Royal Dutch Shell announced yesterday that it would indefinitely suspend offshore oil exploration in the Alaskan Arctic. That’s great news, but this is just a baby step toward securing the future of the Arctic. Understand the details of what Shell has said—and what it did not say—and you will appreciate the hard work that remains to protect northern ecosystems. Here are your questions, answered.
What, exactly, did Shell announce?
Shell said, via a press release, that it would “cease further exploration activity in offshore Alaska for the foreseeable future.” The area that Shell is temporarily abandoning is fairly well defined. Shell holds exploration leases for 275 plots in the Chukchi Sea, the stretch of water that separates Alaska from Russia north of the Bering Strait.
How long will the oil giant leave that portion of the Arctic in peace? It’s not clear. The 2015 drilling season recently ended, so the company had no choice but to withdraw its people and equipment at this time. They almost certainly won’t return next year, and probably not the year after. Beyond that… who knows? It depends on a variety of factors.
Interesting. Tell me more about these factors…
Shell CEO Ben van Beurden insists that the price of oil, which has dropped 50 percent in the last year, has nothing to do with the company’s exploration decisions. “We can’t be driven by today’s, tomorrow’s, or next year’s, or last year’s oil price,” says van Beurden.
That may be technically true—oil companies are accustomed to riding out fluctuations in oil prices while they play a long game on exploration. But those fluctuations happen for a reason, and there’s very little to suggest oil prices will recover soon. The fracking boom flooded the market, and shale continues to produce large amounts of oil. The U.S.-Iran deal could bring more oil onto the market. An agreement at the upcoming Paris climate summit could place serious limits on future consumption. It’s hard to believe that oil prices played no part in Shell’s withdrawal.
A sudden and unforeseen change in oil prices, though, could change everything. Shell has already spent $7 billion on the project, and companies don’t like to waste money.
The other major factor motivating Shell’s withdrawal is you. Yes, you. The Shell’s press release cited the “unpredictable regulatory environment” as one of its reasons for leaving the Arctic. That sounds like a dig at the federal government, but it’s really an acknowledgement that Americans don’t like Arctic oil exploration. Opinion polls show consistent and strong public opposition. Protesters, including a fleet of kayakers in Seattle who blockaded a Shell drilling rig in May and a group of bridge danglers in Portland who delayed Shell’s icebreaker in July, have hounded the company’s Arctic exploration at every turn. Shell was afraid that strong and visible public opposition would eventually translate into an offshore drilling ban in the Arctic.
So this is a PR move?
Not entirely. After a drilling project failed to uncover significant oil stores in one section of the Chukchi Sea, Shell had to disclose to its shareholders the significant financial loss associated with failure in the Arctic. But PR definitely played a role. Shell is dealing with plenty of bad publicity right now. Its operations in the Arctic have produced a series of bizarre accidents. An underwater containment dome was “crushed like a beer can” in 2012, an icebreaker under contract with Shell ran aground in July, and, of course, the infamous Kulluk crashed ashore on New Year’s Eve two years ago. The blunders raise questions not only about the company’s technical prowess, but its decision-making.
“Some people blame these accidents on incompetence, and that may be true,” says Franz Matzner, director of NRDC’s Beyond Oil initiative (disclosure). “But what’s probably more accurate is that there’s no safe way to drill in the Arctic.”
Shell’s public embarrassment hasn’t been limited to Arctic exploration. There was a high-profile shareholder rebellion in 2013, after the company issued a massive bonus payment to a CEO who oversaw enormous losses. An unearthed email revealed that the company was aware of the risk of climate change as early as 1981, but did nothing. In a barely credible attempt to avoid being labeled a climate denier, Shell ended its long-term membership in the climate-denying American Legislative Exchange Council. It has been a bad couple of years for Royal Dutch Shell.
Ok. Shell could reverse course at any time with a change in oil prices and some clever publicity maneuvering. What would it take to permanently keep it out of Arctic?
The president could take several steps to make Arctic oil exploration nearly impossible for a very long time. The draft five-year offshore leasing plan includes portions of the Arctic (and, for that matter, the Atlantic Ocean). Before finalizing the plan, the president could remove those areas. President Obama could also stop issuing new leases for drilling in the Arctic under the current five-year plan, and decline to renew any existing leases. (It’s a wonder that oil companies keep seeking these leases, since none of them has turned a profit on offshore Arctic drilling.)
Finally, and most importantly, the president has the power under the Outer Continental Shelf Lands Act to declare the Arctic off-limits to oil exploration for environmental reasons. While nothing in a democracy is permanent, this would be the closest thing. Future politicians who might want to reverse such a declaration would face a long, arduous and uncertain process.
Shutting oil companies out of the Arctic could also have positive impacts well beyond the local ecosystem. First, the move would keep that oil in the ground and prevent its carbon load from exacerbating climate change. Second, the United States would send a signal to others nations about reconsidering the value of fossil fuels.
“Every country is looking to the United States for leadership in the run-up to the Paris climate conference,” says Matzner. “Making this decision would tell other countries to take control of their energy destiny, starting with their publicly owned lands. What a powerful statement to make about transitioning to green energy.”
Shell’s withdrawal is an admission to the world that even the most bullish oil company can’t make drilling in the Chukchi work, either economically or environmentally. President Obama now has an opportunity to make the company’s Arctic departure permanent.
onEarth provides reporting and analysis about environmental science, policy, and culture. All opinions expressed are those of the authors and do not necessarily reflect the policies or positions of NRDC. Learn more or follow us on Facebook and Twitter.