Written by Robert Powell, Lead Specialist, Priority Conservation
A moment of silence was observed at the start of the Arctic Energy Summit in Fairbanks, Alaska, on Monday, September 28, in response to Royal Dutch Shell's sudden announcement that it has abandoned oil exploration in offshore Alaska "for the foreseeable future." Shell's announcement was a bombshell and caught everyone off guard. The silence in the plenary session hall -- which happens to double as a hockey arena -- was surreal. I wondered: Could this be the end of offshore oil in the Arctic?
Until now, Shell's public statements have always expressed unflinching determination to forge ahead with its exploration program, even as the company's costs and risks rose at alarming rates. In the last seven years the company spent 7 billion dollars and did not find oil. Their 2012 exploration season was a disastrous string of embarrassing and dangerous accidents including the now famous grounding of the Kuluk drill rig, not to mention the grounding of their other drilling rig, the Noble Discoverer. The company was fined by the Environmental Protection Agency, criticized by the US Coast Guard, and taken to court by opponents.
How long could the company endure the damage to its reputation? How long could it throw good money after bad? We now have the answer. Finding no oil this summer, Shell finally threw in the towel. Is this the end of offshore oil exploration in the Arctic for good? I would be very surprised to hear any oil company categorically state that they have turned their back on offshore Arctic oil once and for all. Things could change. Oil prices that are a fraction of the cost of production in the Arctic could one day rebound. The current international glut of oil supply could abate, restoring the financial case for this source of petroleum. In any of these situations, Shell could dust off its ambitions and once again embark on offshore oil exploration in the Arctic.
Or it could turn out -- and this is my expectation -- that the combination of abundant and cheap OPEC oil along with accelerating efforts to adopt fossil fuel alternatives means the dream of Arctic oil really is over. In which case, the host's request to observe a moment of silence will one day be seen as the appropriate gesture.
Shell's retreat from the Arctic follows Canadian announcements that Imperial Oil and Chevron would abandon plans to go before the National Energy Board to plead their case for an exemption to standard precautionary requirements for offshore oil exploration (that WWF has fervently defended for years). They haven't quit yet though. They continue to lobby the government to extend their exploration licenses to play for more time, hoping something will change.
All of the backtracking and delays underline the hard fact that the companies have not shown they can drill safely in the Arctic. Shell's misadventures have demonstrated quite the opposite, eroding confidence in their commitment and capacity to act responsibly. Shell's latest proposal to explore offshore exploration in Nova Scotia without timely access to a capping stack underscored, yet again, the company's willingness to create intolerable risks to both communities and ecosystems, in pursuit of petroleum.
Many people who have invested their hopes in the dream of Arctic oil wealth are saddened by Shell's announcement. It's hard to give up a dream even when it is so close to becoming a nightmare. This announcement means that the risk of a major oil spill in the Arctic has receded -- for the foreseeable future -- and for that I am grateful.
The Arctic is a magnificent, harsh and fragile place. And its home to some very remarkable people who rely to this day on its bounty. Let's keep it that way.
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