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Shell will be under closer watch

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Government’s report on Arctic woes too mild, activists argue

By Jennifer A. Dlouhy | March 14, 2013

WASHINGTON – The Obama administration on Thursday vowed to keep a closer watch on all areas of Shell’s Arctic drilling operations – from 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 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.”

But Salazar said that the Arctic drilling inquiry findings – and the plans for tougher scrutiny – would apply solely to Shell Oil. 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.

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.

Salazar emphasized the Obama administration is committed to Arctic energy development, particularly as other nations seek oil at the top of the globe. But he said 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. 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 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 and will have 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.”

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

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