Shell Scales Back Proposed Arctic Drilling Plan

Yereth Rosen, PlanetArk 21 Feb 08;

ANCHORAGE - Royal Dutch Shell has offered to scale back its oil drilling plans in the Beaufort Sea in order to win the lifting of an injunction against the activity, but the move is unlikely to placate opponents of the plans.

Alaska natives won a court order blocking Shell's plan to drill in the Beaufort last summer, but the major is hopeful that it can persuade the Alaska native groups that led the legal challenge to drop their opposition.

"We felt, let's digest this in digestible chunks, let's proceed in digestible chunks, so the communities can see from the experience of it that this is very manageable," Shell's US president, John Hoffmeister, told Reuters on the sidelines of a industry conference this week.

Shell now plans to use one drilling rig instead of two when it tests its Sivulliq oil prospect off in the Beaufort Sea if the court lifts its injunction. Shell also plans to drill only partial wells -- called top-hole wells -- at the site which would not extend to the hydrocarbon reservoir.

But the proposed lower level of activity was not enough to convince some opponents.

"I just still don't feel reassured that there's a real good plan for oil spills with ice chunks as big as this building," said Siikauraq Martha Whiting, mayor of the Northwest Arctic Borough.

The Alaska native groups fighting the drilling plan are unlikely to go along with a less aggressive program either, said Erik Jorgensen, a Juneau-based lawyer for Earthjustice, an environmental law firm that represents the groups.

"They see all this activity as just being done far too fast, especially when the environment around them is changing so rapidly (due to climate change)," said Jorgensen.

"They want the government to carry out an entirely new environmental impact assessment study."

The waters of the Beaufort Sea are a traditional subsistence hunting ground for Inupiat native communities that live on the northern coast of Alaska. The area where Shell plans to drill is near calving grounds of the Bowhead whale.

A federal appeals court in San Francisco heard oral arguments in the case in December but has yet to issue a ruling on the challenge to the drilling.

Shell paid $44 million for the Sivulliq prospect during a federal sale of Beaufort Sea drilling rights in 2005 in the first move of the major's big return to Alaska.

More recently, Shell paid more than $2.1 billion for drilling rights in the adjacent Chukchi Sea at a federal lease sale earlier this month. Higher commodity prices and a dwindling amount of available acreage globally led Shell back to Alaska, company officials said.

Environmental groups are already challenging in court the federal government's move to sell acreage in the Chukchi Sea, a major polar-bear habitat.

(Additional reporting by Robert Campbell in Juneau, editing by Robert Campbell and Matthew Lewis)