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Judge orders new review for 2008 Chukchi Sea lease sale

Yereth RosenAlaska Dispatch News

Six years after Shell and other companies bought oil and gas leases in the Chukchi Sea, the Interior Department is embarking on a new study of potential development impacts to determine whether the lease sale should have been held in the first place.

Interior’s Bureau of Ocean Energy Management must complete the new analysis of the record-setting $2.66 billion lease sale and submit it for court approval before any new Chukchi Sea drilling is allowed, U.S. District Court Judge Ralph Beistline said in an order issued Thursday.

Beistline’s order was in accordance with a 9th Circuit Court of Appeals ruling on Jan. 22 that found BOEM’s lease sale environmental studies to be inadequate, with potential development impacts that were arbitrarily understated.

The suspension of drilling is somewhat academic. Shell, the only company that had been considering any 2014 drilling, dropped those plans in January indefinitely after the 9th Circuit Court issued its ruling.

BOEM is already launching a new analysis in the form of a supplemental environmental impact statement, said agency spokesman John Callahan.

“The agency swill be putting together a supplemental EIS and submitting a schedule for completion of the SEIS to Judge Beistline,” Callahan said.

There is no timeline yet for that supplemental study to be completed, he said.

For Beistline, BOEM, Shell, the other companies that won lease tracts in the 2008 sale and the environmental and Native plaintiffs who challenged the Chukchi Sea sale’s validity, the new court order is a repeat of past events.

In 2010, Beistline issued a similar order -- and similar suspension of any Chukchi drilling or drilling permits -- after finding that that the pre-sale environmental impact studies done by the Minerals Management Service, BOEM’s predecessor agency, had been inadequate.

BOEM drafted a supplemental impact statement to address deficiencies cited by Beistline. The judge approved BOEM’s new analysis and, in October of 2011, lifted his suspension of drilling activities or permits allowing drilling. Shell ultimately conducted a 2012 drilling season in the Chukchi and in the Beaufort, but operations were plagued by problems that concluded when the Kulluk drill ship grounded in a Gulf of Alaska storm.

Shell shelved plans to drill in 2013, pledging to regroup. In November, Shell submitted a revised exploration plan, which it said incorporated improvements over the 2012 program. Shell also submitted a related integrated operations plan, in accordance with new BOEM requirements.

Under Beistline’s new order, BOEM is allowed to review Shell’s new Chukchi exploration plan at the same time it drafts the new studies of lease sale impacts. Beistline’s ruling also allows non-drilling activities to occur in the Chukchi, including seismic tests, marine surveys and other pre-drilling work classified by BOEM as “ancillary activities.”

There are no pending applications from any company for permits to conduct ancillary activities this year in the Chukchi, according to BOEM, though Shell did some on-site work last summer.

Sen. Mark Begich, a supporter of offshore Arctic drilling, characterized Beistline’s order as a win for development.

“This is good news for Alaskans and for our state’s economy because it ends the temporary shutdown of Shell’s development plans and should lead to resumption of oil and gas development in our state’s promising offshore,” Begich said in a statement. “This lawsuit was just another delaying tactic by those who oppose responsible development in Alaska, so Alaskans should be relieved that we’re now getting on with the business we know how to do so well.”

But Mike LeVine, a staff attorney with one of the environmental plaintiffs that challenged the 2008 lease sale, said the decision doesn’t necessarily mean Arctic development is on the horizon.

“We’ve been down this road before,” said LeVine, the Juneau-based Pacific senior counsel for the environmental group Oceana.

He said he welcomed the new supplemental EIS. “We think that a full and fair evaluation of the potential impacts and risks of drilling in the Chukchi Sea will lead the government to decide that it should not offer leases there,” he said.

However, he said, it may not be worthwhile for BOEM to review Shell’s new drilling plan on Chukchi leases at the same time the agency is doing a new study to determine whether those leases should have been sold at all.

“This all assumes that Shell continues to push aggressively to drill exploration wells,” LeVine said. “It‘s not clear that this company should continue to throw good money after bad pursuing this type of risky activity.”

The only oil industry activities planned this year in federal Arctic waters, according to BOEM’s website, are underwater and sea-surface surveys that BP Exploration Alaska Inc. proposes to do at the Liberty prospect in the Beaufort Sea.

While it evaluates the 2008 lease sale, BOEM has launched preliminary plans for a 2016 lease sale in the Chukchi.

Contact Yereth Rosen yereth@alaskdispatch.com.