enforcement (BSEE) said the drilling permit issued today bars the company from drilling into oil-bearing zones because of that damage, at least for now.

Shell said it will begin drilling once it has determined that the area is clear of sea ice, that support vessels are in place and Transocean's drilling rig Polar Pioneer is anchored over the well site.

"We remain committed to operating in a safe, environmentally responsible manner and look forward to evaluating what could potentially become a national energy resource base," Shell said.

If repairs to the vessel, M/V Fennica, can be completed in time, Shell can ask BSEE to modify its permits and have the restrictions reconsidered.

Drilling activity in the arctic waters off Alaska "must be held to the highest safety, environmental protection and emergency response standards," BSEE director Brian Salerno said. "Without the required well control system in place, Shell will not be allowed to drill into oil-bearing zones."

Shell is trying to return to the US arctic for the first time since 2012 and explore for oil on its Burger prospect in the Chukchi, in water depths of about 140ft (43m). The company had hoped to drill up to six wells before the arctic drilling season ends on 31 October. But the Fennica's woes already have cost the company precious weeks.

Shortly after Fennica left Dutch Harbor, Alaska, on 3 July, crew members were alerted to a leak in the vessel's ballast tank. The Fennica returned to port, where inspectors discovered a breach in the hull. It is on its way to Portland, Oregon, for repairs.

Shell said Fennica is expected to be in the Chukchi "when it is required."

Interior's US Fish and Wildlife Service on 30 June authorized Shell to drill in the Chukchi, but required that Shell space out drilling operations by at least 15 miles — six miles farther than Shell deemed necessary — to avoid disturbing foraging or migrating walruses.

BSEE has granted Shell permission to begin work on two wells that are located less than 15 miles apart. That means the company will only be able to drill one well at a time. Shell will have to plug and abandon the top section of the first well before proceeding to drill at the second site. Shell expects to begin work at its Burger J site.

The restrictions on tapping into oil-bearing zones are reminiscent of the limitations imposed on Shell's operations three years ago during that mishap-plagued season. That year, a containment dome on the Arctic Challenger support vessel was damaged during testing near Seattle. The drilling rig Noble Discoverer dragged its anchor and nearly ran aground on the Alaska coast shortly after, raising concerns about its ability to operate in harsh arctic conditions. At the end of the drilling season Shell opted to move its Kulluk drilling rig through the Gulf of Alaska in December, only to have it run aground on Sitkalidak island after breaking free from its towing vessel during stormy weather.

Shell managed to conduct some preliminary drilling work known as a "top hole" on its Burger A site in the Chukchi and drilled a second top hole at its Sivulliq site in the Beaufort sea in 2012. But after the containment dome was damaged, Shell was barred from penetrating into hydrocarbon-bearing zones in those wells.

BSEE safety inspectors will be on the Noble Discoverer and the Polar Pioneer at all times during operations.

Senate Energy and Natural Resources Committee chairman Lisa Murkowski (R-Alaska) described BSEE's announcement about the permits "good news for Alaska and for the country." She called on government officials to handle other regulatory issues in good faith and in a timely fashion.

Some environmentalists today decried the US administration's decision to allow Shell to begin work in the Chukchi.

"Shell should not be drilling in the arctic, and neither should anybody else," Franz Matzner, director of the Natural Resources Defense Council's Beyond Oil Initiative said. Matzner warned the decision has "lit the fuse on a disaster for our last pristine ocean and for our climate."