Shell Cancels Chukchi Sea Drilling

President Obama boasted in his State of the Union address that "over the last three years, we've opened millions of new acres for oil and gas exploration." To give the impression of immediate action, he proclaimed: "Tonight, I'm directing my administration to open more than 75 percent of our potential offshore oil and gas resources. (Applause.)"

Back in the real world, Oil & Gas Journal reports that Shell has canceled 2014 drilling in the Chukchi Sea, west of Prudhoe Bay, Alaska, following a decision by the 9th Circuit Court on Jan. 22.

The oil field may contain as much as 12 billion barrels of crude, although, O&GJ reports, the U.S. Bureau of Ocean Energy Management settled on a somewhat arbitrary figure of 1 billion bbl "to reflect conservative crude oil price projections and unknown costs from operating in an Arctic offshore environment." Prudhoe Bay, the largest American oil field, originally had 25 billion barrels.

O&GJ reports comments from Shell Chief Executive Ben van Beurden:

"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.

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.

Regarding van Beurden's last point: according to the Alyeska Pipeline Low Flow Impact Study, with production diminishing in Prudhoe Bay, new oil is needed to keep the Alaska pipeline from freezing in winter months.

The president can "open" all the offshore acres he wants, but it's meaningless if three leftist judges in California can keep oil companies tied up in legal knots.

President Obama boasted in his State of the Union address that "over the last three years, we've opened millions of new acres for oil and gas exploration." To give the impression of immediate action, he proclaimed: "Tonight, I'm directing my administration to open more than 75 percent of our potential offshore oil and gas resources. (Applause.)"

Back in the real world, Oil & Gas Journal reports that Shell has canceled 2014 drilling in the Chukchi Sea, west of Prudhoe Bay, Alaska, following a decision by the 9th Circuit Court on Jan. 22.

The oil field may contain as much as 12 billion barrels of crude, although, O&GJ reports, the U.S. Bureau of Ocean Energy Management settled on a somewhat arbitrary figure of 1 billion bbl "to reflect conservative crude oil price projections and unknown costs from operating in an Arctic offshore environment." Prudhoe Bay, the largest American oil field, originally had 25 billion barrels.

O&GJ reports comments from Shell Chief Executive Ben van Beurden:

"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.

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.

Regarding van Beurden's last point: according to the Alyeska Pipeline Low Flow Impact Study, with production diminishing in Prudhoe Bay, new oil is needed to keep the Alaska pipeline from freezing in winter months.

The president can "open" all the offshore acres he wants, but it's meaningless if three leftist judges in California can keep oil companies tied up in legal knots.

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