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January 09, 2013
Dangerous Mishaps Plague Shell's Arctic Exploration
    by Robert Kropp

The Department of the Interior launches an expedited review of Shell's drilling program after a drill rig runs aground in the Gulf of Alaska.

In August, 2011, the US Department of the Interior's Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) granted Royal Dutch Shell the initial permits to begin drilling for oil in the Alaskan Arctic. At that time, BOEMRE stated that it "found no evidence that the proposed action would significantly affect the quality of the human environment."

Shell's exploration plan estimated that in the event of a massive spill it had the capability of recovering 90% of the oil released; an estimation that Rebecca Noblin, Alaska Director for the Center for Biological Diversity, described as "absolutely ridiculous." Only five percent of the oil released during the Gulf of Mexico disaster was recovered, and eight percent from the Exxon Valdez spill in 1989.

The most recent of several examples of Shell's lack of preparation for drilling in the Arctic occurred hours before this New Year, when its drill rig, the Kulluk, ran aground on an island in the Gulf of Alaska. The rescue effort, which involved hundreds of people, succeeded in pulling the rig off the rocks without loss of life or evident damage to the habitat.

According to news reports, a factor in Shell's decision to tow the Kulluk before January 1st was Alaska's oil and gas property tax. Because Shell failed to tow the rig out of Alaskan waters, it will be liable for what the company itself described as "multiple millions" in taxes.

As a result of the accident, the Department of the Interior "launched an expedited, high-level assessment of the 2012 offshore drilling program in the Beaufort and Chukchi Seas to review practices and identify challenges," which is expected to be completed within two months. "The review…will pay special attention to challenges that Shell encountered in connection with certification of its containment vessel, the Arctic Challenger; the deployment of its containment dome; and operational issues associated with its two drilling rigs, the Noble Discoverer and the Kulluk," the Department stated.

The review will be conducted by BOEMRE, the same agency that awarded Shell the exploration permits in the first place.

According to the Interior Department, "The review is consistent with the Administration's commitment to safe and responsible exploration for energy resources in the Arctic."

However, Susan Murray of Oceana said in a statement, "Shell is obviously not prepared for Alaskan waters. The Kulluk accident began in weather conditions for which any reasonable operator should have been ready. As the reported criminal investigation into Shell’s other drilling vessel, the Noble Discoverer, shows, Shell is incapable of protecting its own employees' safety or our oceans."

"Shell's choices put lives and our oceans at risk," Murray continued. "Our government is complicit in Shell's failures. Regulators allowed operations that prioritized profit over common sense."

In an Investor Briefing, the UK-based FairPensions identified a number of serious problems in Shell's Arctic activities, including the grounding of the Noble Discoverer drill ship, unpreparedness for weather conditions, and inadequate spill response equipment.

FairPensions advised investors to ask the following questions:

• Does Shell have any plans to conduct more rigorous testing of its spill response equipment (particularly well containment devices) in Arctic conditions;
• Why was the company seemingly unaware that the Arctic Challenger was unfit for certification by the Coast Guard;
• What level of oversight did Shell’s board of directors exercise over the company's 2012 Alaskan Arctic plans;
• Will the company carry out an analysis of the environmental and financial worst-case scenario and make it available publicly; and
• Has the company carried out a spill response gap analysis of its prospects in the Beaufort and Chukchi seas?

Last May, a report from Greenpeace warned investors of "the potential environmental and financial impact of any potential major oil spill," which, the report points out, "has not yet even been assessed."


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