After investing 10 years and $7 billion in the American Arctic, Shell said on Monday that it would shelve plans to tap the potentially vast oil reserve, leaving "for the foreseeable future" after a disappointing drilling season.
The announcement is a major setback for the oil giant, which had hoped for the largest cache of oil on Earth but instead found a series of accidents, errors and misadventures that scared off competitors and could in effect cordon off the Arctic for good.
Shell had been the only major oil company with an active plan in the Arctic. In recent years, ConocoPhilips, ExxonMobil, BP and Chevron have all suspended activity. Although the Department of Interior is scheduled to sell new leases in the Arctic in 2016, it has not yet prepared the necessary paperwork, signaling to some observers that the sale of new leases will be pushed back or even canceled.
Environmentalists cheered the surprise news from Shell, claiming victory after years of escalating marches, blockades and chants of "Shell No!"
Under the terms of this year's drilling plan, approved in May by the Obama administration, the company had from July 15 to September 28 before it would be forced to retreat ahead of plunging temperatures and heavy weather. In that time, Shell intended to sink at least one drill bit through the icy water, confirm the presence of oil and prepare a wellhead for production – before the company’s leases start expiring in 2017.
The exploration was already among the costliest, most complicated and controversial in the history of hydrocarbon fuel. Three years ago, Shell’s flotilla of rigs and support vessels chugged confidently toward the Chukchi Sea, about 70 miles off the untamed coast of northern Alaska. Even before they arrived, however, problems developed.
The company’s special spill containment system failed a test run. One of its rigs lost anchor and drifted. Another rig, the Kulluk, later ran aground and was totaled. The contractor in charge ultimately pleaded guilty to eight felony charges related to the wreck. But worst of all, Shell drilled just two of its five planned exploratory holes, and those only to a partial depth.
This year the work was again beset by problems. A gash opened on the hull of one of the company’s ice breakers, forcing the ship all the way back to Oregon for repairs, which took days out of an already short season.
Then activists from Greenpeace and Rising Tide, among other organizations, blockaded the mouth of Portland’s Willamette River. They dangled from a bridge and swarmed the waters. And the effort worked: They delayed by a day Shell’s launch of a ship it needed to begin advanced drilling.
Even before that stunt, a coalition of 10 activist groups forced Shell to halve its ambitions. The company wanted to drill two simultaneous wells within 15 miles of each other in the Chukchi Sea. But that’s a violation of established noise protections for polar bears, walruses and other wildlife, the government ruled after the activists called attention to it.
Shell had warned that it may not find oil in the area, despite estimates that the region holds the equivalent of 29 billion barrels of oil and gas. Shell’s own geologists presumably agreed or believed the reserve might be even vaster. But until this year, when the Polar Pioneer rig actually spun a drill bit down 6,800 feet into the seabed, there was no telling for certain whether the region would be a winner.
"Shell continues to see important exploration potential in the basin, and the area is likely to ultimately be of strategic importance to Alaska and the U.S.," Marvin Odum, president of Shell USA, said in a statement. "However, this is a clearly disappointing exploration outcome for this part of the basin."
Activists had framed the issue of the Arctic in the broadest possible terms. It wasn't about polar bears anymore -- but the survival of the planet, and the need to change everything in the face of catastrophic climate change. A research letter published earlier this year in the journal Nature brought the point home. To avert some of the worst outcomes, the authors concluded, “all Arctic resources should be considered as unburnable.”
Under that banner, thousands of protesters turned out last spring, waving “Shell No” flags at the entrance to the company’s terminal in Seattle. Other protesters slipped into kayaks and swarmed the company’s massive rigs, putting a brighter bulb in the spotlight on Shell’s work— and the Obama administration’s decision to approve it.
“The Obama administration seems to be leaving the fate of the Arctic up to Shell this summer,” Travis Nichols, an organizer for Greenpeace told MSNBC at the time. “But that doesn’t mean the future of the Arctic has to be in Shell’s hands.”
As of Monday, it seems, for the first time in a decade, the future of the Arctic is not.