US Blames Shell For Mishaps, Remains Committed To Arctic Drilling

Mar 15, 2013

Interior Secretary Ken Salazar had some tough words for Shell Oil Thursday as he announced the results of an investigation into Shell's Alaskan accidents in 2012. But he did not announce the tough consequences that environmentalists were hoping for in the wake of Shell’s year of Arctic mishaps.

The new Interior Department report (below) blames Shell for a year-long series of mishaps in the energy giant’s quest to find oil off the north coast of Alaska. Those mishaps culminated in Shell’s Kulluk drill rig running aground on New Year’s Eve in the Gulf of Alaska. A week later, Salazar ordered an intensive review of Shell’s operations in the Arctic and its preparations in Puget Sound.

“It’s that plain and simple,” Salazar told reporters on Thursday. “Shell screwed up in 2012, and we're not going to let them screw up, whenever," he said, "unless they have these systems in place.”

Those systems include a third-party audit of Shell's entire operations in Alaska and a comprehensive plan for carrying out all stages of its Arctic endeavors -- everything from towing drill rigs north to having all oil-spill systems finished and tested before the drilling season begins.

Problems In Bellingham

The report highlighted Shell’s poor management of contractors in various parts of the operation. It singled out Shell's relationship with Superior Energy of Houston. Superior is in charge of retrofitting the Arctic Challenger, an oil-spill barge that has spent the past year under construction in Bellingham, Wash. After construction delays and accidents, that barge still has not received federal approval for use in the Arctic.

The report said Superior lacked certification in ship design and building and appeared to get the contract because of its work with Shell in the Gulf of Mexico.

According to the Interior report, Shell only started designing a rebuilt Arctic Challenger nine months before the 2012 drilling season was supposed to begin. It only moved the barge to Bellingham for major construction four months before drilling was to begin.

In June, in a rush to finish critical equipment in time for the summer 2012 drilling window, Shell more than tripled its workforce on the Arctic Challenger — from 2,000 to 7,000 employees. The normally sleepy Bellingham waterfront became a beehive of activity.

But it was too late: what Interior called “significant communication problems between Shell and Superior” and an “absence of clear lines of authority” ultimately led to a catastrophic failure of the oil-spill system during a September test before a federal regulator. That regulator said that a 20-foot spill-containment dome wound up “crushed like a beer can.” The accident forced Shell to cancel plans to drill for Arctic oil in 2012.

Environmentalists Dismayed

The Interior Department’s limited measures disappointed environmentalists, who said the Obama Administration also bears responsibility for giving an unprepared company the opportunity to have so many accidents.

The Sierra Club and other groups want the Obama Administration to reverse its support for Arctic drilling. Instead, Salazar reiterated Obama’s support for expanding domestic production of all forms of energy.

“The administration is fully committed to exploring for potential energy resources on lands that we control both onshore and offshore, as well as in frontier areas like the Arctic,” Salazar said.

In a statement responding to the Interior Department report, Dan Ritzman with the Sierra Club said no oil company should get another chance to fail in the Arctic:

As one of the world’s largest and wealthiest corporations, Shell had years to prepare and plan for the harsh conditions of the Arctic -- and utterly failed. Over the course of one year of trying, Shell’s ships in the Arctic lost control, caught fire, ran aground, damaged their own emergency equipment, and came under criminal investigation. Any other American business so woefully unprepared and dangerously incompetent would be shut down by the authorities immediately.

In February, Shell announced it was canceling this year's Arctic efforts and sending both its Arctic drill rigs to dry docks in Asia for major repairs.

In an email, Shell spokesman Curtis Smith said the company takes the investigation's findings seriously and will use its time off from Arctic drilling to “further improve” Shell’s operations. "We remain committed to drilling there safely," Smith said.

The US Coast Guard and the Justice Department continue to investigate Shell’s mishaps, with possible criminal penalties in the works.

The Interior Department’s report on Shell’s Arctic mishaps: