By Jim Snyder
The U.S. Interior Department said it will review oil and gas exploration in Alaska’s Arctic waters after the grounding of a Royal Dutch Shell Plc drilling rig this month and other equipment mishaps.
Interior Secretary Ken Salazar said today the high-level assessment of drilling in Alaska’s Beaufort and Chukchi seas will be completed in 60 days. It wasn’t immediately clear how the review would affect Shell’s 2013 plans in the region.
Shell is in discussions with the department over “lessons learned” and a “high-level review will help strengthen our Alaska exploration program going forward,” Kelly op de Weegh, a spokeswoman for The Hague-based company, said today in an e- mail.
Shell has spent about $4.5 billion in the past seven years seeking to drill in the Alaskan waters. On Dec. 31, the drill ship Kulluk broke free of a tow boat in a storm, and was stranded on an uninhabited island until being towed to a nearby harbor yesterday.
The Kulluk’s grounding caps a series of episodes that have dogged Shell’s effort to tap Arctic oil. A containment dome designed to cap oil spills was damaged during tests in September, and another drill ship, the Noble Discoverer, slipped its mooring in July and drifted toward shore in the Aleutian Islands.
“While we completed our drilling operations off the North Slope safely and in accordance with robust permitting and regulatory standards, we nevertheless experienced challenges in supporting the program — especially in moving our rigs to and from the theater of operations,” op de Weegh said.
While developing the Arctic offers the chance for the U.S. to reduce its dependence on imported oil, “we also recognize that the unique challenges posed by the Arctic environment demand an even higher level of scrutiny,” Salazar said today in a statement.
Tommy Beaudreau, director of Interior’s Bureau of Ocean Energy Management, will lead the review, the department said.
“As part of our Department’s oversight responsibilities, our review will look at Shell’s management and operations in the Beaufort and Chukchi seas,” Beaudreau said in the statement. “We will assess Shell’s performance in the Arctic’s challenging environment.”
The environmental group Oceana, based in Washington, urged a thorough review of Shell’s experiences in the region.
“Shell has proven again and again that it’s not prepared to operate in Alaskan water and our government must reassess its commitment to allowing activities like this and the way that decisions have been made about our oceans’ resources,” Michael LeVine, senior Pacific counsel for Washington-based Oceana, said in an interview.
Jack Gerard, the chief executive officer for the American Petroleum Institute, which represents Shell and other large oil companies, said at a Washington event today that the Kulluk grounding was a “transportation incident” that shouldn’t discourage drilling in the region.
Copyright 2013 Bloomberg.