Shell requests lease extensions in the Arctic

According to an article in Bloomberg News yesterday, Royal Dutch Shell wants the Obama administration to add five years to the company’s 10-year leases in the Beaufort and Chukchi seas, some of which expire in 2015. In a July 10 letter from Shell’s Alaska office to the Bureau of Safety and Environmental Enforcement, which was obtained by Oceana, an environmental group with offices in Juneau, Alaska, as part of a Freedom of Information Act request, Shell laid out the factors supporting its request.

These constraining factors include: multiple time-consuming federal court and administrative challenges, appeals, and remands, based upon findings that the government had failed adequately to carry out its legal obligations; BSEE’s unexpected and unprecedented determination to introduce a fixed operational time constraint on drilling into a prospective reservoir zone, specifically the Sept. 24 cut-off; accommodation of Alaska Native whaling season in the Beaufort Sea; limited Arctic-viable and regulatory-compliant drilling rigs; and BSEE’s announced intention to develop new, comprehensive operating regulations specific to all future drilling operations on the Alaska OCS.

I suspect that Shell has legitimate grounds to ask for an extension, especially based on the legal delays, but citing “limited Arctic-viable and regulatory-compliant drilling rigs” as justification for an extension doesn’t wash. Sure, these rigs are in limited supply, but Shell presumably knew that when it signed the 10-year leases. Why wasn’t Shell prepared to provide these rigs? Why didn’t it purpose-build state-of-the-art rigs and support vessels?
The letter to BSEE states that “despite Shell’s best efforts and demonstrated diligence, circumstances beyond Shell’s control have prevented, and are continuing to prevent, Shell from completing even the first exploration well in either area.”

The Kulluk and the Noble Discoverer represent Shell’s best efforts? That’s the best that one of the world’s richest corporations can do?

Drilling for oil and gas in the Arctic will happen one day because the reserves are just too large to keep on ice forever, but it must be done with the best equipment and under the strictest conditions. Shell may ultimately be able to recoup its $6 billion investment, but first it must take responsibility for its notable and preventable screw-ups in 2012 and demonstrate a willingness to do it right. Pointing fingers at Native whalers and whining about seasonal limitations just doesn’t cut it.

About the author

Bruce Buls

With a degree in English literature from the University of Washington (Go Dawgs!), journalism experience at the once-upon-a-time Seattle P-I, and at-sea experience as a commercial fisherman in Washington and Alaska, Bruce Buls has forged a career in commercial marine trade journalism, including stints at Alaska Fishermen’s Journal and National Fisherman, WorkBoat’s sister publications. Bruce spent 16 years as WorkBoat's technical editor before retiring in May 2015. He lives on Puget Sound’s Whidbey Island, about 20 miles north of Seattle (go 'Hawks!).

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