Is BP Behind Us or is it an Election Year?

Ken Silverstein | May 09, 2012

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Is BP behind us or is it an election year? Alaskans, at least, are saying that if Royal Dutch Shell is allowed to explore for oil and gas off its coastline then it would be a bountiful supply line as well as a huge job creator.

The debate over whether to allow more oil and gas drilling near the Arctic slope has long been a battle point between Alaskans and environmentalists. Throughout the years, momentum shifts from one interest group to the next, depending on the circumstances. Before the BP oil spill in April 2010, the Democratic-led White House was easing the resistance to more off-shore drilling. After the accident, however, the national demeanor changed and the administration hit the brakes.

Now, of course, it’s a presidential election year. Whether the decision to allow Shell to drill in the Arctic’s Chukchi and Beaufort Seas is tied to that or whether it is an extension of an arduous review process is in the mind of the beholder.

Shell would like to begin exploration by July 1, although it still has some hoops to jump through. Altogether, the oil company has spent $3 billion over five years priming the wells for production. The U.S. Geological Survey says that the area could hold 10.36 billion barrels of oil and 8.6 trillion cubic feet of natural gas, possibly more.

“We have conducted an exhaustive review of Shell’s response plan for the Beaufort Sea,” says Bureau of Safety and Environmental Enforcement Director James Watson. “Our focus moving forward will be to hold Shell accountable and to follow-up with exercises, reviews and inspections to ensure that all personnel and equipment are positioned and ready.”

The bureau goes on to say that Shell is proposing to drill up to four shallow water wells, which is much less treacherous territory than the deep waters of the Gulf of Mexico where the BP oil spill occurred. As part of its spill response plan, the company must be prepared for any accident that is three-times worse than anything previously submitted. It must also detail the equipment it would use to clean up and explain fully how such tools would logistically get to those isolated locations.

Shell’s Strategy

Vigilance is the key. Part of Shell's strategy to avoid a fate similar to that of BP is to keep rescue staffs on call as well as to inspect its sites once a week. Shell also said that the icy waters in the Arctic make any oil clean-ups easier than they would be in the warmer waters of the Gulf.

That's has not satisfied skeptics. Some U.S. congressional representatives from states along the Pacific coastline say that rigorous prevention technologies must first be established. They also say that responding to any disaster in the Arctic would be exceedingly difficult given the distance between the drilling sites and onshore positions.

“Shell may have met all federal spill response requirements, but this does not mean that meaningful quantities of oil would be recovered after a major spill in the Arctic Ocean,” says Lois Epstein, director of Arctic programs for The Wilderness Society of Alaska. “Only about 3 percent of the oil was recovered after the BP spill, which occurred under temperate conditions.”

In the two years since the BP oil spill, the Obama administration has beefed up existing regulations, increased the fines and added new rules. Such laws are meant to ensure that companies “blow-out preventers” and the cemented seals covering them truly do work before any developers start exploring.

As the world saw during the April 2010 disaster, natural gas is oftentimes discovered alongside oil. But proponents of natural gas emphasize that unlike oil, it is not a solid and therefore it is less problematic. Altogether, the Interior Department says that 27 percent of oil and 15 percent of natural gas is now discovered offshore.

After the BP oil spill, the White House did the right thing by banning future exploration until it could get a handle on what had just happened. Now, it is trying to resurrect a policy that was in the works prior to the accident. Its apparent decision to allow Shell to drill off the Alaskan coastline is a manifestation of that strategy that may also have political benefits for the president.


EnergyBiz Insider is the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists.

Twitter: @Ken_Silverstein

energybizinsider@energycentral.com


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Comments

The Gulf Horizon Accident offers lessons for Arctic

BP established a $20 Billion trust fund and is paying out $7.5 billion now for claims, attorney fees etc. The massive oil spill from the Deepwater Horizon rig in the Gulf of Mexico ultimately dissipated far faster than anticipated. Researchers now believe they can attribute this to a combination of topography and huge numbers of bacteria, according to The Wall Street Journal [Jan 2012]. So the media feeding frenzy should have acknowledged this issue. The tragedy was the death of workers while the environment recovered.

The National Academy of Engineering and National Research Council caution the U.S. government that deep water drilling is one of the riskiest and most complex undertakings that explorers can attempt. Since Shell is proposing to drill up to four shallow water wells there should be less risk.

The Horizon Spill has generated a series of safeguards and greater due diligence with better engineering requirements for well design and construction. Arctic drilling could commence given these regulations but accidents will happen i.e. replacing a stop sign with a traffic light will not guarantee elimination of vehicle collisions.

 

If the oil companies pay heed to their experienced engineers and technicians then accidents (e.g. spills etc.) will be minimized. If company executives focus only on operating expense and cut corners then another Horizon could occur.

Richard W. Goodwin West Palm Beach FL

tourism and local economies

It's not just the oil and gas field that was hurt. Tourism was too and the whole ripple effect from that. Fisherman could not work and their product was spoiled for months on end. The deep water drillers are blaming this on Obama when they should have focused on self improvement. The other parts of the economy were hurt worse than the oil and gas business.

the White House did the right thing

Billions of lost revenue, thousands of jobs dislpaced, it will take until 2016 to get back to square one, and this was the first major US spill since Santa Barbara and of course no others occurred along with or after Santa Barbara or the BP spill. The gravity of the situation of the spill was obvious to all, especially the deep water industry. The industry was on red alert and in all probability nothing was gained but plenty was lost by closing the Gulf. The entire incident and all the lessons learned would have occurred anyway but the wreckless broad bush reaction added waste upon waste.  The White House did it's thing, I think not the right thing.

Not sure I agree with "...White House did the right thing..."

Ken,

I am not sure I agree with your final paragraph.  The White House tarred all oil companies drilling in the Gulf with the same brush.  From what I read, BP selected a well cementing operation that was less expensive but not as reliable as former practices.  I have not seen the records related to testing the blowout preventers nor am I sure whether BP or the drilling contractor was responsible for procuring the preventers but both should have been responsible to see they were tested and functioning as they should--although, I am not that sure that the blowout preventers could have made up for the problems with the cement seals.

The real reason I question the conclusion though is that the White House banned further deepwater drilling Gulf by anyone then turned around and loaned $2 billion I believe it was to Petrobras to drill in even deeper water in the Atlantic.

The other questionable decisions the White House made were related to what actually to do about the spilling oil.  To refuse to allow offered assistance of skimmer ships and other oil recovery assistance from abroad was incredibly stupid and to ignore suggestions from the states affected by the spill and refuse to provide assistance to execute their plans for protecting their shorelines was outrageous.  This President (and his administration) is one of the worst things that could have happened to the United
States.  He does not have enough experience in anything to know what to do and most of his cabinet that are involved in energy and the environment seem to be more academic than practiced as well.

 As for BP--well, it is funny they have enough money to be paying for damages but decided to go with a well sealing program that was the cheaper of the alternatives and, from what I understand, ignored warnings that there were problems because they just had to get the well completed. 

Mark Wooldridge