Shell cancels 2014 drilling off Alaska in court decision’s wake

Royal Dutch Shell PLC will not resume activity on federal leases it holds offshore Alaska in 2014 because a US appeals court’s Jan. 22 decision in a 2008 lawsuit against the US Department of the Interior has created significant uncertainties, company officials stated.

“We took a pause in 2013 to prepare for the next drilling season, we have added additional people and resources to the venture, we have updated our plans with what we had learned from 2012, and we have worked very closely with [Interior] and other government agencies in the US,” Shell Chief Executive Ben van Beurden said in a Jan. 30 conference call with investors.

“However, we are frustrated by the recent decision by the Ninth Circuit Court of Appeals in what is a 6-year-old lawsuit against the government,” he continued. “The obstacles that were introduced by that decision simply make it impossible to justify the commitments of cost, equipment, and people that are needed to drill safely in Alaska this year.

“We have to wait for the courts and the US administration to resolve this legal issue,” van Beurden said. “Given all of this, we will not drill in Alaska in 2014, and we are reviewing our options here.”

A three-judge panel in the Ninth US Circuit appeals court ruled a portion of the environmental impact statements prepared prior to federal oil and gas leasing off Alaska’s Arctic coast in 2008 was improperly prepared, and sent the matter back to the district court which heard the lawsuit for further action (OGJ Online, Jan. 24, 2014).

But it was not immediately clear what impact, if any, the court’s decision would have on Chukchi Sea leases awarded to Shell Gulf of Mexico Inc., ConocoPhillips Co., and Statoil USA E&P Inc. in OCS Lease Sale No. 193 on Feb. 6, 2008.

‘It’s frustrating’

“The lack of a clear path forward and an associated timeline makes it impossible to commit the resources needed to explore safely in 2014,” a Shell spokesman in Alaska told OGJ on Jan. 30. “It’s frustrating to be put in this position as we felt we were making solid progress toward a 2014 program.”

Shell already has endured multiple regulatory and legal delays, he noted. “Every year we are delayed from understanding the oil and gas resources under the Chukchi Sea only further delays the potential creation of tens-of-thousands of jobs, billions of dollars in tax revenue, and much-needed new oil for the Trans-Alaska Pipeline System,” he said.

Alaska’s congressional delegation quickly registered its dismay over Shell’s decision. US Sen. Lisa Murkowski (R-Alas.), the Energy and Natural Resources Committee’s ranking minority member, said she was disappointed but not surprised, “given the Ninth Circuit’s decision and the administration’s failure to provide regulatory and permitting certainty for oil development in the Arctic.”

Murkowski said, “We can’t expect Shell to continue to spend billions of dollars on this project when the rules keep changing,” adding that she expects the Obama administration to quickly address deficiencies the court identified in its analysis of OCS Lease Sale No. 193.

‘Simply unacceptable’

“It is simply unacceptable that judicial overreach is getting in the way of letting Alaskans develop our own natural resources,” said Mark Begich (D), Alaska’s other US senator. “I’ll be talking with [US] Interior Sec. Sally Jewell today and expect her agency to move quickly to address the court's questions and concerns and do everything possible to get this process back on track.”

US Rep. Don Young (R), the state’s only US House member, said President Barack Obama and his administration give lip service to offshore oil and gas development, but haven’t devised a clear production plan which they would be willing to defend, “including moving quickly to address all issues with the environmental assessment left in question by the courts.”

Young said, “If they are not committed to development in the Arctic, they need to be honest with their leaseholders who have already invested billions of dollars seeking the opportunity to drill. Right now, they’re looking to have it both ways.”

One environmental organization was not surprised by Shell’s decision following the court’s Jan. 22 decision. “Given these recent events, [Interior] should reevaluate its Arctic drilling efforts, including reconsidering Chukchi Lease Sale 193 through a full new Environmental Impact Statement,” Alaska Wilderness League Executive Director Cindy Shogan said.

Contact Nick Snow at nicks@pennwell.com.

Related Articles

Shell cuts $15 billion in spending for 2015-17

01/30/2015 Royal Dutch Shell PLC has curtailed more than $15 billion in potential spending over the next 3 years, but is not “not overreacting to current low ...

Victoria extends drilling, fracing ban

01/30/2015 The new Victorian Labor government of premier Daniel Andrews has extended the coal seam gas (CSG) exploration and hydraulic fracturing ban in the s...

Chevron’s $35 billion capital budget down 13% from last year

01/30/2015 Chevron Corp. will allocate $35 billion in its capital and exploratory investment program for 2015, including $4 billion of planned expenditures by...

US Senate passes bill approving Keystone XL pipeline project

01/30/2015 The US Senate has passed a bill approving construction of the proposed Keystone XL crude oil pipeline by a 62-36 vote after 3 weeks of debate. Nine...

Oxy cuts capital budget by a third

01/30/2015 In the midst of falling oil prices, Occidental Petroleum Corp., Houston, expects to reduce its total capital spending for 2015 to $5.8 billion from...

MARKET WATCH: NYMEX natural gas prices drop after storage report

01/30/2015 US natural gas closed at its lowest price in more than 2 years on the New York market Jan. 29 following the government’s weekly gas storage report,...

Pennsylvania governor reinstates state forest drilling moratorium

01/29/2015 Pennsylvania Gov. Tom Wolf (D) signed an executive order fully reinstating a 2010 moratorium on new oil and gas leases in state forests and parks. ...

PwC: Low oil prices might drive surge in restructuring in 2015

01/29/2015 Mergers and acquisitions (M&A) in the oil and gas industry hit 10-year highs in terms of deal value and volume in 2014, according to a report f...

DOE could meet 45-day LNG export decision deadline, Senate panel told

01/29/2015 The US Department of Energy would have no trouble meeting a 45-day deadline to reach a national interest determination for proposed LNG export faci...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST



On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected