Royal Dutch Shell's Alaska operations could have used a dose of "local knowledge" to prevent their latest debacle: the grounding of the oil rig Kulluk. That phrase, "local knowledge," should ring a bell for Shell. The company was the one of the largest contributors to a group opposing the restoration of Alaska's Coastal Zone Management program. Alaska has more miles of coastline than all other states combined -- yet no input to offshore development.
Why did Shell spend so much money to keep coastal Alaskans away from the table? Don't they value the experience of local people along the Beaufort and Chukchi coasts? Oh, that's right. When you're drilling in their back yards, you only want silent partners.
Here's the scoop, geniuses. Local knowledge might have helped you figure out that shipping out of Dutch Harbor with only one, largely untested tug, IN THE MIDDLE OF WINTER, wasn't a good idea. When the Deadliest Catch boats are still tied to the dock, maybe you should ask why.
I'm convinced the decision to leave their special berth in Dutch Harbor was financial. An annual tax of 20 mills is levied on oil company assets in Alaska on Jan. 1. The Kulluk just happened to leave state's waters about a week before that. Does being Shell-shocked and fetched up still make you taxable?
Shell risked some of the worst sailing weather in the world in an attempt to avoid millions in taxes. Just because most of our legislature bends every time an oil company exhales, it doesn't mean Mother Nature will.
I realize I'm swimming against the tide on the issue of offshore Arctic drilling. President Obama thinks it's a good idea and opened the area to leases after 20 years of closure. (Because he hates oil.) When asked about the safety of drilling in such a precarious place, Interior Secretary Ken Salazar said, "I believe there's not going to be an oil spill." Did he believe there would be a $400 million runaway oil rig stuck on a beach?
Our delegation in Washington, D.C., thinks it's a brilliant idea to drill in Arctic waters even though Alaska doesn't get the revenue -- just the risk of a spill. Awesome.
Shell's oil spill prophylactics have failed miserably. The company's containment cap was tested in calm, ice-free waters. The 20-foot-tall dome "breached like a whale" and sank 120 feet, where it was "crushed like a beer can" by the pressure. Its containment barge was fined by the Coast Guard for spilling hydraulic fluid. When they ran aground in Dutch Harbor with the Noble Discoverer, the company denied it had run aground and then had tugs pull the ship off. The NTSB is investigating and Shell has lawyered up.
The backup plan for the latest voyage was another tug in Seward. It makes you wonder if some flatlander looked at a map and thought, "Well, that's only an inch away." It took 24 hours at full tilt in 30-foot seas to get that boat where it was needed.
Lloyd's of London insured the new Freedom Tower in New York City, but said the Arctic is too great a risk. Lloyd's said what Salazar should have said: "The environmental consequences of disasters in the Arctic have the potential to be worse than in other regions. The resilience of the Arctic's ecosystems in terms of withstanding risk events is weak, and political sensitivity to a disaster is high. As a result, companies operating in the Arctic face significant reputational risk."
No, I'm not making this up. Lloyd's is betting that a skyscraper known as the Freedom Tower, the tallest building in the Western Hemisphere, erected at One World Trade Center, on the same land where terrorists attacked us on 9/11, will not be hit again.
But the Arctic is too risky to insure. So is Shell's Arctic adventure self insured? Did their shareholders vote to take on what Lloyd's wouldn't?
Not to worry, the 1990 Oil Pollution Act has a limited liability clause. It limits the amount non-tanker vessels can be forced to pay in the event of an accident. So, after Shell has incurred $28 million in expenses, it may be able to invoke its liability limit. Can we call that a bailout?
Of the large Western oil companies operating in the U.S. or United Kingdom today, Shell has one of the worst safety records and, according to 2007 data, the highest mortality rate.
The Kulluk, tortured by curling seas and pounded on the surf, may breach. The 150,000-plus gallons of petro products may spill. The response teams will be in harm's way on a Gulf-facing beach with little access. Boats, booms and white suits will pretend to do something for the cameras. Public relations is always a priority.
I talked to a businessman this week who strongly supports drilling in the Arctic. He's furious at Shell. He thinks the company's incompetence is jeopardizing the whole program. He was counting on the work. We are on opposite sides of the argument but we both agreed, if Shell can't get its act together 50 miles from a Coast Guard base, what business does it have drilling oil wells almost 2,000 nautical miles from one?
First published in The Anchorage Daily News