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Shell says drilling ‘pause’ will cost Alaskans jobs


Jill Burke | May 27, 2010

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In statements announcing a decision to shut down new exploratory drilling for oil and gas, the Obama administration on Thursday variously used the  words “pause,” “postpone” and “suspend” in reference to the implications for industry’s offshore future in Alaska’s arctic region.

For now, those words are the policy equivalent of a “top kill,” ending any hopes for Shell’s season of exploration on the very same day BP was attempting a “top kill” of its own in hopes hours of high-pressure mud injections would counteract and choke off its leaking gusher in the Gulf of Mexico.

“There’s nothing that’s going to get us to drilling in 2010,” said Curtis Smith, a Shell spokesman, when asked whether the language of the announcement left room for salvaging Shell’s summer operations in Alaska.

After the Obama administration’s announcement the company did seek, and receive, clarification that a suspension would be tallied in months, not years — an important distinction, according to Smith. A full year’s hiatus in permitting would effectively thwart the 2011 season, since beginning anew in May of next year would not allow enough time to mobilize for Alaska’s short open-water season before freeze up in late October. Knowing that the administration intends to withhold a decision on Shell’s drilling permits for months gives Shell a functional opportunity to attempt to get the permissions required under the Obama administration’s mandate for tougher oversight for next year.

“We are going to pursue drilling in 2011,” Smith said, but he admitted it will come at a cost that will have to be absorbed by Alaskans hoping for work this summer.

“Roughly 700-800 workers were envisioned in a full drilling program this year. That includes several Alaskan contracting companies. A large number of those jobs will not materialize,” he said.

According to some of the businesses in question, many of which are Native-owned, more than a hundred million dollars are collectively at stake.

In an unusually bitter twist of fate, the company whose disaster cost Shell its shot to drill this summer may be the sole company in Alaska allowed to access a new offshore oil deposit this year. This fall, BP hopes to drill to the outer continental shelf to access an as yet untapped deposit in the Beaufort Sea. The drill will depart from state waters, but reach six to eight miles offshore to hit its target. It will need a federal drilling permit for the section of the drilling operation that falls outside Alaska boundaries. Thus far the Interior Department has been silent on whether the new moratoriums will in any way affect BP’s project, dubbed “Liberty.” Liberty’s wellhead is located on a gravel island, and the language in the moratorium largely focuses on offshore operations located in sea depths of 500 feet and greater, or which originate from floating drilling platforms.

It may be BP is aware of the prickly temperament that may come from frustrated Americans watching the company work to mitigate the disaster in the Gulf while simultaneously pressing on with a plan that will stretch state-of-the-art technology — ultra-extended reach drilling — to new limits. BP’s own literature describes Liberty as an “offshore oilfield.” And late last month the company described it as an “offshore prospect.”  But asked Thursday if the project was at risk in light of the moratoriums, Liberty was described as a “near-shore” operation: “The development will reach near-shore resources with a land drilling rig from an existing satellite drilling island,” said BP spokesman Steve Rinehart via e-mail. “We hope to have first oil production in 2011.”

Heading into the Memorial Day Weekend, Shell is suffering déjà vu. In 2007, with its drill ships ready to drive into Alaska’s Arctic waters, a successful court challenge shut things down just weeks before Shell hoped to get underway. The concern then was over potential impacts of its activity to subsistence whale hunts, Smith said. The impact of the litigation lingered into the 2008 season, and the company chose not to attempt drilling in 2009. 2010 marked a deliberate return to the Arctic, one that followed Shell successfully turning a former and formidable foe — the North Slope Borough — into a leery but willing ally. (Underscoring the delicate relationship, on Thursday, Borough Mayor Edward Itta applauded the president’s decision to delay drilling.)


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