How critical to the future of Arctic drilling is Royal Dutch Shell PLC's decision this week to delay its Beaufort and Chukchi seas projects? During today's OnPoint, Michael Conathan, director of ocean policy at the Center for American Progress, discusses the reasons for the postponement and his expectations for the Obama administration's support of the project in the future.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Michael Conathan, director of Ocean Policy at the Center for American Progress. Michael, thanks for coming on the show.
Michael Conathan: Absolutely, thanks for having me.
Monica Trauzzi: Michael, earlier this week Shell announced it would delay its plans to drill in the Arctic until next year after an oil containment system was damaged during final testing. This is one of a series of challenges that this project has faced over the last couple of years. How critical of a failure is this for the company and for the industry?
Michael Conathan: I think really the more troubling thing is, as you put it, the series of failures that have been encountered along the way. Obviously, this process has taken longer than Shell anticipated going in and I think that, as Secretary Salazar said in some of his most recent remarks, it's largely attributable to the way they've managed the process. And that if their house had been a little more in order going forward, that perhaps they'd already be operating earlier in the drilling season. The series of incidents that they've encountered, everything from the air permits, the air emissions permits from their vessels that prevented the drilling from moving forward perhaps as early as last year following the lawsuit, you know, they then subsequently had problems with getting their drilling ship over to Alaska. Once they got it there it slipped an anchor and drifted, nearly ran aground up there in Alaska. And then they've had problems with one of their response vessels and getting that approved by the Coast Guard and this latest with the containment dome that they'd been testing. And the fact that they couldn't even carry out a successful test of the equipment in relatively benign conditions doesn't instill a lot of confidence that they'd be able to actually operate effectively in the Arctic when the time comes.
Monica Trauzzi: So, what Shell is doing here is really seen as important for the entire industry, because they're sort of leading by example. Should the entire industry then be concerned that this may be a less than viable area to drill in?
Michael Conathan: I would hope so. I think it is a less than viable area to drill in right now given the technology we have, the scientific knowledge we have and the response capacity in the region. We did a report that looked specifically at infrastructure and how you would be able to mount a response. At the Center for American Progress we put our report out back in February talking about the complete lack of transportation infrastructure. For example, there's one highway that goes to the north slope of Alaska. You know, there's very limited airport capacity. There are no deep water seaports. There are no people up there to execute a response the way there were in the Gulf following Deepwater Horizon. And we are seeing the industry start to back away from some of their previous commitments. Statoil, the Norwegian company, has announced that they're going to slow down their process a little bit. And sort of external support companies have voiced their concerns as well with Lloyd's of London saying that drilling in the Arctic presents a very serious risk, something that they would have to think carefully about trying to insure.
Monica Trauzzi: But, at the same time, this administration does have an all-of-the-above energy policy and we haven't really seen any indication, at least publicly, that they're sort of scaling back their support for this project. What's your sense of what the Obama administration's position is at this point following this incident?
Michael Conathan: Well, again, I think from Secretary Salazar's comments you can tell that they are eager to have Shell start operations up there, but they're also not going to move ahead unless they are convinced that there are some safeguards in place. And, you know, there's plenty of debate and there should be plenty of debate about whether the safeguards that the federal government is talking about are going to be sufficient to really be able to mount an adequate response once we get up there. And so I think one of the other things that they really need to look at is, you know, what is the federal capacity to operate in that region? The Coast Guard's been up there over the summer conducting some more operations up there, but our icebreaking capacity, for example, is just laughable in this country right now. We have one operational icebreaker, you know, that's fewer certainly then Canada and Russia, even countries like Sweden and Kazakhstan have more icebreakers that are operational than we do. So, the permitting is one aspect of it which I feel that they could be a little stronger in their requirements for response capacity and things of that nature in their permitting process. But that's just really one piece of the puzzle and we have to look at the support that's up there as well.
Monica Trauzzi: Are there any specific indicators, at this point, that you've seen that this won't happen in 2013? I mean a Romney administration would certainly be supportive of something like this. We're seeing the Obama administration supporting it. Any reason to believe it wouldn't happen next year?
Michael Conathan: I haven't seen indications from the administration that they do not want to continue moving in this direction. I hope they'll take the time to reconsider what an appropriate framework should look like for moving forward. I think realistically the assumption is that Shell will be coming back in 2013. You know, they wouldn't be starting to drill their wells now if they didn't think that was a likely outcome. But I really hope that this gives folks pause. It's not just Shell's operations that have caused the problems either. We've also seen the environmental complications up there. The other reason that it took them so long to get started was because despite the fact that sea ice in the Arctic is at the lowest level in recorded history this summer, there was still ice in the Beaufort and Chukchi seas that prevented their operations from getting started sooner. And that just speaks to the incredible volatility up there in the region. And I hope the irony isn't lost on people that it is the fact that we have burned so many fossil fuels that have led to climate change that have allowed the ice to recede and that it then has subsequently now opened up these areas to drilling and our response is to go in and extract more fossil fuels that we can burn and perpetuate the cycle. You know, I think that's a lesson that seems to be lost on a lot of folks in all of this.
Monica Trauzzi: So then more broadly, do you disagree with the all-of-the-above energy strategy that this administration has employed and the next administration, whether it be Obama or Romney, will likely have in place?
Michael Conathan: Well, I think it depends on, obviously, how you're defining all of the above. I mean there's no question that we need fossil fuels for our current energy economy. The question that I think is more appropriate is whether in creating that all-of-the-above energy strategy our oil and gas policy should include the Arctic. And I think at this point it's premature and I don't think it should be occurring up there in that region.
Monica Trauzzi: All right, the debate continues. We'll end it there.
Michael Conathan: All right.
Monica Trauzzi: Thank you for coming on the show.
Michael Conathan: Thank you very much.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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