Interior vows ‘high-level’ Arctic-drilling review after Shell’s mishaps

The Interior Department is launching a “high-level,” 60-day review of Shell’s troubled 2012 attempts to look for oil off Alaska’s northern coast after the company experienced a series of mishaps.

The review arrives a week after Shell’s Kulluk drillship ran aground en route back from the Arctic region, and as Interior is under pressure from green activists to block 2013 drilling off Alaska’s coast.

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Interior said the review of 2012 Arctic operations will “help inform future permitting processes in the region.”

Interior Secretary Ken Salazar, in a statement, said the Obama administration is committed to energy exploration in “frontier” regions like the Arctic, but also said careful oversight is needed.

“Exploration allows us to better comprehend the true scope of our resources in the Arctic and to more fully understand the nature of the risks and benefits of development in this region, but we also recognize that the unique challenges posed by the Arctic environment demand an even higher level of scrutiny,” he said.

The grounding of the Kulluk was among a number of woes Shell experienced in seeking to begin long-delayed drilling in the oil-rich Beaufort and Chukchi seas last year.

A separate drillship, the Noble Discoverer, slipped its moorings and dragged anchor while heading to the Arctic, almost running aground in Dutch Harbor in July.

Separately, a key piece of equipment the company needs on hand to contain a potential subsea blowout was damaged during testing.

Ultimately, Shell did not win regulators’ permission to drill into oil-bearing zones, but was allowed to begin preliminary, so-called top-hole drilling last year.

Interior said the review, which will include technical assistance from the U.S. Coast Guard, will identify “challenges and lessons learned.”

“The review, which is expected to be completed within 60 days, will pay special attention to challenges that Shell encountered in connection with certification of its containment vessel, the Arctic Challenger; the deployment of its containment dome; and operational issues associated with its two drilling rigs, the Noble Discoverer and the Kulluk,” Interior said.

The review will examine Shell’s safety management, oversight of contractors and ability to meet federal standards for development in the Arctic climate.

The grounding of the Kulluk has created new uncertainties around Shell’s years-long, multibillion-dollar effort to strike oil in Arctic waters off Alaska’s coast. The next drilling window in the Arctic seas begins in the summer, when sea ice recedes.

“Inspections are now underway to better understand the Kulluk’s overall condition. Once complete, we will know more about the Kulluk’s immediate future, including its availability for our ongoing exploration program. Before speculating on any impact to our exploration plans, we will first complete our detailed evaluation of the vessel’s condition,” Shell said in a statement Tuesday.

The company said it welcomes Interior’s review.

“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,” Shell said.

The company said it’s already in “dialogue” with Interior, and that “a high-level review will help strengthen our Alaska exploration program going forward.”

Shell’s experiences could influence how much development ultimately takes place in the U.S. Arctic region. Companies including ConocoPhillips and Spanish oil giant Repsol also hold leases in federal waters off Alaska’s coast.

Environmentalists bitterly oppose drilling in the rough waters off Alaska’s coast, calling it a threat to whales, polar bears and other endangered and sensitive wildlife that inhabit the Arctic seas.

Michael LeVine, senior counsel with the group Oceana, said a broader federal review is needed and that “Shell has proven that it is not prepared to operate in Alaskan waters.”

“A full investigation of Shell’s season of mishaps should include not only the Department of the Interior and Coast Guard, but also NOAA, and other agencies. The government must reassess its commitment to exploration in difficult places like the Arctic and how it makes decisions about our ocean resources,” he said Tuesday in response to Interior’s announcement.

The U.S. Coast Guard has initiated a separate probe of the “circumstances and contributing factors” in the Dec. 31 grounding of the Kulluk on an island in the Gulf of Alaska.

Interior's Bureau of Safety and Environmental Enforcement and the National Transportation Safety Board will provide technical advice in the probe, the Coast Guard said.

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