Shell games in Alaska

Shell game

Pick a shell, any shell. I bet you can’t find the renewables.

In Alaska, there’s good news and there’s bad news. The good news first: last week Royal Dutch Shell shut down its drilling rig in the Chukchi Sea and gave up its immediate dream of a great Arctic oil bonanza. After seven billion dollars of failed investment in a single dry well, Shell has now followed the lead of ConocoPhilips and Norway’s Statoil, throwing in the towel, eating its losses, and heading home empty-handed.

Good News

This is very good news indeed, for many reasons. First, exploration in the Arctic is fraught with graver dangers than in more benign climates. Frigid temperatures, ice, and punishing storms increase the likelihood of spills and other disasters. Second, the Arctic environment is fragile, and even a small mishap can affect flora and fauna for decades. The Exxon Valdez spill occurred over 26 years ago, but “many Alaskan beaches remain polluted to this day, crude oil buried just inches below the surface.” And third, it is imperative that most of the oil already discovered remain in the ground, to avoid the global ravages of unleashed climate change. There is no reason to go looking for more, in the Arctic or anywhere else. #ShellNo.

There’s a fourth reason this is especially good news. Shell’s retreat is the result, at least in part, of an energized climate movement. Marchers in New York, kayaktivists in Portland and Seattle, and divestment campaigners in Sacramento have all played their parts in the rightful demonization of fossil fuel companies.

“We are pleased that Shell has finally come to grips with the reality that drilling in the Arctic makes no sense,” Andy Sharpless, CEO of the nonprofit Oceana, said. “It’s not economically viable nor is it sensible from an environmental standpoint.” This is a dramatic victory for sanity and a hopeful step toward a world where no one needs to buy or burn oil. And thus a world where no company needs to look for more oil to sell.

Bad News

But that sustainable world is not just around the corner; it will arrive only after we chalk up many more victories. In fact, Shell refuses to fold completely, claiming this is only a strategic retreat due to “the high costs associated with the project and the challenging and unpredictable federal regulatory environment in offshore Alaska.” In other words, Shell implies, if the supply-demand curve restores oil to its usual high price, and if an Old Energy president moves into the White House, it’s off to the races again—in the Gulf of Mexico, through the Bakken shale, and all along the Alaska coast. Looking for oil, looking for trouble.

That’s the bad news. In fact, Marvin Odum, director of Shell Upstream Americas, made it clear that the company “continues to see important exploration potential in the [Arctic] basin, and the area is likely to ultimately be of strategic importance to Alaska and the US.”

Furthermore, Shell is not the only oil behemoth that insists on beating its head against an Arctic ice floe. The Italian company Eni recently situated an enormous platform in the Barents Sea off Norway, and it is soon expected to begin producing 100,000 barrels of oil daily. “It’s there, it’s connected, it’s done. It’s starting in a few weeks,” reported a company insider.

Empty Promises

Shell, too, plans to continue exploring for more oil. CEO Ben van Beurden does admit that “dangerous levels of global warming above 2°C will occur unless CO2 is buried or reserves are kept in the ground.” But he’s still holding out unreasonable expectations that carbon capture and storage will prove economical, and therefore that Shell is justified in a continuing search for new sources of oil:

There will still be a need for hydrocarbons for years to come, and the decline in existing production is always going to be faster than the decline that the most successful [low carbon] policies can create. There is always going to be a need for investment.

Van Buerden does nod in the direction of solar and wind energy, promising that Shell will obtain a “very, very large segment” of its earnings from renewable power—but only by the end of the century. The company’s current green investment is just 3 percent of its annual capital budget (including biofuels), and van Buerden expects renewables will not begin to become important until after 2050.

Economist Nicholas Stern, author of the influential 2006 British government report on the economics of climate change, says that Shell and other hydrocarbon companies are badly mistaken. Renewable energy is fast becoming competitive, he points out, and people will increasingly insist on policies to hold global warming to 2°C:

[The oil companies] do not believe the world will be wise enough to follow policies that can hold the world to 2°C and are asking us to bet against the world … telling us that we won’t do what we’ve set out to do and that it is a safe bet to bet that we won’t.

We have to try to show them that they are wrong and that we can get the world’s people to insist that we must follow those policies. We must try to build pressure to try to make that 2°C assumption correct and the forecast of the energy companies wrong.

One way to build that pressure, Stern adds, is to divest from fossil fuel stocks—and to positively keep stocks or invest in companies that take responsible action on climate change.

That doesn’t include Shell, which remains oblivious to the real dangers and the required urgency. If it’s really turning itself into a green energy company, Shell is moving much too slowly to preserve the Arctic—or to preserve the rest of the planet.