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Vol. 17, No. 43 Week of October 21, 2012
Providing coverage of Alaska and northern Canada's oil and gas industry

Committee hears lessons learned from Shell’s Arctic OCS operations

It was standing room only on Oct. 11 as members of the public crammed into a meeting room in the University of Alaska Anchorage, to hear testimony on lessons learned from Shell’s drilling venture in the Chukchi and Beaufort seas this year. The occasion was a field meeting of the U.S. Senate Committee on Commerce, Science and Transportation. And Sen. Mark Begich, the lone committee member at the hearing, sat at a table facing representatives from Shell, government agencies and North Slope communities, each of whom presented their perspective on the summer’s events in the Arctic offshore.

Drilling started

Pete Slaiby, Shell’s vice president in Alaska, emphasized the significance of drilling finally starting in the Arctic outer continental shelf this year and thanked all of the various organizations that had helped Shell reach this point. Slaiby commented on the value of the federal interagency working group, established by President Obama, in bringing multiple regulatory agencies “under one roof” for efficient permitting.

Having paid $2.2 billion for outer continental shelf leases, Shell expects government agencies to be funded at an appropriate level to allow the company’s Arctic program to move forward, Slaiby said. Regulations and regulatory decisions must be based on facts and science; the litigation system needs reform; and, presumably referencing delays in Shell’s access to its leases for drilling, the terms of the leases should be extended, he said.

“These are all subjects for future discussion,” Slaiby said.

Interagency group

David Hayes, Deputy Secretary for the Interior, commented on what he sees as the success of the interagency working group.

“I am pleased to report that the federal government has never been more coordinated in terms of permitting activities and, I believe, has never before provided a clearer roadmap to companies who are interested in doing business in the Arctic,” Hayes told Begich. “We’ve enjoyed the working relationship with Mr. Slaiby and Shell.”

Interior’s regulations represent the gold standard for safe and environmentally sound operations and Shell has met our high regulatory standards, Hayes said. Lessons learned from this summer include a need for a better coordinated relationship with the science community, and a broader approach to decision making, rather than making decisions on a project-by-project basis, he said.

USCG operations

Rear Admiral Thomas Ostebo of the U.S. Coast Guard told Begich that for this year’s open water season the Coast Guard had deployed into the Arctic the national security cutter, the Bertholf, the high-endurance cutter, the Alex Haley, and two 225-foot, ice-capable buoy tenders. The Coast Guard had positioned two H60 Jayhawk helicopters at Barrow. This deployment had been achieved by juggling Coast Guard assets from other parts of the U.S., without sacrificing Coast Guard readiness anywhere, he said.

The Coast Guard also successfully conducted its first Arctic test of its oil spill recovery system.

“It does not work in icy waters but it does work in the open waters of the Arctic,” Ostebo said.

In addition, the Coast Guard conducted more than 1,000 hours of community service activities in North Slope communities.

Many ships

Among some extensive lessons learned is a realization that with some 700 to 800 ships passing through the Bering Strait this year, many of them transiting Russia’s Northern Sea Route, oil industry activities form only one part the picture when it comes to having a Coast Guard presence in the far north, Ostebo said.

Also, with big distances to offshore drilling operations and between those operations, the Jayhawk helicopters proved especially important to Coast Guard operations. And the Coast Guard had to use the helicopters to conduct several search and rescue operations involving both commercial operations and subsistence hunters.

But the communications and logistics needed to support Coast Guard operations proved challenging. In particular, communications bandwidth is often one of the first things to fall short in any emergency response, Ostebo said.

“That would be a critical need in the Arctic and we learned that this summer,” he said.

NOAA

Laura Furgione, acting director of the National Oceanic and Atmospheric Administration’s National Weather Service, said that NOAA has been receiving more requests for longer range Arctic weather and ice forecasts, as well as nautical charts, as interest in the region has increased. Information needed for accurate forecasting is in short supply and NOAA is moving forward with a new polar satellite system. However, there is a pending gap in satellite coverage from 2016 if an existing satellite system goes out of operation at that time.

In addition to services such as regular Arctic weather and ice forecasts, NOAA provides technical support for the U.S. Coast Guard and has developed a new web-based system to help emergency responders deal with oil spills, Furgione said.

As offshore oil industry activity moves from exploration towards development additional environmental observations, improved nautical charts and improved forecasting will all be needed.

“There’s a great deal of work to be done,” Furgione said.

Local involvement

Representatives from North Slope communities emphasized the need for local involvement in decision making for the Arctic offshore, especially given the communities’ dependence on subsistence hunting for bowhead whales and other marine mammals. And, given the risk of damage to subsistence resources from oil industry activities, the communities need to see some compensating benefit to offset those risks, the representatives said.

However, overall, the representatives complemented Shell on the manner in which it had conducted its operations this year.

The North Slope Borough feels encouraged by the responsible and measured approach of Shell during the drilling season, said Jacob Adams, the borough’s chief administrative officer.

Revenue sharing

But, with major oil finds in the Arctic offshore likely to have a dramatic impact on the North Slope communities, akin to the impact of onshore oil developments, there needs to be a sharing of oil revenues between the federal government and the people of Alaska, Adams said.

“Given our people’s physical and cultural reliance on the bowhead whale and other important marine mammals, we bear the majority of the risk with what can go wrong with outer continental shelf development and receive little direct benefit,” Adams said.

Adams also said that Alaska Natives do not feel involved in the decision making when it comes to outer continental shelf industrial activities.

“Part of the frustration expressed by Alaska Natives towards outer continental shelf development is due to the fact that we do not feel that we have been offered a seat at the decision making table,” Adams said. “The federal government must give more than lip service to the local involvement, and meaningful enquiries must be made through the government’s tribal consultation policies.”

Adams particularly emphasized the importance to the Native communities of allowing an oil pipeline across the National Petroleum Reserve-Alaska, to avoid the need to use oil tankers in the Chukchi Sea should oil fields be developed there.

Adams urged the federal government to focus its efforts and financial resources on enabling a year-round presence in the Arctic by the Coast Guard, improving Arctic communications systems and the construction of more U.S. ice breakers.

A complex balance

“The life of a 21st century Inupiat is a complex balancing act between preserving our culture and developing opportunities for the benefit of our people,” said Edith Vorderstrasse, consulting division manager for UIC, the Barrow Native village corporation.

Vorderstrasse said that during 35 years of oil production on the North Slope the oil industry had made little effort towards local hire through local Native corporations. And while Shell had done an outstanding job of working with Alaska Native corporations, there have been no similar in-depth efforts by other offshore leaseholders in their projects in the Chukchi and Beaufort seas, Vorderstrasse said.

If offshore development takes place, the oil industry must build a strong alliance with the Inupiat people, she said.

Community needs

Vorderstrasse said that UIC supports both onshore and offshore oil and gas development.

“We will support exploration and development activities as long as they are done in a way that ensures protection and preservation of our Inupiat culture and our subsistence way of life, (and ensures) economic benefits for our community; employment for our shareholders and their families; and contract opportunities for companies,” she said.

And Vorderstrasse argued for the formation of a training consortium to enable the training of Alaska Natives for oil industry jobs.

In addition, experience this year has shown that support for offshore industrial activity puts a considerable strain on village infrastructures, including housing, power supplies and water supplies — the federal government should make available revolving loans to help communities deal with these issues, and there should be local revenue sharing with federal offshore oil revenues, Vorderstrasse said.

The federal government also needs to ramp up U.S. Coast Guard Arctic operations. And ratifying the United Nations Convention on the Law of the Sea would avoid conceding Arctic territory to other Arctic nations.

“We are concerned that the United States has failed to recognize the Arctic as a new geopolitical frontier,” Vorderstrasse said.

—Alan Bailey



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