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CAN SHELL SAFELY DRILL IN THE ARCTIC?

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By: MICHEAL KAUFMAN
Published: Mar 30, 2015 at 10:40 am EST

Shell Oil Company, subsidiary of multinational oil giant Royal Dutch Shell Plc (ADR) (NYSE:RDS), is conducting drilling tests in Bellingham, Washington, ahead of potential regulatory approval for drilling in the Arctic.

According to media reports, government officials in Washington are observing Shell’s oil spill response system, which is to be deployed in the Arctic. The testing comes two years after the oil company’s previous venture ended abruptly in 2012, after it failed a deployment test because of damage to its emergency containment system. The failure led to heightened concerns over environmental safety. However, the system, which was deployed on a barge, has since been certified after repairs were carried out.

Despite receiving the appropriate certification from the American Bureau of Shipping and the US Coast Guard, the barge, known as Arctic Challenger, is being tested by regulators to judge for further approval. As reported by FuelFix, Shell spokesperson Curtis Smith said, “We volunteered to demonstrate its capabilities to regulators in advance of 2015 drilling.”

Janice Schneider, Assistant Interior Secretary, Brian Salerno the Director of the Bureau of Safety and Environmental Enforcement and other government officials, have been invited by Shell to watch the deployment of the company’s containment system. To further ensure compliance with international laws and standards, inspectors from the US Coast Guard will also be present at the drilling exercise.

The Arctic Challenger, modified so it can be used to launch Shell’s emergency containment system, will be on stand-by as a precautionary measure, reinforcing the company’s lines of defense in case of an unexpected oil spill.

Shell already has multiple layers of protection in place, including a capping stack similar to the one deployed by BP Plc (ADR) (NYSE:BP) when it faced a leak at its Macondo well in 2010. The Macondo incident led to one of the world’s worst oil spills, which could result in a multi-billion dollar environmental penalty for BP.

The 2010 spill led to stricter regulations for the entire oil drilling industry while researchers are still trying to determine the magnitude of environmental damaged by the oil that crept deep into the ocean. Companies are expected to have additional layers of safety in place, to avoid a repetition of the horrors faced in 2010.

In 2012, when Shell’s emergency system failed a deployment test, environmentalists questioned how well the system would do in the harsh waters of Arctic, after failing a test in calmer waters. Similar concerns are surfacing even now as Shell continues testing. As FuelFix has reported, a spokesperson for Greenpeace USA has expressed his concerns over how Shell could use emergency equipment like Arctic Challenger in the rough Arctic environment, based only on deployment test results in Washington. Playing down the current tests and its potential success, he said, “They have almost no bearing on whether Shell can drill safely in the Arctic.”

It remains to be seen whether Shell’s emergency equipment will be able to pass the tests it is conducting, and whether or not regulators will be satisfied. However, the tests, even if successful, will do little to allay the concerns of environmentalists and the company might have to undergo harsher tests before starting its drilling activities in the Arctic this year.

SOURCE

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