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Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

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More Trouble in the Arctic for Shell

A US court decision may delay Royal Dutch Shell’s drilling plans in the Arctic in a small victory for environmentalists and Native American groups.

A panel of judges on the US Court of Appeals for the Ninth Circuit has agreed with environmentalists and Native American groups that the government acted illegally and with “incomplete information” when it moved to open up a 30-million-acre area of the Arctic to oil and gas exploration.

The court decision could delay Shell’s bid to resume drilling in the Arctic this summer, which it officially launched last November.  

Related article: Rising Costs Hit Balance Sheets of Major Oil Companies

Shell is the biggest leaseholder in offshore Alaska, in the Chukchi Sea, and the only company to have drilled in the Arctic in recent years.

The influential Sierra Club sued the US government after the $2.6 billion sale of leases covering a continental shelf in the Chukchi Sea in 2008.

Among other things, the Sierra Club claims that energy companies such as Shell and ConocoPhillips could reap far more oil than the 1 billion barrels the Interior Department claimed was available.

This week, the US Court of Appeals determined that the Interior Department leases in question, opening nearly 30 million acres to exploration drilling, were based on a flawed estimate of 1 billion barrels of economically recoverable oil for the scope of production.

The department must now analyze its decision and disclose the potential environmental impacts oil exploration could causes in the area. The US Department of the Interior is also expected to re-examine Shell’s licenses, which could delay or even halt its plan.

Related article: Shell, Gazprom Neft Eye Siberia’s Bazhenov as Next Bakken

To date, Shell has invested well over $5 billion in its Arctic drilling projects and spent six years fighting legal challenges from environmental groups.

A particularly disastrous year for Shell in the Arctic was 2012, when it opted to suspend drilling altogether before completing a single well. Problems with ice and requirements for permits thwarted Shells Arctic plans in the summer of 2012 and then one of its drill ships, the Kulluk, was damaged when it ran aground.

Shell also had to pay $1.1 million in fines for air quality violations, and ran into problems obtaining an air permit from the Environmental Protection Agency for the emissions from the drill ships.

By. Charles Kennedy of Oilprice.com


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