Bromwich: The Arctic Drilling Conundrum

July 23, 2012

By Michael Bromwich
Founder and Managing Principal of The Bromwich Group

The wells that Shell proposes to start drilling in the Arctic’s Chukchi and Beaufort Seas in the next few weeks are almost surely the most widely litigated, hotly debated, and heavily scrutinized proposed offshore wells in this country’s history. The extraordinary level of interest that has existed for some time has increased as the time for Shell to begin drilling has drawn closer, focusing most recently on the complications and difficulties Shell has experienced. These have included problems and issues with one of its drillships, one of its spill response vessels, and its containment system. While these complications are real and significant, the most formidable obstacle remains one that neither Shell’s top scientists and engineers, nor government regulators, can solve – the continuing presence of sea ice that has delayed the commencement of any drilling. The delays caused by the sea ice, and other permitting and certification delays, will almost surely force cutbacks in Shell’s original proposed drilling program.

Why this high level of interest in these few wells? Because of the massive oil and gas potential in the Arctic; because of the massive investment of time and money by Shell over many years; because Shell’s activities this summer are viewed as the important first step for the oil and gas industry to gain a larger foothold in the Arctic in subsequent years; because of the fragility of the Arctic ecosystem; because of the painful memories of the Deepwater Horizon oil spill; because of the concerns that an oil spill of any magnitude would be far more difficult to address in the harsh conditions of the Arctic; and because of the lasting damage such a spill could cause to the way of life of many Alaska native communities. In short, Shell’s proposal brings into stark relief the difficult question of how to appropriately balance the need to continue developing our offshore energy resources, especially in a region with such vast resources, with the need to preserve and protect the environment in one of the most fragile and treasured ecosystems in the world.

The government is required by law to balance these interests, and it has taken the legally required steps to do so. Even though the wells Shell proposes to drill in the Chukchi and Beaufort are in shallow water, have low pressure, and are relatively simple as a technical matter, they have received extensive regulatory scrutiny. The Department of the Interior has reviewed and approved separate exploration plans for the Chukchi and Beaufort, separate spill response plans, and must still review and approve separate applications to drill each well before drilling can begin. Those applications to drill must all satisfy the more rigorous requirements that went into effect after Deepwater Horizon. In addition, the EPA and Coast Guard have responsibilities to determine whether Shell’s proposal meets other regulatory requirements, including the air emissions of its vessels and the suitability of its vessels to serve their intended functions and withstand the harsh elements of the Arctic. Indeed, by imposing the requirement that Shell have a fully capable containment system to address a potential subsea blowout (previously only required in deep water), and by committing to have inspectors on site throughout the drilling process, the Department of the Interior has shown an appropriately heightened level of concern for the risks associated with drilling in the Chukchi and the Beaufort.

We need to be clear about one central truth: offshore drilling is never without risk. We learned that painful truth the hard way during Deepwater Horizon. The claims, in the immediate aftermath, that the incident was a total and complete anomaly rang hollow, and over time were repeated less often.

But just as the risks should not be minimized, they also should not be exaggerated, as has been frequently been in the case in the debate over Arctic drilling. The risks of an oil spill are extremely small, and never have so many precautions been taken to minimize the chances of a low probability, high consequence event in the world of offshore drilling. If Shell is able to fully satisfy the remaining regulatory requirements, they should be allowed to move forward with a necessarily shortened drilling program this summer; if not, then they should not. These should be decisions made by experienced regulators, not decisions driven by politics or influence. Ironically, the final approval lies in the hands of Mother Nature and whether the sea ice melts in time. That is a powerful reminder of the formidable challenges presented by the Arctic.