December 7, 2024

ConocoPhillips Suspends Arctic Drilling Plans

The decision had been expected after last month’s announcement by the Interior Department that Shell Oil Company would have to provide a detailed plan addressing numerous safety issues before it could resume its drilling operations in Alaska’s Chukchi and Beaufort Seas. Shell was forced to remove its two drilling rigs from the area and send them to Asia for repairs after a series of ship groundings, weather delays and environmental and safety violations during the 2012 drilling season. Shell, which has spent more than $4.5 billion on its exploration program, also called off its drilling program for this year.

“While we are confident in our own expertise and ability to safely conduct offshore Arctic operations, we believe that more time is needed to ensure that all regulatory stakeholders are aligned,” Trond-Erik Johansen, president of ConocoPhillips Alaska, said in a statement.

The statement cited a recent Interior Department report calling on the oil industry and federal government to coordinate efforts to develop standards for drilling, maritime safety and emergency response systems and equipment for the Arctic region.

ConocoPhillips said it welcomed working on that approach with the government before drilling. The company has 98 leases in the Chukchi Sea’s Outer Continental Shelf, a region that oil company geologists say has the potential to produce billions of barrels of oil in the coming decades.

“Once those requirements are understood, we will re-evaluate our Chukchi Sea drilling plans,” Mr. Johansen said.

Environmentalists have long opposed drilling in Arctic waters, arguing that it cannot be done safely because of powerful ice floes, winds and long periods of darkness, and that it would disturb the habitats of many threatened species including polar bears.

“ConocoPhillips has made a good choice,” said Michael LeVine, a lawyer for the environmental group Oceana. “As we’ve learned again and again, operating in Alaskan water demands preparation, care and attention to details companies have not yet proven able to provide.”

Senator Lisa Murkowski, an Alaska Republican who sits on the Energy and Natural Resources Committee, expressed disappointment but said she understood that the decision was necessary.

“Companies can’t be expected to invest billions of dollars without some assurance that federal regulators are not going to change the rules on them almost continuously,” she said. “The administration has created an unacceptable level of uncertainty when it comes to the rules of offshore exploration that must be fixed.”

The Norwegian company Statoil had already announced that it was putting off its plans to drill in the Alaskan Arctic waters from 2014 to 2015.

The Interior Department’s review, completed in early March, concluded that Shell had failed in a broad range of operational and safety tasks, including the towing of one of the two drilling rigs, which ran aground on an Alaskan island on New Year’s Eve. David Lawrence, the executive vice president who was in charge of the Alaska drilling program, recently left the company. The company said that the departure was “by mutual consent.”

This article has been revised to reflect the following correction:

Correction: April 10, 2013

An earlier version of this article misstated the day of ConocoPhillips’s announcement. It was Wednesday, not Tuesday.

Article source: http://www.nytimes.com/2013/04/11/business/energy-environment/conocophillips-suspends-arctic-drilling-plans.html?partner=rss&emc=rss

Shell Told to Better Manage Arctic Drilling

Shell has already announced that it will not return to the Arctic Ocean in 2013, saying it would take a “pause” to repair its damaged equipment and review its drilling and safety systems.

Interior Secretary Ken Salazar said that would not be enough. He said the company must demonstrate to the government and an independent reviewer that it has the equipment, the management capacity and a plan for all contingencies before it can resume operations.

“Shell screwed up in 2012 and we’re not going to let them screw up whenever their pause is removed unless they have these systems in place,” Mr. Salazar said in a news briefing Thursday.

The Interior Department conducted an urgent review of Shell’s operations after a disastrous 2012 drilling season notable for ship groundings, environmental and safety violations, the failure of a spill-containment system, weather delays and other mishaps.

The review, completed last week, concluded that Shell had failed in a wide range of basic operational tasks, like supervision of contractors that performed critical work, including towing one of the company’s two drilling rigs. That rig, the Kulluk, ran aground on Sitkalidak Island in Alaska on New Year’s Eve and is now headed to Asia for extensive repairs. No oil was spilled and there were no serious injuries.

The report was harshly critical of Shell management, which has acknowledged that it was unprepared for the problems it encountered operating in the unforgiving Arctic environment. The report did not single out individual managers.

The 32-page study also faulted government agencies, including the Interior Department and the Coast Guard, for failing to anticipate some of the problems Shell faced, including accidents involving both drilling rigs as they traveled to and from drill sites in the Beaufort and Chukchi Seas.

“Government still has a lot to learn,” said Mr. Salazar, who will soon step down and is expected to be replaced by President Obama’s nominee, Sally Jewell, chief executive of Recreational Equipment Inc. in Seattle. “The Arctic is a very difficult environment to operate in. Shell is one of the most resource-capable companies in the world and it still encountered a whole host of problems trying to operate up there.”

“It doesn’t mean that exploration cannot continue,” Mr. Salazar said. “But I think the cardinal lesson is that moving forward on any Arctic exploration needs the comprehensive integration we attempted to bring to last summer and will attempt to do an even better job of in the future.”

A Shell spokesman, Curtis Smith, said the company took the Interior Department’s recommendations seriously.

“Consistent with our recent decision to pause our 2013 drilling program, we will use this time to apply lessons learned from this review, the ongoing Coast Guard investigation and our own assessment of opportunities to further improve Shell’s exploration program offshore Alaska,” Mr. Smith said in a statement. “Alaska remains a high potential area over the long term, and we remain committed to drilling there safely, again.”

Shell lobbied federal officials for several years to persuade them it could drill safely in the Arctic. The company has invested more than $4.5 billion in leases and equipment on the venture, which Shell believes can yield billions of barrels of oil over the next two decades. Tommy Beaudreau, director of the Interior Department’s Bureau of Ocean Energy Management and the leader of the review team, said that Shell conducted some operations well but failed in its oversight of critical contractors.

“Shell simply did not maintain strong, direct oversight of some of its key contractors,” Mr. Beaudreau said in a statement. “Working in the Arctic requires thorough advance planning and preparation, rigorous management focus, a close watch over contractors, and reliance on experienced, specialized operators who are familiar with the uniquely challenging conditions of the Alaskan offshore.”

A number of investigations into the 2010 BP Deepwater Horizon explosion and oil spill in the Gulf of Mexico identified poor oversight of contractors as a central contributing factor to the accident. A trial now under way in federal court in New Orleans will help determine the relative fault of the well operator and its subcontractors.

Marilyn Heiman, director of the United States Arctic Program for the Pew Charitable Trusts, said in an e-mail that the Interior Department review was an important first step toward understanding what went wrong and how to prevent future accidents.

“Improved oversight and rigorous world-leading standards must be put in place before any future Arctic drilling is allowed,” she said. “The violations and mishaps from last year are not acceptable only three short years after the Deepwater Horizon disaster.”

Article source: http://www.nytimes.com/2013/03/15/business/global/interior-dept-warns-shell-on-arctic-drilling.html?partner=rss&emc=rss