April 9, 2014
Coast Guard Report Raises More Questions for Shell and Government
Shell and other oil companies are focused on the Arctic Ocean as a potential new frontier for energy development. Despite the lack of adequate baseline information and any proven technology for responding to a spill in icy Arctic waters, United States government regulators have repeatedly made decisions to allow leasing and exploration activities and have granted necessary approvals. The company’s push to drill and government acquiescence put at risk coastal communities and vibrant ecosystems filled with iconic animals such as bowhead whales, walrus, and polar bears.
Shell’s efforts have been beset by poor management, failures to appropriately assess or mitigate risks, and lack of attention to detail. These failures are premised on government decisions and approvals that were poorly justified, based on insufficient analysis of potential impacts to the Arctic, and, in some cases, found to be illegal. The result of industry and government mistakes? Frustration, litigation, inefficiency, and Shell’s failed 2012 drilling efforts. Among other substantial problems, the company’s attempts to drill exploration wells in the Chukchi and Beaufort seas in 2012 eventually led to the grounding of the Shell’s drill rig, the Kulluk, near Kodiak, Alaska and provided further evidence — if any was necessary — that companies like Shell are not prepared to operate in remote and unforgiving Arctic waters.
Last week’s Coast Guard “Report of Investigation into the Circumstances Surrounding the Multiple Related Marine Casualties and the Grounding of the MODU KULLUK On December 31, 2012” is the culmination of more than a year of investigation into the causes of the grounding of the Kulluk. Several of the facts in the Coast Guard’s report have received substantial attention—in particular, the Aiviq master saying that he believed that leaving Dutch Harbor with the proposed “length of tow, at this time of year, in this location, with our current routing guarantees an ass kicking.” The report also highlights the fact that Shell and its contractors prioritized financial gain and convenience ahead of common sense and safety by deciding to move the Kulluk at a risky time of year in order to avoid paying $6 million in state taxes.
The report follows another critical review prepared by the Department of the Interior, Notices of Violation issued by the Environmental Protection Agency identifying violations of the Clean Air Act, and separate Coast Guard findings related to safety and discharge violations aboard Shell’s drilling vessels. Together, these analyses paint a very clear picture of a company that is either woefully unprepared or unwilling to take the necessary precautions to operate safely in the Arctic Ocean. It also shows again that government agencies planned poorly and failed to ensure Shell’s activities were carried out safely.
And, so, we all — Shell, the government, Alaskans, and other Americans — sit at a crossroads. Shell has to decide whether it is in its shareholders’ best interests to continue to throw good money after bad — currently more than $5 billion — at what the best available public information collected here suggests is likely to be an uneconomic natural gas find while risking another, more significant accident. The company should take a hard look in the mirror and decide whether, in fact, it is capable of the care and attention to detail that Arctic waters demand.
The government has been forced by the Ninth Circuit Court of Appeals to revisit its choice to offer leases in the Chukchi Sea, has committed to preparing Arctic-specific safety and response standards, and should take the opportunity now to fundamentally revisit whether it should allow Shell or other companies to explore for oil in the harsh and remote Arctic conditions. Alaskans and all Americans can take this opportunity to make sure that costs, risks, and benefits of oil exploration are being equitably balanced—we deserve more than the current situation in which Shell benefits from choices to allow leasing and exploration drilling, while we and the world’s oceans bear all the risks.
Ultimately, good corporate governance, government accountability, stringent standards, and wise planning are the keys to improving stewardship for important Arctic Ocean resources. We all want healthy ocean ecosystems and affordable energy. As Shell’s 2012 season and all of the subsequent analyses, including the Coast Guard report, show, allowing a demonstrably unprepared company to operate in the Arctic Ocean will get us neither. Rather than continued failed policies based on poor decisions from the past, it is time to step back and re-evaluate whether and under what conditions to allow industrial activities in the Arctic Ocean.
