Arctic lease sale revisions: BOEM's Alaska OCS program at risk.

• Author: Bradner, Mike
• Position: SPECIAL SECTION: Arctic Oil & Gas

If Shell is unable to drill on its offshore Chukchi Sea federal leases this summer after years of delay, the credibility of the Outer Continental Shelf (OCS) oil and gas leasing program in Alaska may well reach rock bottom. This is important because the US Bureau of Ocean Energy Management (BOEM) is now planning OCS lease sales in the Chukchi and Beaufort seas in 2016 and 2017 and on January 27 announced a new five-year lease sale program with another Beaufort sale in 2020 and a Chukchi sale in 2022. BOEM says companies have expressed interest in the government having the future sales, so things are proceeding for now.

The Department of the Interior has also announced, however, that 9.8 million acres of sensitive marine areas in the Beaufort and Chukchi seas will be withdrawn from future lease sales. Much of this acreage had not been offered in previous sales, having been deferred, but the new designation is a more definitive statement that these lands will not be offered.

The areas withdrawn include three areas of the Chukchi Sea, a twenty-five-mile buffer area along the Alaska coast, an additional subsistence use area near Barrow, and the Hanna Shoal, an environmentally-sensitive area. Two areas of the Beaufort Sea are withdrawn, subsistence whaling areas near Barrow and Kaktovik, two Inupiat villages along the northern coast.

The coastal buffer and subsistence whaling areas are currently withheld from leasing but the Hanna Shoal is a new addition that would apply in the planned 2016 and 2020 Chukchi sale. The Hanna Shoal is a large area northwest of Barrow in the central Chukchi Sea area. The withdrawal does not affect existing leases--there are seven leases held by Shell (not Shell's primary targets for drilling, however) and three by Repsol--but rather that the acreage around the leases will not be offered in future sales including one planned in 2016.

All eyes are on Shell, however. The company has spent $6 billion, and if its drilling plans are frustrated again, seven years after the 2008 Chukchi Sea OCS lease sale, one can hardly blame the company for washing its hands of the business.

Given the track record it seems unlikely that ConocoPhillips, StatOil, and Repsol, the other companies holding leases from that lease sale, will pursue their drilling plans until Shell is allowed to drill.

Hopeful Shell

Shell is still hopeful, however, that it will get the green light to drill this year. As this is written, a positive development is that a Supplemental Environmental Impact Statement (SEIS) prepared by the BOEM is on track to be published in February with a final Record of Decision on the SEIS due in March.

The SEIS is being done to clear up an issue of litigation--the size of a potential discovery in the Chukchi Sea lease sale area--brought by environmental groups over the original 2008 Environmental Impact Statement (EIS) done for the lease sale. The revised estimate for discoveries in the sale area is 4.3 billion barrels of recoverable oil, an...