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Shell cancels 2009 off-shore drilling program

Decision means loss of 700 jobs, more than 100 support service jobs on North Slope

Posted: Friday, December 19, 2008

ANCHORAGE - Shell Oil has canceled its exploratory drilling program for next year in Alaska's Beaufort Sea while it focuses on court challenges to its offshore plan.

The decision means the loss of about 700 jobs directly related to the drilling program and more than 100 local support service jobs on the North Slope, Shell Alaska spokesman Phil Dyer said Thursday. It also means Shell won't be investing tens of millions of dollars in Alaska next year, he said.

The original intention was to establish a rig offshore and drill three exploratory wells in 2009, Dyer said. Instead, the oil company will put together a drilling plan for 2010 and 2011 that will include both the Beaufort and Chukchi seas.

Shell Oil also announced Thursday that it was canceling its seismic program in the Beaufort for 2009. But Dyer said that decision was unrelated to the recent court decision. The seismic program was canceled because the company already has the information it needs, he said.

A three-judge panel of the 9th Circuit Court of Appeals ruled last month that federal regulators improperly granted Shell Oil permission to drill in the Beaufort Sea. The Minerals Management Service environmental assessment had determined that the proposed exploration "would not significantly affect the quality of the human environment."

But the court ordered the Minerals Management Service to reconsider how exploratory drilling would affect wildlife and Inupiat Eskimo subsistence hunting and fishing.

According to Shell, the agency performed a complete analysis of the company's exploratory plan and correctly found that it would have minimal impact on marine mammals and subsistence activities. Shell maintains that the court ignored the expertise of federal regulators.

Shell said Thursday that it now wants the full 9th Circuit Court of Appeals to rehear the case. It plans on filing a petition with the court.

Dyer said Shell has no intention of abandoning its efforts to drill offshore in Alaska but has to adjust its plans given the court challenge.

Kevin Banks, director of the Division of Oil and Gas at the Alaska Department of Natural Resources, said Shell's decision is troubling.

"They can say they will be back in 2010 but it would depend of course on them having some success working its way through the court," he said.

In 2005, Shell Exploration & Production Co., part of Royal Dutch Shell PLC, spent more than $44 million for 84 offshore leases in the Beaufort Sea.

MMS in February 2007 approved an outer continental shelf exploration plan submitted by Shell Offshore Inc. Shell proposed to drill up to 12 exploration wells on 12 tracts over three years.

The company waited until last June to cancel its drilling plans for 2008. Dyer said Shell did not want to wait that long again.



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