OFFSHORE DRILLING:

EPA issues draft permit for exploratory wells off Alaska

U.S. EPA has granted preliminary approval for Shell to drill three exploratory wells in the Chukchi Sea off Alaska.

Shell Gulf of Mexico Inc. welcomed the news but noted that several hurdles remain before drilling this summer, including final EPA approval and possible appeals. The decision drew praise from Alaska lawmakers but condemnation from environmental groups, which may challenge it in court.

The proposed Clean Air Act permit would allow Shell to operate the Frontier Discoverer drill ship and its associated fleet for a multi-year exploration drilling program in the Chukchi Sea. The drill site closest to land is more than 60 miles offshore and about 80 miles from Wainwright, Alaska.

EPA initially proposed a draft permit Aug. 20, 2009, with an extended public comment period running through October. After reviewing comments, EPA decided yesterday to issue a new modified proposed permit and begin a new comment period.

Emissions allowed under the new proposed permit are lower, including substantial reductions of particulate matter emissions and sulfur dioxide, compared to the August proposed permit, EPA said.

EPA will accept public comment through Feb. 17 and will hold a public hearing in Barrow, Alaska.

Shell said the issuance of the draft permit "starts the clock on a critical timeline of events that will ultimately determine if we can explore our Alaska leases in 2010."

"Today's announcement is good news, but the length of the public comment period combined with likely appeals still pushes the boundaries of our ability to drill in 2010," Shell said in a statement. "Obviously, the windows in which we have to operate are limited and a decision to move forward is an extremely expensive one. We will continue to monitor our options in the days ahead as we get closer to making that critical decision."

The Interior Department approved the plans from Shell in December with conditions, including "close monitoring" to ensure they meet safety and environmental standards. The wells will provide Interior more data and allow the department to evaluate the feasibility of future development in the Chukchi Sea, Interior Secretary Ken Salazar said at the time (E&ENews PM, Dec. 7, 2009).

The associated fleet consists of a primary icebreaker, a secondary icebreaker/anchor handler, a supply ship, an oil spill response ship and oil spill work boats.

The Shell subsidiary paid $2.1 billion for leases in the Chukchi at a 2008 sale held under the 2007-2012 five-year offshore leasing program. The program is currently undergoing review in response to a U.S. Circuit Court of Appeals for the District of Columbia order that required additional environmental analysis. Salazar's decision on the remaining plan is forthcoming, the department said.

David Dickson of the Alaska Wilderness League said drilling should not happen until there is more information gathered to allow a thorough analysis of its potential impacts.

"We feel very strongly that there needs to be a comprehensive multi-agency environmental impact statement done," Dickson said.

As for whether the permit might be challenged in court, Dickson said, "I think many groups are exploring options at this point."

A coalition of environmental groups, including the Alaska Wilderness League, Defenders of Wildlife, Earthjustice, Natural Resources Defense Council, Oceana, Sierra Club, Wilderness Society and several others, had jointly criticized Interior's decision to approve the drilling. The coalition said the agency approved the plan without a full analysis of its potentially significant effects on wildlife and Alaska Native subsistence and despite a lack of fundamental scientific information about the region.

Alaska Sens. Mark Begich (D) and Lisa Murkowski (R) welcomed the EPA news.

"The EPA's decision to approve an air-quality permit for Shell's Chukchi Sea exploration have been a long time coming," Murkowski said in a statement. "Today's decision represents progress. While several additional hurdles remain, the agency's action offers some reassurance that exploration for oil and gas resources off Alaska's coast will be allowed to proceed."

Begich added, "The U.S. needs to focus more on production of our rich energy resources right here at home. Let's stop paying billions a year to hostile countries and start putting Alaskans to work."

Click here to read EPA's public notice and information sheet.

Click here to read EPA's statement of basis for the proposed permit.