Shell Delays Drilling in Arctic

Shell's Kulluk rig ran aground during storm, Dec. 31, 2012 (NOAA)

Shell announced that it would suspend drilling plans in the Arctic for 2013, waiting until next year at the earliest to being exploration of oil and gas. Environmentalists hailed the decision as a victory for the Arctic, but the company insisted that the delay was a temporary setback in a long-term plan to get oil from Alaskan waters. Shell's CEO stated that the decision is only a minor setback and its long-term plans remain intact. Alaskan Senator Lisa Murkowski issued a statement saying that the decision shows Shell's commitment to safety.

Maybe. But, the suspension is significant. No matter how you slice it, the inability to begin drilling, once again, demonstrates both Shell's mishaps as well as the extreme conditions under which it hopes to operate. Shell's seven-year misadventure in the Arctic has already cost over $4.9 billion without a single drop of oil to show for it.

After multiple years of delays, Shell hoped 2012 would be its year. But, last year was a year to forget for Shell's Arctic campaign, plagued by close-calls and near disasters. The drilling season was delayed due to icier than expected conditions. In July, Shell lost control of its drilling ship, the Noble Discoverer, when it slipped anchor and nearly ran aground. The incidence sparked cries that Arctic conditions were too dangerous to allow drilling to move forward.

In December, released emails showed that Shell's permits were not granted because its spill containment dome, which regulators have stated is a prerequisite to drilling, failed in safety tests. The containment dome is supposed to cover a blown out well at the bottom of the sea to contain an oil spill, but Shell's dome was "crushed like a beer can" when tested.

And to top it off, Shell's rig the Kulluk ran aground on December 31 as Shell hoped to move it out of Alaskan waters to avoid paying taxes.

For a complete rundown of Shell's mishaps in 2012, check out Kiley Kroh's post at Climate Progress.

The fact remains that for offshore oil drilling, which by its nature is inherently risky, the Arctic presents a whole new set of risks. Harsh storms, rough waters, sea ice, lack of infrastructure, and unproven oil spill response make the Arctic a particularly inhospitable place to operate. Other oil companies have decided not to drill in the Arctic for these reasons, and many are waiting to see how Shell fares before moving in.

The array of mistakes made by Shell has caused the Department of Interior to review its decision to allow drilling in the Arctic. Pressure was building on the administration, which has been favorably disposed to Arctic oil drilling up until now, to delay or shut down Arctic oil development.

What is particularly interesting about Shell's decision to suspend 2013 drilling operations is the possibility that they did so to avoid a backlash that could permanently halt drilling. Ostensibly, Shell called off plans so that it could get its drilling rigs repaired and be ready for 2014, but I wonder if Shell may have suspended this year's plans to let the regulatory storm blow over. In other words, if Shell had moved forward with drilling in 2013, public pressure may have forced the Dept. of Interior to crack down. Instead, Shell and the Dept. of Interior can claim that the delay will allow for the problems to be fixed, paving the way for drilling in 2014.

Interior's review of the Arctic program may be released in the next few days, which may decide Shell's Arctic plans beyond just 2013.