Feds release findings from Arctic drilling probe

The Obama administration on Thursday vowed to keep a closer watch on all areas of Shell’s Arctic drilling operations — from initial deployment to demobilization — before allowing the company to hunt for oil in the region again.

Interior Secretary Ken Salazar delivered the promise as administration officials wrapped up a high-level probe of blunders surrounding Shell’s hunt for oil in the Chukchi and Beaufort seas last year, including the out-of-control drift of a drillship, violations of federal pollution permits and the grounding of Shell’s Kulluk rig on an Alaskan island.

“Shell screwed up in 2012,” Salazar told reporters on a conference call. “And we’re not going to let them screw up (again).”

But Salazar stressed that the Arctic drilling inquiry findings _ and the plans for tougher scrutiny _ would apply solely to Shell Oil Co. And conservationists immediately rejected the report as a slap on the wrist that would do nothing to make Arctic drilling safer for the environment, wildlife or native Alaskan communities in the region.

Shell hopes to resume exploratory drilling in the region next year, after pausing operations this summer while drilling rigs are repaired in Asia. Separately, ConocoPhillips is laying the foundation to drill in U.S. Arctic waters in 2014.

Shell spokesman Curtis Smith said the company welcomed the findings. “Consistent with our recent decision to pause our 2013 drilling program, we will use this time to apply lessons learned from this review, the ongoing Coast Guard investigation and our own assessment of opportunities to further improve Shell’s exploration program offshore Alaska,” Smith said. “Alaska remains a high potential area over the long-term, and we remain committed to drilling there safely, again.”

Salazar emphasized the Obama administration is committed to Arctic energy development, particularly as other nations begin looking for oil at the top of the globe. But, he conceded, both government and industry need to proceed cautiously.

“The government still has a lot to learn. The Arctic is a very difficult environment to operate in,” Salazar said. “Shell is one of the most resource-capable companies in the world (and) they encountered a whole host of problems in trying to operate up there.”

Most of Shell’s mishaps happened while its rigs were traveling to and from U.S. Arctic waters, including the drillship Noble Discoverer’s out-of-control drift near Dutch Harbor, Alaska, last July and the grounding of its Kulluk rig as it traveled to a Seattle shipyard for maintenance. Shell and oil industry leaders have described the mishaps as maritime incidents, distinct from the drilling itself.

But the episodes illustrated that even routine maritime operations surrounding Arctic drilling can be risky, particularly given the scarce infrastructure and resources along Alaska’s northern coast.

The 52-page Interior report, prepared by Acting Assistant Secretary Tommy Beaudreau, signifies regulators will adopt a more holistic and aggressive approach to overseeing all aspects of Shell’s Arctic exploration program _ even when its drillships are far outside the region.

Based on the probe’s findings, Salazar said Shell will be required to submit a comprehensive, integrated plan describing every phase of its operations from preparations through demobilization. The company also will be forced to conduct a third-party audit to ensure its management systems are tailored for Arctic conditions.

The probe concluded that oIl companies working in the Arctic must “maintain strong, direct management and oversight of their contractors,” Beaudreau said. “This was an area where, frankly, Shell fell short, contributing to many of the problems Shell experienced last year.”

The report urges “close coordination among government agencies,” which may have jurisdiction over small pieces of Arctic drilling ventures, such as maritime transport, air pollution and emergency response. And it recommends that government and industry develop Arctic-specific standards for drilling, maritime safety and emergency response, given the uniquely challenging conditions in the region. But it largely absolves government agencies of any involvement in the mishaps last year.

Environmentalists said the Interior Department missed an opportunity to bolster Arctic oversight.

Mike LeVine, Pacific senior counsel for Oceana, said the Interior Department “is committing to business as usual” and appeared to be “simply shifting blame.”

“While this report might be a good first step, the Department of the Interior should implement necessary changes to its standards, regulations, and oversight obligations before it makes any decisions to allow future exploration activities by Shell or any other companies,” LeVine said.

Greenpeace’s U.S. executive director, Phil Radford, said the report “merely gives Big Oil a slap on the wrist” by requiring little more than additional “paperwork” before Shell can drill again.

The drillship Noble Discoverer and Shell’s conical drilling rig, the Kulluk, will be repaired in Asian shipyards later this year. A massive oceangoing heavy-lift vessel began hauling the Noble Discoverer to Korea for repairs on March 9 and the Kulluk could begin its own journey to a Singapore shipyard later this month.


Read more ongoing FuelFix coverage of Shell’s Arctic drilling troubles: