It was just after Christmas 2012, and the Kulluk, a 250-foot-high, floating oil-drill rig, swung like a metronome in gale-force winds blowing through the Gulf of Alaska. The tug that had been towing the rig bobbed helplessly in 50-foot waves, her four diesel engines flooded with seawater as the rig’s skeleton crew of 18 drifted toward a barrier island. If the Kulluk hit, it might split open, spilling 143,000 gallons of diesel fuel and 12,000 gallons of hazardous fluids into the water.
Luckily, a Coast Guard helicopter team was able to swoop in and airlift the crew to safety, and, though the rig hit the island a few days later, it never ruptured. Ecological disaster was avoided, but it had been close. And no one was hurt.
The near accident was no surprise to environmentalists. They had warned there'd be problems if Shell, operator of the Kulluk, was permitted to drill offshore in the Arctic. The oil multinational wasn't prepared for the severe conditions in the far north, they said.
This month, Shell will try to drill offshore in the U.S. Arctic again. If it succeeds, the door flies open to wholesale American development in one of the Earth’s last pristine places, as the U.S. enters a gold rush for Arctic riches that is already underway elsewhere. But if, as environmentalists fear, another accident occurs, it might end attempts to drill in America’s high north for years. Oil extraction is one of the dominant debates in what may be the world’s newest great game, Rudyard Kipling’s term for the struggle between major powers to dominate the earth’s remote but vastly strategic places.
The Cold War Over a Very Cold Place
The Arctic, which covers 8 percent of the Earth’s surface, is warming twice as fast as the rest of the planet. With all that ice melting, the region is in danger of becoming a 21st-century Wild West—a free-for-all for power and riches opening up at the top of the planet.
“The Arctic is emerging on the world stage, and it is not yet settled whether businesses, governments and other operators can fully manage the risks,” said a Council on Foreign Relations (CFR) report released in May 2015. Ice is disappearing so fast that the U.S. Navy predicts the entire Arctic Ocean may be totally ice-free in summers by 2050, with ships able to traverse the top of the North Pole. Newly open waters are already multiplying security and rescue concerns for the U.S., says Rear Admiral Daniel Abel, who runs Coast Guard forces in District 17, a massive 3.8-million-square-mile area encompassing 44,000 miles of coastline and parts of the Pacific Ocean, Bering Sea and Arctic Ocean. So much ice has disappeared since the 1970s that “just the amount of new open water I have to deal with is the size of 45 percent of the continental U.S.,” Abel said.
There are no deep-water harbors in the U.S. Arctic, so as ice melts, emergency missions will have farther to go from bases to the south. Ship sinkings in dangerous Arctic seas are a real possibility. In recent naval war games, representatives of all the U.S. military service branches planned responses to possible near-future scenarios, including terrorists seizing a ship in Arctic waters, enemy vessels carrying nuclear weapons north of Alaska and, if oil companies drill offshore, dealing with a massive spill.
Warmer conditions are also opening up once-blocked trade routes and areas for drilling or mining, and with so much at stake, Arctic nations hope the current peace will keep but are arming up, planning for a harsher outcome, with Russia making the most aggressive moves. In March, it launched massive military maneuvers in the high north, involving 38,000 troops, over 50 ships and 110 aircraft. “Russia has made a military buildup in the Arctic a strategic priority, restoring Soviet era airfields and ports and marshaling naval assets,” the CFR reported. Recently, Russian military planes called “bear bombers” resumed buzzing U.S. airspace off the Alaskan coast, a practice last seen during the Cold War.
Navies and shipping companies hungrily eye shortcut trade routes opening up as ice disappears. Russia’s northern sea route, the Northeast Passage, became ice-free in summers in 2007, shortening the distance between Asia and Europe by as much as 30 percent, which saves fuel, cuts carbon emissions and helps shippers avoid the pirate-filled waters off the coast of Africa. Five cargo vessels sailed the new route in 2009; 71 did it in 2013. Russian President Vladimir Putin says he wants the Bering Strait, between Alaska and Russia, to become the next Suez Canal, and U.S. naval planners have taken to calling the waters between Russia and Alaska “the Bering Gate.”
It’s a new kind of geopolitical cold war, and the U.S. is in danger of losing. “We’re not even in the same league as Russia right now,” Coast Guard Commandant Paul F. Zukunft says. “We’re not playing in this game at all.” In the Arctic, the only way to move around on the surface of the sea in even thinner summer ice—to do search and rescue, lead other naval or commercial ships, or conduct heavy research—is often on icebreakers. The U.S. has only two, both old and “there’s no money for new icebreakers,” reports Fran Ulmer, chair of the U.S. Arctic Research Commission. Ulmer says an icebreaker can cost up to a billion dollars, and “it takes years to get one built.” Russia operates 27 icebreakers, and China, which is not an Arctic nation but has aspirations in the area, will have two by next year.
Tourist ships have also begun journeying into the U.S. Arctic, through the formerly iced-over Northwest Passage—the 900-mile sea route over Alaska and northern Canada, and the shortcut between Europe and Asia that Western explorers had sought for centuries. For centuries, that ship graveyard crushed vessels with ice, killing crews with starvation, sickness or cold. In the most famed tragedy, crews of the British Erebus and Terror were trapped in ice in 1848—they walked off in search of rescue and ended up eating each other.
Those horror scenes are a far cry from the passage now, as German cruise ships routinely carry vacationers through it. In 2016, the huge luxury liner Crystal Serenity is scheduled to sail from Seward, Alaska, to New York City, carrying as many as 1,000 passengers in its lounges, bars and staterooms. Cheapest tickets: $21,455. Even private yachts have begun showing up off Barrow, at the top of Alaska, and neither the Coast Guard nor locals are alerted that they are coming, so unlike international travelers arriving elsewhere in the U.S., they simply land, unvetted. The adventurers on two such boats, Norwegian and Russians, told me they were surprised that when they transited through U.S. Arctic waters, they never had to show a passport or answer any questions. “We just walked ashore,” one man said. With Barrow’s airport less than a mile from the beach, any disembarking sailor with a U.S. driver’s license could buy a ticket on a daily commercial flight to Anchorage and be anywhere else in the United States the next day, with no one the wiser.
Russia and China are bullish on the high north for more than its lovely vistas and money-saving trade routes. They also believe that there’s an astounding treasure pile of resources there. Beneath the Arctic waters, projected oil and mineral finds—in particular, potential new hydrocarbon reserves thought to lie off Russia, Norway, Greenland and Canada—have triggered an undersea land rush. All Arctic oceanfront nations currently own mineral rights beneath the waters of their continental shelves, an "exclusive economic zone" extending out from shore for 200 miles. But under a treaty called the United Nations Convention on the Law of the Sea (UNCLOS), any coastal nation can now claim an additional 200 miles of sea bottom if it proves to a committee of U.N.-based scientists that the area is part of its continental shelf. Russia and Norway have already put in claims.
During recent summers, the U.S. icebreaker Healy has hosted scientists mapping and taking samples of the sea bottom off northern Alaska, in preparation for the U.S. making a similar claim—it could potentially gain new territory twice the size of California. But unlike other Arctic nations, the U.S. currently cannot make claims, because it’s the only one that hasn’t ratified the treaty, despite support for it from both the Bush and the Obama administrations, the military, shippers, oil companies, the U.S. Chamber of Commerce and environmental groups.
Republican senators have blocked UNCLOS for years. They object to a provision authorizing the International Seabed Authority (ISA) to oversee deep sea mining, believing that any oversight of ocean issues by international bodies will diminish U.S. sovereignty—this despite a 1994 revision giving the U.S. effective veto power over any ISA decisions, should the U.S. join up. The last time the treaty came up in the Senate, in 2012, 34 Republican senators pledged to vote against it, effectively killing it, since a two-thirds majority is required for ratification.
After years of watching other countries more aggressively move into the Arctic, Washington has been more focused on the region in recent months. In January, President Barack Obama issued an executive order to coordinate federal efforts under a national Arctic strategy. His administration has also encouraged greater communication between federal agencies responsible for oversight or permitting of offshore Arctic drilling, which Shell says has been a big help. And in April, the U.S. assumed chairmanship of the Arctic Council, a diplomatic body of eight Arctic nations designed to cooperatively deal with development and environmental issues in the region. So far, council states have agreed on search-and-rescue response protocols and marine oil-pollution preparedness.
But, says Ulmer, “money hasn’t started flowing. Other Arctic nations have been more focused.” Perhaps because the lower 48 states are not attached to Alaska, “the U.S. does not self-identify as an Arctic nation,” she says. “Getting the public support necessary to achieve funding is a tough battle.”
In May, Alaska Senator Dan Sullivan introduced an amendment to the National Defense Authorization Act requiring the secretary of defense to detail a military plan for the Arctic. "It's one thing to talk about these issues but another to have a forced posture that reaffirms our strategy," he says. "It's the snow-globe syndrome. Americans in the Lower 48 see us as something they see in a glass. It makes them feel good. But they don't take us seriously.”
Of course, Shell Oil and other companies that have purchased leases north of Alaska take the Arctic very seriously. But despite the financial stakes, those other companies aren’t plunging into chilly waters yet. They want to see what happens to Shell first. ”Shell leads with their chin,” one ConocoPhillips executive told me. And if Shell succeeds, a huge development push is likely to follow, Arctic concerns will accelerate, and the Lower 48 may, after years of inattention, start to focus on the American High North.
The Eskimo and the Oil Man
In 2008, Shell paid a record $2 billion for the Burger prospect—a collection of oil and gas leases in the Chukchi Sea, which lies between the De Long Strait and Point Barrow. Ironically, Shell was buying back from the government the right to drill in areas it had paid for in 1989 and 1990. Those old leases lapsed after Shell drilled but found no oil. Other companies were also unsuccessful—35 wells were drilled in offshore Arctic waters between 1981 and 2002, but none hit oil. “We found gas but weren’t interested in gas,” says Ann Pickard, Shell’s executive vice president for the Arctic. “We walked away.”
But by 2008 the situation had changed. The U.S. Geological Survey (USGS) published a report predicting that 13 percent of all undiscovered oil on earth and 30 percent of all natural gas lies above the Arctic Circle, most of it underwater. “The extensive Arctic continental shelves may constitute the…largest unexplored prospective area for petroleum on earth,” it said.
At the same time, Alaskan land-based oil—which once supplied 25 percent of all U.S. needs—was drying up; the state’s pipeline was carrying only one-third of peak flow. Shell decided to take a fresh look at the old sites, using newly developed 3-D seismic techniques and computer modeling. Shell agreed with USGS estimates: There were, it thought, 27 billion barrels of oil to be had beneath the Chukchi and Beaufort seas off Alaska. The Beaufort leases cost Shell $84 million.But buying oil leases in the U.S. does not automatically give a company the right to drill. Shell still had to apply for over 30 permits from a range of regulatory agencies, including the Environmental Protection Agency, the Department of Interior and the National Oceanic and Atmospheric Administration. Shell might have weathered that process, but it made a strategic mistake: It failed to consult local Iñupiat Eskimos, who feared that drilling would frighten off whales and other marine mammals—which the Iñupiats depend on for food. "The ocean is our garden," said Edward Itta, the then-mayor of North Slope Borough, the Wyoming-sized county that makes up the top of Alaska. “Subsistence hunting, fishing and gathering are in our DNA. It’s who we are.”
Borough lawyers started the legal challenge. Quickly, other Eskimo and environmental groups joined in. They took Shell to court, charging that the Mineral Management Service—the Department of Interior's federal agency responsible for permitting drilling at that time—failed to conduct the scientific research that would prove whether the Beaufort drill plan would harm sea mammals and discharge dangerous air and water pollution.
The court ruled against Shell, so it began modifying its drill plans. But year by year, the lawsuits multiplied, with more environmental groups joining in. The federal agencies grew more frightened of suits, and the permit process grew more complex. The application for the clean-air permit alone ran 1,400 pages, weighed 7 pounds and took Shell staffers months to compose. By 2012, Shell had sunk $4 billion into studies, applications, leases and preparation without ever drilling.
Most Iñupiat legal opposition dropped away that year after Shell shrank its plans and promised to stay away during whale hunting weeks. Shell finally drilled that summer, briefly, but did not hit the expected oil reserves. Then the Kulluk ran aground on that barrier island, and Shell shut down operations again, despite the fact that, as Pickard points out, “the actual drilling in 2012 went well. The Kulluk accident happened when the season was over—and not even in the Arctic. It happened after we left.”
Nevertheless, the near disaster triggered federal investigations along with charges of mismanagement and incompetence. So Shell reworked its plans yet again. Finally, on May 11, 2015, the Department of Interior’s Office of Environment ruled that Shell’s offshore plan will cause “no significant impact” to waters off northern Alaska or the wildlife there. Precautions include a tapping cap to stop spills (modeled after the one that ended the Gulf of Mexico Macondo spill in 2010); employing two tugs instead of one for the massive submersible drill rig Polar Pioneer, which lacks its own engine; and having federal observers on rigs 24 hours a day. There will also be stricter oversight of private contractors, whose negligence in 2012—unreported engine stoppages and failure to notify the Coast Guard of hazardous conditions aboard the drillship Noble Discoverer—resulted in a plea agreement and $12.2 million in fines and community service payments. Shell has also agreed to consult with Iñupiat elders regarding any effects the project may have on marine mammals, and to keep away during Iñupiat whale hunts, as it did in 2012.
In June, Shell’s ships started gathering in Dutch Harbor in Alaska’s Aleutian Islands, where volcanic peaks protect a deep-water anchorage, over 1,000 miles from the eventual drill site. And in July, the 30-vessel fleet—including two oil rigs, supply barges, icebreakers, worker housing and even an oil tanker to collect any spill—is scheduled, if final permits come through, to make the journey along the Aleutian chain and turn north into the Bering Strait, where the U.S. and Russia lie only 40 miles apart. Later in July, the fleet will reach the Chukchi Sea, where the Shell team will begin sinking two exploratory wells. The company has now invested $7 billion in its Arctic project, and it’s yet to pull a single resource out of the undersea land.
“We believe that area is a potential Gulf of Mexico,” says Pickard. “We see future production of over 1 million barrels a day.” But environmentalists fear the project will end in disaster, even if Shell strikes black gold. “If the worst happens, there’s no way to clean or contain an oil spill in ice,” says Erik Grafe, an attorney for Earthjustice, a nonprofit environmental law organization. “Even the best-prepared companies are not up to conditions in the Arctic.” In early June, Earthjustice and a consortium of environmental groups filed suits contesting Shell’s venture.
Though the eskimo whaling captains didn’t join in these new suits, they remain wary. Last month, Harry Brower Jr. of Barrow, a whale hunter and president of the Alaska Eskimo Whaling Commission, sat in his office, at the northern tip of America, 320 miles north of the Arctic Circle and across the street from a black-sand beach and the Chukchi Sea. Spring whaling season had just ended. The view, black water and white ice, was not so different from what his ancestors had looked at 4,000 years ago. The bowhead whales had migrated past Barrow recently, on their way to their summer feeding grounds off Canada.
“We have a lot of unanswered questions,” Brower said. "We don't know how the sound [of drilling and ships] will affect the sea animals. We don’t know what happens if there's an oil spill. Cleanup technology may prove inadequate. Oil cleanup has been tested in calm seas. I'm not sure that knowledge would apply in 40 mile-per-hour winds and 13-foot seas."
Pickard says that if Shell finds the hoped-for bonanza this summer, the company will still need to begin a whole new process of applications before being allowed to extract it. Shell would have to build a new Alaska pipeline across the tundra, to carry the undersea oil and link up with the existing pipeline, which runs from the land-based fields at Prudhoe Bay to Valdez. New construction would require "the world’s biggest environmental impact statement," says Pickard, adding that “the earliest actual production could begin would be between 2025 and 2030.”
The barriers nearly drove Shell to give up, she admits. “We came to the edge of walking away more than once. The biggest argument against that was, if we do not develop these resources, somebody else will. If Burger works, it will open up the whole area.”
The fate of Shell’s Arctic project this summer and over the next few years will be one key indicator of whether the U.S. can juggle the tasks of maintaining influence, exploiting commercial opportunities and protecting the environment in one of the last unspoiled places on earth.
Pickard will retire after the Alaska operation whether or not it is a success, she says, but she still feels the pressure. "As I travel to other Arctic countries, other governments say to me, The whole world is watching you. Make sure you are successful. If you're not, it will hurt us in other parts of the Arctic. I think this summer is historic. A historic burden."