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Total Sizes up Shell’s Game

Chuck Clusen’s Blog:Posted October 2, 2012

It isn’t often that an oil industry executive speaks out against oil exploration. Yet last week, the Financial Times reported that French oil giant Total’s chief executive, Christophe de Margerie, claimed the risk of an oil spill in [the Arctic] such an environmentally sensitive area was simply too high. Perhaps even more rare is the position I find myself in now—a conservationist in the strange position of being in agreement with a major oil company’s chief executive.

Although the environmental community has continually pointed to the seemingly overlooked risks of Shell’s plans for offshore drilling in Alaska, our warnings, as a rule, are ignored by Shell. But something is different about Shell’s Arctic plans—it’s not just environmental groups warning of the risks. De Margerie’s warning is just the latest in a pattern of warnings from the business world.

Lloyd’s of London, a preeminent insurance market, has voiced similar concerns. In April Lloyd’s, along with the think tank Chatham House, released Arctic Opening: Opportunity and Risk in the High North which warns oil and gas exploration “can have devastating consequences on local environments” and “cleaning up any oil spill in the Arctic, particularly in ice-covered areas, would present multiple obstacles which together constitute a unique and hard-to-manage risk.”

It’s not just insurers that are leery of Arctic exploration, banks have begun to refuse to lend to Arctic oil and gas projects. Bloomberg reports West LB, a significant lender of oil and gas projects won’t lend to projects bound for the Arctic. “There are risks that are almost impossible to manage…remediation of any spills would cost a fortune.”

Shell’s performance this season only reinforced environmentalists’ and financiers’ worries. The company was dogged with one blunder after another. Their drillship, the Noble Discoverer, slipped anchor and nearly ran aground while in harbor. Shell’s fleet couldn’t meet air pollution standards and was forced to obtain a special exception from the EPA to legally operate this summer. But perhaps most disturbing is that Shell was never able to gain certification from the Coast Guard for its safety barge, the Arctic Challenger.

Now that Shell has shown the world that it is not ready for Arctic exploration, the administration should order a top-to-bottom review of the Arctic plans. Major aspects of Shell’s plan are still glaringly deficient. The infrastructure needed to facilitate a major clean-up effort simply does not exist on the North Slope of Alaska. Technology must be developed that is proven effective in cleaning oil from ice and ice covered waters. Baseline scientific study is necessary to understand how the Arctic ecosystems will respond to oil spills. Every aspect of Shell’s exploration plan needs further review.

Clint Kincaid aided Chuck Clusen with this post.

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