Grounding of Kulluk rig the latest in a series of mishaps, raising possibility that Shell may be forced to re-evaulate its proposals
The Obama administration ordered a sweeping review of Shell’s plans to drill in the Arctic on Tuesday, after a series of mishaps ending with the New Year grounding of the company’s Kulluk rig.
The review – and a separate investigation of the grounding of the Kulluk – raises the possibility that Shell, after investing six years and $5bn trying to extract oil in harsh and remote conditions, may be forced to re-evaluate entirely its plans to drill in the Arctic.
The high-level review will home in on some of the most difficult moments for Shell since it began exploring for oil beneath the Beaufort and Chukchi seas last summer: a series of equipment breakdowns and safety and environmental violations.
The department of interior, in announcing the review, said it would help determine whether the company is prepared to operate in the Arctic.
“Our review will look at Shell’s management and operations in the Beaufort and Chukchi Seas,” said Tommy Beaudreau, the director of the Bureau of Ocean Energy and Management, who will be heading the 60-day review. “We will assess Shell’s performance in the Arctic’s challenging environment.”
The review will pay special attention to the series of mishaps that culminated in the grounding of the Kulluk, including the botched test of its made-to-order oil spill containment dome, and equipment breakdowns and safety and environmental violations aboard the Arctic Challenger barge and the Noble Discoverer and Kulluk drilling rig.
Shell’s safety and environment practices will come under additional scrutiny with a separate US Coast Guard investigation announced on Tuesday into the grounding of its drill rig.
Tuesday’s moves come at a time when the Obama administration has been under growing pressure from Arctic scientists and campaign groups to reconsider its decision to open up the Arctic to oil companies.
The Arctic is believed to be one of the last great unexplored deposits of oil and natural gas remaining beneath the Beaufort and Chukchi, but conditions are far more difficult than anywhere else – and so are the risks to a pristine environment and wildlife including endangered polar bear.
“The unique challenges posed by the Arctic environment demand an even higher level of scrutiny,” the interior secretary, Ken Salazar, said.
The company said it welcomed the 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,” Curtis Smith, a company spokesman, said in an email. “A high-level review will help strengthen our Alaska exploration program going forward.”
Campaign groups said the review was a step in the right direction, but renewed their call on Obama to ban drilling in Alaskan waters outright.
“Again and again we are learning the hard way that Shell is not prepared to operate in Alaskan waters,” said Michael Levine, a senior attorney for the Oceana conservation group. “There is no way Shell should be allowed to drill into hydro-carbon bearing zones in 2013 or in the foreseeable future.”
The review could clear the way for further restrictions on Shell. Eleanor Huffines, who manages the Arctic programme for the Pew Environment Group, said it was time for the Obama administration to impose an Arctic-specific regulatory regime. ” What I would really like to see is the Obama Administration take a step back and impose Arctic specific safety, training, and spill response standards,” she said. “We would like to see training, equipment and spill response standards that are geared towards the reality of the weather, the remoteness of infrastructure, the fog, the sea, the winds – all those things that you are not going to encounter in the Gulf of Mexico.”
The Kulluk drilling ship ran aground on rocky shores off Alaska on New Year’s Eve, after breaking free from tug boats pulling it to Seattle. Before the grounding, Crew had struggled for five days through four-storey waves and 70mph winds to tow the rig to safe harbour. Salvage crews finally pulled the rig to sheltered Kiliuda Bay on Monday.
But the stranding was only the latest in a string of setbacks. Arctic groups said the repeat equipment failures and the oil company’s failure to meet air pollution standards for the region should have been a warning sign.
Separately, the US Coast Guard on Tuesday formally announced it was launching an investigation into the Kulluk’s grounding.
Even without the review, Shell is facing severe challenges to resume its billion-dollar quest for Arctic oil. It was unclear whether the Kulluk can be repaired in time for any drilling next summer – even if the company is cleared to return to the Arctic – and there are not many vessels designed to weather the region’s high waves and floating ice.
All of those mounting costs – and now the prospect of more stringent regulations for the 2013 season – may even persuade oil companies to stay out of the Arctic, said Paul Sullivan, an economics professor at the National Defence University. “The number one lesson is that it’s not easy to do oil exploration and production in the Arctic,” he said.
Meanwhile, new technologies were making unconventional oil and natural gas more attractive, he said. “The Arctic has a lot of potential but it could be that there are lot of better potentials elsewhere.”
Employees from firms including British Gas and npower being paid to work at Department of Energy, documents reveal
Almost two dozen employees from companies including the energy giants British Gas and npower are working at the Department of Energy and, in most cases, are being paid by the government to do so, documents released under freedom of information rules reveal. Oil companies such as Shell and ConocoPhillips also have staff inside the department, and civil servants have travelled in the opposite direction to work for the companies.
The Green party MP Caroline Lucas, who made some of the FOI requests, said: “Fossil fuel giants should have no place at the heart of government given that their current investment strategies run contrary to the need to build a low-carbon future that delivers both security and prosperity. It’s even more outrageous that taxpayers are footing the bill for some of these secondments, including from British Gas-owner Centrica, at a time when British Gas customers are struggling in the face of a 6% rise in their energy bills, and the company is expected to make £1.4bn profits after tax this year.
“These corporations obviously don’t lend out their employees without expecting something in return.”
A spokeswoman for the Department of Energy and Climate Change said: “Secondees bring with them knowledge and expertise which are vital to helping Decc do its job effectively. Likewise, seconding Decc staff into industry – be that oil, gas, renewables or other areas – provides insight into the challenges faced by those sectors. It is normal for secondees to be paid directly by Decc or for their company to be refunded for their time; this is standard practice across government.”
The documents show 23 external people are working at Decc. Those being paid by the department include employees of Centrica, Barclays, ESB (Ireland’s biggest energy firm), National Grid and Rolls-Royce. Staff from Shell and npower’s owner, RWE, are seconded
At least half a dozen Democrats elected to the Senate despite receiving series of oil and coal attack ads
The oil and coal lobby and groups backed by the conservative billionaire Koch brothers spent $270m on television ads in the final weeks of the election, attacking Barack Obama and Democratic candidates for Congress.
It turns out not to have been a very good investment, according to the Centre for American Progress Action Fund, which tracked the funding.
Obama won re-election, and carried Ohio and Virginia, which were heavily targeted by the ad campaign, and at least half a dozen Democrats were also elected to the Senate despite being on the receiving end of the oil and coal attack ads.
In the last two months of the election alone, industry lobby groups as well as Koch-funded entities such as Americans for Prosperity spent $270m on television ads, including $31m of ads that were focused specifically on energy, the centre’s analysis said.
Researchers used data supplied by Kanter Media for its analysis. The result of the big spend was nearly 57,000 television ads representing fossil fuel concerns, according to the Centre for American Progress. In Senate races alone, the outside groups spent more than $60m since September, the analysis said. The same groups spent $49.7m trying to sway house races.
One of the biggest single spenders – the US Chamber of Commerce – struck out entirely in its efforts to influence Senate races, according to a separate analysis by the National Wildlife Federation.
The Chamber, which has been a loud and vocal critic of Obama’s clean energy measures, spent $20m on Senate races during this election season – losing at least seven. The Chamber spent $4.4m alone trying to block the election of Democrat Tim Kaine in swing state Virginia, and another $4.3m to keep Democratic senator Sherrod Brown from re-election.
The Chamber also spent heavily to try to keep Wisconsin’s Tammy Baldwin out of the Senate, spending $2.8m on television ads.
Villagers say pipeline leak in June 2005 fouled fish ponds, farmland and forests in Oruma
Nigerian farmers have asked a court in the Netherlands to rule that the oil company Shell is liable for poisoning their fish ponds and farmland with leaking oil pipelines. The case could set a precedent for holding multinationals responsible for their actions overseas.
Shell has argued that the case, which began in 2008, should be heard in Nigeria. Lawyers for the Nigerians argue that policy decisions by Shell are made at its headquarters in The Hague and that means The Hague civil court can rule in the case. Just hHow much Shell would face in compensation and clean-up costs would be addressed at a separate hearing if the court rules in favour of the farmers.
Villagers and Friends of the Earth say leaks from Shell’s pipeline fouled fish ponds, farmland and forests in three villages in the Niger Delta: Goi, Oruma and Ikot Ada Udo.
“If you are drinking water you are drinking crude, if you are eating fish, you are eating crude, if you are breathing, you are breathing crude,” one of the farmers, Eric Dooh, told reporters outside the court. “What I expect today is justice,” he added. “I expect that judges are going to
State moves above Hawaii as most expensive place to buy gas, with some drivers paying $5 a gallon, as prices drop elsewhere
Gasoline prices in California rose to another all-time high on Sunday after passing a four-year high a day earlier, according to a leading industry body.
The four-cent-per-gallon jump Sunday was even bigger than Saturday’s jump, which was just a fraction of a penny.
AAA reported in its latest update on Sunday that the statewide average price for a gallon of regular unleaded gasoline is $4.655. Saturday’s average of $4.6140 was the highest since June 19, 2008, when it was $4.6096.
Sunday’s price, like Saturday’s, was the highest in the nation, with the Golden State leapfrogging Hawaii this week as the state with the most expensive fuel due to a temporary reduction in supply.
Californians are paying 24 cents per gallon more than motorists in Hawaii, according to the AAA report.
In some locations, fuming motorists paid $5 or more per gallon while station owners had to shut down pumps in others.
“I seriously thought it was a mistake on the sign when we pulled in,” said Nancy Garcia, 34, while filling her Honda Accord at a Chevron station in the Los Angeles neighborhood of Highland Park.
She paid $4.65 a gallon for regular grade and said she couldn’t afford to fill her tank all the way.
AAA’s Daily Fuel Gauge report said the national average both Saturday and Sunday was about $3.81 a gallon, the highest ever for this time of year.
However, gas prices in many other states have started decreasing, which is typical for October.
The dramatic surge came after a power outage Monday at a Southern California refinery that reduced supply in an already fragile and volatile market, analysts said, but the refinery came back online Friday and prices were expected to stabilize by next week.
Patrick DeHaan, senior petroleum analyst at GasBuddy.com, predicted the average price could peak as high as $4.85.
“There is some relief in sight but probably not for a couple of days. Early next week is when we may see some more significant declines … but at retail prices, prices may climb for the next two to three days before they start to come down,” he said.
When supplies drop, wholesale prices rise. Then distributors and station owners have to pay more to fill up their station’s tanks. They then raise their prices based on how much they paid for their current inventory, how much they think they will have to pay for their next shipment, and, how much their competitors are charging.
A web of refinery and transmission problems is to blame, analysts said.
The situation is compounded by a California pollution law that requires a special blend of cleaner-burning gasoline from April to October, said Denton Cinquegrana, executive editor of the Oil Price Information Service, which helps AAA compile its price survey.
“We use the phrase ‘the perfect storm,’ and you know what, this current one makes those other perfect storms look like a drizzle. I don’t want to scare anyone, but this is a big problem,” Cinquegrana said. “Run-outs are happening left and right.”
Among the recent disruptions, an August 6 fire at a Chevron Corp refinery in Richmond that left one of the region’s largest refineries producing at a reduced capacity, and a Chevron pipeline that moves crude oil to Northern California also was shut down.
There was some good news, however.
Exxon Mobil Corp said a refinery in Torrance returned to normal operations Friday after the power failure Monday disrupted production for most of the week. State officials said with the refinery coming back online, prices should start falling.