Resource Development Council

RDC Comment Letter:
Shell's 2011 Exploration Plan for the Beaufort Sea
and Oil Discharge Prevention and Contingency Plan

December 21, 2010

Mr. John Goll, Regional Director
Bureau of Ocean Energy Management, Regulation & Enforcement
3801 Centerpoint Drive, Suite 500
Anchorage, AK 99503-5820

Re: Shell’s 2011 Exploration Plan for the Beaufort Sea and Oil Discharge Prevention and Contingency Plan

Dear Mr. Goll:

The Resource Development Council (RDC) appreciates the opportunity to submit comments on the Shell’s 2011 Exploration Plan for the Beaufort Sea and the associated Supplemental Environmental Assessment. RDC urges the Bureau of Ocean Energy Management, Regulation & Enforcement (BOEM) to approve Shell’s 2011 open water season exploration plan in the Beaufort Sea and its Oil Discharge Prevention and Contingency Plan (ODPCP), especially given the unprecedented steps the company has taken enhance its program.

RDC is a statewide membership-funded organization founded in 1975. Our Alaskan membership is comprised of individuals and companies from Alaska’s oil and gas, mining, timber, tourism, and fisheries industries, as well as Alaska Native corporations, local communities, organized labor, and industry support firms. RDC’s purpose is to link these diverse interests together to encourage a strong, diversified private sector in Alaska and expand the state’s economic base through the responsible development of our natural resources.

Shell’s 2011 exploration plan and ODPCP have been revised to include provisions to reduce discharges to the marine environment and to bolster its previously approved exploration plan, which underwent extensive public review and met or exceeded all federal and state regulatory standards. The plan was also reviewed and upheld by the 9th Circuit Court of Appeals.

In light of the Gulf of Mexico oil spill, Shell has taken significant steps to prevent any well control event at its exploration well and to strengthen its response capabilities in the highly unlikely event of a blowout. Shell is prepared to stop the flow quickly and to collect or clean up any spilled oil from the environment, using assets that will be pre-staged in the Arctic.

The new support vessels Shell has added to its project on a standby basis will enhance response capabilities.

Shell’s oil spill contingency plan is robust and includes capabilities for the recovery of a “worst case” discharge. Oil spill response personnel, vessels and equipment will be pre-staged in the area to respond immediately should an oil spill event occur. The company itself is well prepared to prevent any well control event. Well control is the primary emphasis of all of Shell’s exploration plans. Every activity is geared toward maintaining well control and integrity. Shell has committed to deploying the latest and best available technology to carry out its program.

Drilling in the Arctic offers distinct differences compared to deepwater drilling in the Gulf of Mexico. The pressure encountered in deepwater drilling is multiple times greater in the Gulf of Mexico than in Alaska where wells would be in shallow water. Another distinction is that many Alaskan offshore operations are seasonal in nature. For example, Shell has proposed conducting its exploratory drilling during the summer and fall open water season. Ice management vessels will be positioned on site to deflect any ice flows that could potentially approach a rig. There are also major differences between state and federal oversight and regulatory frameworks, as well as fundamental differences in the geology of the regions. All of these contrasts warrant special consideration in public policy decisions and should lead the BOEM to conclude that exploration should move forward in the Beaufort Sea in 2011.

RDC has a high level of confidence exploration and development can occur safely in the Arctic – with no significant impact to the environment, polar bears, or other species. BOEM’s own analysis of the impacts of Shell’s exploration plan, which included a detailed cumulative impact analysis of a multi-well program, determined that exploration would have no significant impact on the marine environment or wildlife. The processes and safeguards in place today in Alaska should allow exploration activity to resume safely in the Alaska OCS.

While the Chukchi and Beaufort Seas are considered frontier areas, exploration activity has occurred there before. In fact, thirty wells have been drilled in the Beaufort and five in the Chukchi – all without incident. These wells were drilled in the 1980s, utilizing older technology compared to what exists today. Moreover, there has never been a blowout in the Alaska or the Canadian Arctic that has resulted in an oil spill.

Opponents of oil exploration have cited the lack of infrastructure in the Arctic as a reason not to drill in the region. However, it is important to note that additional infrastructure will be built to accommodate future needs once exploration and development activities move forward. The lack of infrastructure today is due directly to the fact that there has been virtually no ongoing development or commercial activity of any kind offshore in the Arctic. However, Shell has committed to stage extensive resources onsite to immediately respond to any incident. In addition, the Alaska Clean Seas consortium has substantial resources and experience in the Arctic and has done extensive mapping to identify sensitive areas. The consortium has also conducted extensive safety and oil spill drills in the Arctic and has active research programs dating back into the early 1980s.

It is important to note that not all questions and concerns regarding oil and gas exploration and development can possibly be answered and met. Not all risks can be eliminated. If the federal government insists that every concern and risk be eliminated, then it must be prepared to import virtually all the oil the nation requires to meet future needs. It must then also accept the consequences of a much heavier reliance on foreign oil, including soaring trade deficits, a weaker and more vulnerable economy, and compromised national security. Put another way, failure to move forward with OCS development in Alaska will put the state economy at risk, as well as the nation’s security.

OCS oil and gas development is absolutely critical to Alaska’s future economy. With the Trans- Alaska Pipeline System (TAPS) now running at one-third capacity, exploration blocked in the Arctic National Wildlife Refuge (ANWR), and non-development activists working toward Wilderness designations in the National Petroleum Reserve (NPR-A), nothing less than Alaska’s future economy is at stake.

The responsible development of potentially immense oil and gas deposits in the Arctic would significantly boost the economy and extend the life of TAPS. Without new federal oil production, TAPS could be uneconomic to operate at some point in the next decade.

Between ANWR, NPR-A and the Alaska OCS, there could be nearly 40 billion barrels of oil in place. By comparison, 16 billion barrels of oil have been produced on state lands across the North Slope in 33 years. The sustainability of TAPS and Alaska’s economy will largely depend on some combination of oil production from these federal areas, which represent the nation’s best onshore and offshore prospects for major discoveries.

Not developing federal oil in Alaska makes no sense from an economic and energy security stand point, especially given the fact that America imports over 60 percent of its oil, and at a great cost. American oil production is projected to decrease by 9.9 billion barrels within the next 20 years, nearly a 15 percent annual decrease from current levels. Meanwhile, imports of oil from OPEC are projected to increase by 4.1 billion barrels, nearly 19 percent – and at a cost of $607 billion.

New production in the Alaska OCS would reduce America’s reliance on foreign energy. The Alaska OCS is an important future source of U.S. energy supply with up to 29 billion barrels and over 200 trillion cubic feet of natural gas potentially in place. The potential recoverable reserves offshore Alaska is more than all the current total proven U.S. oil reserves of approximately 21 billion barrels. Alaska could have the ninth largest oil resources in the world ahead of Nigeria and Libya – if access is granted to these potential reserves. Moreover, OCS gas reserves would significantly improve the long-term economic viability of the proposed gas pipeline from the North Slope to the Lower 48 – a clean energy priority of the Obama administration. To become a reality, the pipeline requires additional gas reserves beyond what has already been discovered onshore.

Given its potential for immense recoverable reserves and enormous economic benefits to the state and nation, the Alaska OCS should be opened to responsible development. Shell’s Beaufort Sea exploration plan for 2011 would be a good first step. OCS development in the Beaufort and subsequent development in the Chukchi Sea would generate hundreds of billions of dollars in royalty and tax revenues to the state and federal governments and aid the nation’s economic recovery by reducing the trade deficit and creating tens of thousands of new jobs. All 50 states would benefit, including steel and pipe manufacturers in the Midwest, shippers along the coasts, and high-tech industries in the Western states. Union labor would benefit from pipeline construction and maintenance.

The OCS can sustain Alaska’s economy for generations. Currently there are more than 108,000 Alaskan jobs tied to the discovery, production and shipment of Alaskan oil and natural gas, accounting for more than 15 percent of Alaska’s population. According to a University of Alaska study, OCS production could provide an annual average of 35,000 additional jobs within the state for 50 years and $72 billion in new payroll.

RDC and many Alaskans share President Obama’s view that America needs to conserve more and put new emphasis on renewable and alternative energy. By doing so, the nation can ultimately break its reliance on foreign oil. Yet while America must conserve more and move toward renewable energy, it still needs to pursue new oil and gas production, given the fact it will take decades before renewable energy becomes a dominant energy source. Even with the Obama administration’s goal to decrease dependence on oil, it is projected that fossil fuels will still account for two-thirds of this nation’s energy consumption in 2025. Meanwhile, every barrel of oil that is not produced in the U.S. will be imported from abroad to meet our needs. Given economic, environmental and geopolitical concerns, America must produce more of the oil it consumes – under American laws, regulations and oversight, and by American workers. It is vital that Alaska’s abundant offshore energy resources be fully utilized for compelling economic and energy security reasons.

In concluding, I would like to quote from a December 2, 2010 editorial of the Anchorage Daily News: “Let Shell go to work in 2011 to explore for oil – and also restore faith in the industry’s ability and will to do it right, to tap Alaska’s oil and gas treasure while abiding by the highest environmental and safety standards on the planet. We need the oil. We need the jobs. And we need to provide them while protecting the Arctic environment and its communities.” This statement accurately reflects the sentiment of RDC and most Alaskans regarding Shell’s proposed exploration program.

RDC encourages BOEM to act in a timely manner to allow Shell to proceed with its 2011 exploration program in the Beaufort Sea.

Resource Development Council for Alaska, Inc.

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