Interior Report Faults Shell for Mismanagement of Contractors

The Department of Interior has concluded its expedited review of Shell’s failed 2012 Arctic drilling campaign.

Before resuming activity in the Arctic Ocean, the company must undergo a third party review of its entire operation.

Secretary of the Interior Ken Salazar put it bluntly.

“Shell screwed up in 2012,” he said.

And now the company must follow new orders from the government before it can operate again in the Arctic Ocean.

Shell must produce an “integrated plan” for future work. The company will have to detail each facet of Arctic drilling – from marine transport, to emergency response, to demobilization.

The company also must allow an outside firm to review its Arctic practices.

Bureau of Ocean Energy Management director Tommy Beaudreau says the review will need to illustrate whether Shell is capable of overseeing the contractors it uses. He says the company continually failed to do so this year.

Shell contracted Superior Energy, a company with a long history in the Gulf of Mexico, to design its underwater containment system.

“Ultimately, Shell, working with Superior, was not able to bring that system online. They were not able to obtain Coast Guard certification for the vessel. The deployment test of the system itself failed,” Beaudreau said.

That’s why the Interior Department only allowed Shell to drill pilot wells last summer.

Beaudreau went on, saying Shell relied on contractors for emissions controls that could not meet government muster. That led to violations of EPA air permits.

And most recently, the company relied on contractors to tow the Kulluk, a rig that grounded New Year’s Eve.

“Taken altogether, this points to the need for strong operator oversight of the contractors they’re working with,” Beaudreau said. “Now these issues, based on our recommendations, are issues that are going to have to be specifically addressed, and we need to be told how they’re being addressed.”

Before the company can resume any drilling – regardless of the depth, Beaudreau says, it must prove the containment dome can operate correctly.

Secretary Salazar says the government reacted appropriately to Shell’s stumbles – that the various agencies in the Department of Interior successfully managed the setbacks.

“We were very much keeping coordinated,” Salazar said. “I was being informed daily on the activities relating to the US Coast Guard and on issues relating to oversight of the Arctic Challenger.”

Shell Alaska spokesman Curtis Smith says the company does not know which firm will conduct the review. Nor did he have an idea how long the review will take.

The company still says Arctic drilling is possible next summer.

“2014 is a possibility, but our future plans offshore Alaska will depend on a number of factors, including the readiness of our rigs and our internal confidence that lessons learned from our 2012 drilling program have been fully incorporated,” Smith said.

Shell sent its rigs to Asia for repair, and last month announced its suspending its drilling program this coming summer.

Conservation groups are disappointed. Michael LeVine is senior council with Oceana. He says Shell should be held accountable, but that’s only the first step.

“It is also necessary for the department of Interior to look inward and fundamentally reassess how and why it allowed an unprepared company to allow in unforgiving, harsh waters in Alaska,” LeVine said.

The Coast Guard is conducting its own review of the company. There is no time frame when that will be released.

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