Shell Blames Everyone But Itself in Request for Suspension of Arctic Leases - Oceana USA
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November 3, 2014

Shell Blames Everyone But Itself in Request for Suspension of Arctic Leases

Two life rafts sit on the beach adjacent to Royal Dutch Shell's conical drilling unit Kulluk 40 miles southwest of Kodiak City, Alaska, Jan. 3, 2013. The Kulluk was grounded after efforts by U.S. Coast Guard and tug vessel crews to move the vessel to a safe harbor during a winter storm during a tow from Dutch Harbor, Alaska, to Everett, Wash. (U.S. Coast Guard photo by Petty Officer 2nd Class Zachary Painter/Released)

In a letter dated July 14, 2014, Shell appears to request that the Bureau of Safety and Environmental Enforcement (BSEE) bend its rules to allow an extension of the 10-year term for the company’s oil and gas leases in the U.S. Arctic Ocean.  The company claims that circumstances that were “unexpected” and “beyond Shell’s control” have created a situation in which leases in the Chukchi and Beaufort seas may expire before exploration drilling can be completed.  Shell, of course, has yet to complete a single exploration well on any of the leases it owns currently, and the company seems to point its fingers everywhere but where the blame lies—with its own poor decision-making and failure to appreciate risk and manage expectations.  

Shell claims that the company’s failures are due to factors such as accommodating Native whaling, government failures brought to light in successful lawsuits and agency appeals, and proposed new regulations.  The arguments it makes that these occurrences were unexpected or beyond its control are, at best, disingenuous.  The company obviously knew—or clearly should have known—about its legal obligations to protect subsistence harvest, the difficult conditions in the Arctic, and about the potential problems with government analyses.

Moreover, as it has repeatedly done, Shell entirely fails to acknowledge its own role in creating this situation.  There is no mention of the management and other problems that led to Shell’s failures in 2012.  Nor is there any acknowledgment that Shell has invested substantially more than other companies, pushed harder for approvals, and generally encouraged the government to speed up processes—rather than doing them right.  

In the letter, Shell acknowledges the difficulties of operating in the Arctic, with challenges including the lack of “basic infrastructure,” and shows why we should be asking whether good planning, effective risk management, and a careful reconsideration of whether safe exploration or development in the Arctic is possible at this time. These acknowledgements come on the heels of Shell’s arguments to the White House Office of Management and Budget that Arctic-specific safety and prevention regulations are unnecessary and too costly.  So, on the one hand, the company blames the unique Arctic Ocean conditions for its inability to complete exploration wells while, while on the other, saying that it is too costly to account for those conditions when seeking to prevent and respond to spills. Shell cannot have it both ways. 

The plight of a shipping barge that is stuck in the Beaufort Sea is illustrative of both the conditions and the lack of resources available for emergency response in the Arctic, as would be needed if an oil spill occurred. The barge, which is carrying a substantial amount of diesel fuel, was separated from its tug boat during a storm last week.  With all attempts to retrieve it failing, and sea ice rapidly forming, the barge will most likely remain stuck in the Beaufort Sea until the spring or summer of next year. 

Ultimately, Shell bought its leases fully aware that they would expire after 10 years.  The problems it has encountered are largely of its own making, and the government owes the company no special treatment.  It may very well be that the realities of attempting industrial activities in the Arctic require special rules and considerations.  We should insist that all of those new rules are in place before decisions are made to sell leases or allow activities.  Perhaps the best course is to allow the existing leases to expire and start afresh with new rules and an insistence that companies prove they can operate safely and without harming ocean resources before decisions are made to sell leases or allow exploration.

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