U.S. orders Arctic drilling assessment after rig mishap


A Coast Guard aircraft watches the tandem towing of the Shell’s drilling rig, the Kulluk, after a violent storm drove it aground last week. (Handout/Reuters)
January 8, 2013

The Interior Department on Tuesday ordered “an expedited, high-level assessment” of oil and gas activities in Alaska’s Arctic waters following a violent storm that drove Shell’s drilling rig, the Kulluk, aground last week and revived debate over the company’s plans to explore for oil in the Chukchi and Beaufort seas.

Shell said it would inspect the rig, which was towed Monday to safe harbor on Kodiak Island in Alaska, for possible damage before the Kulluk resumes its journey to winter harbor in Seattle for maintenance and repairs.

But environmental groups were preparing a letter to Interior Secretary Ken Salazar arguing that the latest of a series of mishaps for Shell showed that the company wasn’t able to drill safely in the harsh Arctic waters.

“Shell has proven that it is not prepared to operate in Alaskan waters,” said Michael LeVine, Pacific senior counsel at Oceana, a group opposed to offshore drilling. “We hope this review amounts to more than a paper exercise. The Department of the Interior, after all, is complicit in Shell’s failures because it granted the approvals that allowed Shell to operate.”

The Interior Department remains focused on ensuring safe drilling rather than barring drilling off Alaska’s coast. A special Interior Department panel of government, industry and environmental experts is working on safety guidelines for offshore drilling.

“Developing America’s domestic energy sources is essential for reducing our dependence on foreign oil and creating jobs here at home, and the Administration is fully committed to exploring for potential energy resources in frontier areas such as the Arctic,” Salazar said in a statement. But, he added, “we also recognize that the unique challenges posed by the Arctic environment demand an even higher level of scrutiny.”

Shell said it would participate in an investigation by the Coast Guard, which rescued 17 crew members from the rig. The company said it “will implement lessons learned.” The Kulluk, whose name means thunder, drifted onto Kodiak’s rocky shores after its connecting line to a towboat called the Aiviq came undone in a storm Dec. 27, Shell said. Aiviq is the Inupiaq word for walrus.

Lois Epstein, an engineer and Arctic program director of the Wilderness Society, said, “the real question is, is the Kulluk going to be available or not?” She said that there was water in one part of the rig but it wasn’t clear whether it came from a damaged hull or an open hatch.

Shell drew a distinction between drilling safely and the Kulluk accident, which happened while the rig was traveling to warmer waters.

“Of the recent setbacks, none involved drilling operations. The situation with the Kulluk was a marine transit issue and one we take very seriously,” the company said in a statement. But it defended plans to resume drilling this summer, saying: “It is possible to drill safely offshore Alaska, as our 2012 record shows. The industry has drilled more than 30 wells in the waters off the North Slope.”

But Epstein said, “it’s important to look at the drilling and transportation activities as a package and decide whether there’s a problem with that package.” And Oceana’s LeVine said that the government “must reassess its commitment to exploration in difficult places like the Arctic.”

Tadeusz W. Patzek, chairman of the University of Texas at Austin's department of petroleum and geosystems engineering, said in an e-mail that Shell’s experience now would help it improve over the 10 to 15 years it will take before any oil is actually produced in the Arctic.

“As one develops new technology and/or applications in a new harsh environment, mishaps and accidents will happen. Take it for granted,” Patzek said. “So the name of the game is to limit the negatives (accidents) to a manageable minimum, with no or very small impacts on the environment, while learning for 10 years or so, developing better solutions, and while retaining the huge future payoff in terms of oil production.”

Steven Mufson covers energy and other financial news.
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