Coast Guard Delays in the Arctic Have Broader Implications

After more than five years and $4 billion of planning and investment, Shell hopes to finally drill exploratory wells in the Alaskan Arctic this summer.  This important achievement will be a critical juncture on the road to greater American energy self-sufficiency.  For years, many have watched the company wade through a labyrinth of legal challenges and federal delays. Just as in the Gulf of Mexico, development of our abundant natural resources off Alaska’s coast will be vital to addressing our future energy challenges, meeting demand and keeping energy and commodity costs reasonable.

At long last, Shell may just be days away from commencing its operations in the Alaskan Chukchi and Beaufort Seas – if the U.S. Coast Guard can quickly permit and approve one of the operation’s oil spill barges.  The nation should be watching.

According to an article posted yesterday, the U.S. Coast Guard is continuing final tests of the Arctic Challenger, a barge that Shell has voluntarily offered as an enhanced safety precaution that will serve as part of Shell’s larger oil spill response capabilities. The barge would only be necessary in the event that a blowout could not be prevented or contained by multiple levels of safety equipment – many of which are new requirements added since the Macondo accident in 2010. Shell has already announced that it will pursue a fewer number of wells this year thanks to regulatory delays and a shorter drilling season. If the window of opportunity narrows further, will more delays lead to yet another year of inactivity in the U.S. Arctic?

At this historic moment, it’s an opportune time to assess what this venture could mean for American consumers and the economy.  The Chukchi and Beaufort Seas off Alaska offer one of the most promising opportunities to bolster our fuel supply and grow our economy.  With an estimated 27 billion barrels of oil and 132 trillion cubic feet of natural gas, these resources could be a game-changer for Alaska, for West Coast residents who rely on Alaskan energy, and for consumers across the United States.  From plastics to fertilizer to shampoo and rubber, we all rely on oil and natural gas to meet our basis needs each and every day.

Due to natural declines in oil production in Prudhoe Bay, the volume of oil transported through the Trans-Alaska Pipeline has declined from over 2 million barrels a day in 1988 to an average of 595,000 barrels today. Operating in some of the coldest temperatures in North America, the warm-oil pipeline may not function properly at such low volumes and could be decommissioned in coming years if the volume of oil passing through it does not increase.  If new sources of oil do not come online and the pipeline were forced to close prematurely, West Coast refineries would lose an efficient, dependable way of transporting Alaskan oil to American consumers. Such a scenario would also be devastating to Alaskans who depend on the pipeline as a significant source of revenue and employment.

Shell’s venture additionally represents a much-needed first step for the United States into the Arctic – an area of increasing geopolitical importance for its bountiful natural resources and desired trade routes. America’s limited commercial and military presence in the region may pose difficulties as the United States seeks to advance our interests in the area going forward.  Shell’s drilling operations – and the government’s support of this endeavor – will be a key first test for other U.S. public and private interests looking to expand into this new frontier.

Clearly, much is riding on the final certifications of the Arctic Challenger and the ability of regulators to efficiently review and assess operations for final approval this summer.  Time is running out. We’ve witnessed far too many instances of regulatory delay, in this project and in numerous other energy and infrastructure projects. Ultimately, these delays stifle jobs, economic growth and the ability of our nation’s energy producers to deliver affordable, reliable supplies of fuel to consumers.  And, now all of these benefits rest on whether a barge – a vessel that will likely not be utilized and that is not even required by regulation, will be approved for service in the waning summer months.