Arctic-sea oil exploration stands to open new frontier

By JOHN M. BRODER and CLIFFORD KRAUSS

POSTED: 01:30 a.m. HST, May 24, 2012

WASHINGTON >> Shortly before Thanksgiving in 2010, the leaders of the commission President Barack Obama had appointed to investigate the Deepwater Horizon oil spill in the Gulf of Mexico sat down in the Oval Office to brief him.

After listening to their findings about the BP accident and the safety of deepwater drilling, the president abruptly changed the subject.

?Where are you coming out on the offshore Arctic?? he asked.

William K. Reilly, a former chief of the Environmental Protection Agency and a commission co-chairman, was startled, as was Carol M. Browner, the president?s top adviser at the time on energy and climate change. Although a proposal by Shell to drill in the Arctic had been a source of dissension, it was not a major focus of the panel?s work.

?It?s not deep water, right?? the president said, noting that Shell?s proposal involved low-pressure wells in 150 feet of water, nothing like BP?s 5,000-foot high-pressure well that blew out in the gulf.

?What that told me,? Reilly later recounted, ?was that the president had already gotten deeply into this issue and was prepared to go forward.?

Barring a successful last-minute legal challenge by environmental groups, Shell will begin drilling test wells off the coast of northern Alaska in July, opening a new frontier in domestic oil exploration and accelerating a global rush to tap the untold resources beneath the frozen ocean. It is a moment of major promise and considerable danger.

Industry experts and national security officials view the Alaskan Arctic as the last great domestic oil prospect, one that over time could bring the country a giant step closer to cutting its dependence on foreign oil. But many Alaska Natives and environmental advocates say drilling threatens wildlife and pristine shorelines, and perpetuates the nation?s reliance on dirty fossil fuels.

In blessing Shell?s move into the Arctic, Obama continues his efforts to balance business and environmental interests, seemingly project by project. He pleased environmentalists by delaying the Keystone XL pipeline from Canada and by adopting tough air standards for power plants, yet he has also delighted business concerns by rejecting an ozone standard deemed too costly to the economy.

And now, the president is writing a new chapter in the nation?s unfolding energy transformation, in this case to the benefit of fossil fuel producers.

?We never would have expected a Democratic president ? let alone one seeking to be ?transformative? ? to open up the Arctic Ocean for drilling,? said Michael Brune, executive director of the Sierra Club.

Shell?s Arctic quest has consumed seven years and $4 billion over two presidential administrations.

Other oil companies are already lining up to join Shell in the Arctic, which company executives say could eventually yield a million barrels a day of crude ? or more than 10 percent of current domestic output. Among the Inupiat who live closest to the proposed drilling, the project continues to generate tension and debate. Although they depend on oil production for jobs and tax revenue, they rely on the ocean for much of their food and culture.

?I?m worried because we live off the ocean, the bowhead whale, the beluga, the walrus, the bearded seal,? said Tommy Olemaun, president of the Native Village of Barrow, an Eskimo tribal organization. ?The ocean is our garden.?

The natural world holds a mystical grip on the nearly 5,000 Eskimos of the North Slope, where the migration patterns of the bowhead whale dictate the rhythm of life. All other activity stops when the Inupiat load up their sealskin boats with gun-fired harpoons. Whale meat is carved at the beach and shared among the community along with mythical tales of whales giving up their freedom to nourish the people.

Bow-shaped whale skulls are displayed in front of public buildings, and baleens ? the bristly plates that filter krill in the whale?s mouth ? as trophies in offices and homes.

In early April, Roy Nageak, 60, a whaling captain, got off his snowmobile and climbed a high ice ridge four miles offshore in search of a navigable hunting trail. ?Those oil guys can think whatever they want, but we know how harsh this ocean is,? he said. ?They don?t know what they are getting into.?

But the Eskimos have also come to rely on the oil industry. Before onshore drilling began in the 1960s, many North Slope communities lacked running water and relied on kerosene lanterns for light. Residents chopped ice on nearby lakes and transported it by dog sled to preserve their food. There were no high schools or fire stations.

Since the construction of the Trans-Alaska Pipeline in the late 1970s, the North Slope has produced as much as one-fifth of the nation?s oil, and taxes on the industry finance the North Slope Borough government?s $350 million annual budget. Over the past 50 years, nearly all of Alaska?s prosperity has been driven by oil production and crude prices. Residents pay no state income tax, and in fact receive checks ? totaling roughly $5,000 for a family of four last year ? from the Alaska Permanent Fund, a corporation largely financed by oil revenues.

But the Exxon Valdez disaster in 1989 had changed attitudes, especially among villagers. They feared that drilling would disturb the bowhead migration, forcing the whales away from their food and their pursuers dangerously far offshore. They also feared a spill could poison the whales.

The Deepwater Horizon disaster on April 20, 2010, the worst offshore spill in U.S. history, shut down Shell?s drilling plans for the year, but barely slowed its lobbying campaign on the Arctic. In numerous White House meetings even at the height of the gulf crisis, top Shell officials pressed for a decision.

After the flow from the stricken well was stanched in July, Obama focused on when to restart offshore drilling and whether to expand it. A month before the BP disaster, the administration had proposed opening new areas to drilling off the East and Gulf Coasts as well as Alaska.

The company?s plans were set back again at the end of December 2010 when an EPA panel revoked the air pollution permit for one of its drilling rigs. The EPA action effectively stopped Shell?s plans for another year, but the president put his foot on the gas.

In May 2011, he authorized onshore oil lease sales in Alaska?s National Petroleum Reserve and extended oil companies? offshore leases in the Arctic Ocean. In July, he created by executive order a multiagency task force led by the deputy interior secretary but overseen by Heather Zichal, an environmental adviser to the 2008 Obama campaign, to prod the bureaucracy on Arctic issues, particularly Shell?s drilling plans.

Still, some government officials complained that there remained huge gaps in response plans for a spill and too many unknowns about the effect of drilling on marine animals.

At the urging of regulators, Shell strengthened spill prevention and response plans. It built a containment system for the Arctic modeled on the one that successfully capped the BP well and added ships and equipment to the armada to be in place to capture any spilled oil. The company agreed reluctantly to shorten its Chukchi Sea drilling season by 38 days, to less than three months, to ensure that the area would be ice-free in case of a blowout.

The government strengthened its Arctic research programs to better understand the impact of increased industrial activity in the northern ocean. Those and other concessions seemed to placate officials at the permitting agencies, who were navigating between their regulatory duties and the president?s obvious desire to drill.

Shell?s permits came in a rush. Interior approved exploration in both seas by last December. Response plans were endorsed in February and March of this year. The EPA?s appeals board cleared the final air permits at the end of March ? just as the whaling season got under way. NOAA came through with a marine mammal permit in early May.

?We can?t stop it,? said one senior agency official who had qualms about Arctic drilling but understood the president?s wishes. ?We can only make it less bad.?

Shell is awaiting its final drilling permits from the Interior Department. Two Shell ships are in Seattle, undergoing final modifications and inspections.

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