New Environmental Review Could Move Offshore Chukchi Drilling Forward

A map of the Chukchi Sea offshore leases. The green squares are Shell leases. (Image: Bureau of Ocean Energy Management)
A map of the Chukchi Sea offshore leases. The green squares are Shell leases. (Image: Bureau of Ocean Energy Management)

A new draft environmental review of leases off Alaska’s northwest coast could bring oil companies one step closer to resuming offshore oil exploration in the Chukchi Sea.

Dozens of leases—purchased by Royal Dutch Shell and other oil companies back in 2008—have been challenged in court by Alaska Native organizations and environmental groups since before the sale took place.

In January, the 9th Circuit Court of Appeals upheld those leases. At the same time, the court ruled that the estimated impact on the environment was lacking.

“They said that its reliance on an estimate of 1 billion barrels of recoverable oil was, to use their words, arbitrary and capricious,” said John Callahan, a spokesperson for the Bureau of Ocean Energy Management. After the court decision, the Chukchi leases were suspended and BOEM was told to perform a new, more realistic assessment.

This time, Callahan said the agency considered what would happen if multiple fields were developed on the lease sites. They also used new data to estimate significantly more oil could be found.

“This analysis considers a scenario in which 4.3 billion barrels of oil are produced; it assumes development of both an anchor field and a satellite field; and it covers 77 years of oil and gas activity,” the average life of an offshore oil well, Callahan said.

When the court first ordered this new environmental analysis, conservation groups cheered—but they were quick to condemn Friday’s findings by BOEM. In a statement, Michael LeVine, a lawyer for ocean advocacy group Oceana, said the news “makes today feel more like Groundhog Day than Halloween.”

Senator Lisa Murkowski praised the new study, but warned that regulators are “getting down to the wire” if they want to pave the way for oil companies to drill in the Arctic next year.

BOEM still has to take its review through a 45-day public comment period. They’re planning to travel to communities along the Chukchi coast, as well as hubs like Anchorage, Fairbanks, and Barrow.

Shell drilled its last well in the Arctic two years ago. Their 2012 season ended with a high-profile accident as the Kulluk rig ran aground near Kodiak Island. But that incident, and the subsequent investigation into Shell’s operations, isn’t the only reason why the company hasn’t gone back to the Arctic. Legal challenges and uncertainty over leasing has also played a part.

Shell and other leaseholders—including Statoil and ConocoPhillips—have been lobbying the Department of the Interior to extend their 10-year contracts in the Arctic. They’re similar to lease agreements for other offshore drilling zones, like the Gulf of Mexico, but the oil companies argue that Arctic drilling takes more time, because the exploration window is shorter in icy waters.

In an email Friday, Shell spokesperson Megan Baldino said the company is still waiting to hear back on its request for extended leases. At the same time, she said the company is also reviewing the draft analysis of the Chukchi lease sale.

KUCB’s Lauren Rosenthal contributed to this story.