Shell Faces Pushback As Alaska Drilling Nears

June 19, 2012

The federal government could soon give the final go-ahead for Royal Dutch Shell to begin drilling for oil in the Arctic Ocean. Shell has spent $4 billion since 2007 to prepare for this work, and is hoping to tap into vast new deposits of oil.

But the plan to drill exploratory wells is controversial — opposed by environmental groups and some indigenous people as well.

You can get a feel for this controversy by stepping aboard the Nanuq. Shell plunked down $100 million for this 300-foot-long, Arctic-class spill-response vessel. And unlike similar vessels that serve the oil industry in the Gulf of Mexico, there’s no foul-smelling black smoke coming out of the stacks.

“They retrofitted this vessel with clean-air technology just to keep those emissions down,” says Shell scientist Michael Macrander. “All of our vessels have been worked on to keep our emissions down.”

That’s not simply because Shell is big-hearted. The company’s plans to drill in the Arctic last year were thwarted when environmental groups successfully petitioned the EPA to reject the company’s original air-quality permits. Shell switched to low-sulfur fuel and installed particle scrubbers to meet the higher standard. So the fleet heading north is a lot cleaner than it would have been in 2011.

Air isn’t the only issue. Inupiat who live along the north coast of Alaska have been worried that oil exploration could scare away the whales they hunt. The company has taken steps to address those concerns.

“That goes all the way to agreements with the Alaska Eskimo Whaling Commission to shut down during critical periods while they are hunting,” Macrander says.

Shell says it will pull its drilling rig out of the Beaufort Sea for weeks during the summer whale hunt. And Macrander also notes that the Nanuq is painted blue and white because Inupiat told Shell that those colors are less likely to scare whales.

‘We’re Not Ready Scientifically’

Those accommodations have tempered Inupiat opposition to the drilling. But they don’t satisfy environmental groups. Everyone from Greenpeace to the Sierra Club to the Alaska Wilderness League continue to fight a pitched battle to block Shell.

“We’re not ready scientifically, we’re not ready in terms of having effective cleanup, and we’re not ready in terms of having the regulatory oversight mechanism that we should have had,” says Lois Epstein of the Wilderness Society in Anchorage.

Epstein says government agencies don’t have enough technical staff to fully evaluate oil and gas operations. She says it helps a bit that the government has decided to put inspectors on the Arctic drilling rigs for the entire time they are drilling offshore. But that’s not enough.

Another concern for environmental groups is that the federal government has been leasing tracts to oil companies without first stopping to figure out what parts of the Chukchi and Beaufort seas should be set aside as wildlife preserves. Scientists are still trying to identify the most critical habitat for marine mammals, Epstein says.

“When we do identify areas that are highly productive in terms of calving and important in terms of raising young, we should set aside those areas to assure that whales and other marine mammals have that habitat,” he says.

Scientific research has accelerated in the region over the past few years — funded primarily by Shell and other oil companies, and carried out largely by academic researchers. Macrander argues that they’re making good progress in closing the data gaps that previous reviews have identified. But Epstein says development is simply happening too fast, in an area where so much is at stake, for the environment and for the native peoples.

“Yes, there’s enormous pressure to go after the Arctic, but we’re not so desperate right now that we have to do that,” she says.

Keeping The Petroleum Economy Going

Environmental groups reach sympathetic ears in the Lower 48 states, but that’s not the case in Alaska. Scott Goldsmith, an economics professor at the University of Alaska Anchorage, says most Alaskans are excited that Shell is about to start drilling offshore.

“It could be one of the next big events that will keep the petroleum economy going for another generation or more,” he says, adding that most Alaskans care more about the petroleum economy than they do about the pristine Arctic.

The economic concerns have been growing because oil production from Alaska’s major sources has been in real decline. Drilling offshore could turn that around dramatically.

There are potentially 25 billion barrels of oil up there, arguably worth several trillion dollars. So it’s no mystery why Shell has already invested $4 billion on this prospecting. The company will doubtless spend a lot more before oil could start to flow.

“The costs are big but the volumes are substantial,” says Pete Slaiby, Shell’s vice president for Alaska. “The only area in the U.S. with potentially more resource would be those remaining in the deep-water Gulf of Mexico.”

Slaiby says if they do find rich pockets of oil, it will take at least a decade to drill production wells and to string pipeline to carry the oil to shore and on to market.

And Shell isn’t the only company interested. ConocoPhillips and Statoil hope to start drilling exploratory wells next year.

So will the Arctic Ocean eventually bristle with thousands of oil rigs, like the Gulf of Mexico? Slaiby doubts it. Modern technology requires far fewer oil-production platforms. And the harsh conditions will keep out everyone but the big guys, “so it will never, in my view, have that kind of industrial look that the Gulf of Mexico might have.”

‘We Didn’t Know You Guys Were Here’

Since the BP blowout in the Gulf of Mexico, there has been enormous attention paid to the risks of offshore oil. The situation in Alaska is different from the Macondo — the water is only a few hundred feet deep, unlike the 5,000-foot depth in the Gulf, so it’s less technically challenging.

On the other hand, the Arctic Ocean is so far from major ports and airports that it would be a major challenge to mount a large-scale spill response. The U.S. Coast Guard doesn’t have vessels stationed along the North Slope of Alaska, though this summer, at least, the agency is planning to have a full-time presence in the region.

And with all the buildup to this drilling season, it may come as a surprise to learn that this is not, in fact, the first time Shell has drilled in the Beaufort and Chukchi seas north of Alaska.

“We drilled wells two decades ago, drilled them all successfully without any kind of major incident,” Slaiby says. “And the greatest compliment I hear about that is one I hope to get at the end of 2012, and that is [people saying], ‘We didn’t know you guys were here.’ ”

Actually, there is one way that Shell wants to make its presence felt — in creating jobs, and the political support that comes with them. Slaiby says these operations could ultimately generate 55,000 jobs — a huge number for sparsely populated Alaska.

And they’re already starting to hire.

Onboard the Nanuq spill cleanup vessel near Valdez, Robert Long is one of the nearly 200 Alaskans hired for spill cleanup duty.

“The pay’s good, the work’s good here,” says the 50-year-old Alaska native.

Are he and the members of his community concerned about an oil spill? “I’m sure anybody is,” he says. “You know if there is [one], we’ll be right there cleaning it up.”

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