The Inside Story of Shell’s Arctic Assault

A months-long investigation shows how the energy giant pressured the Interior Department during the company's gung-ho Arctic push—and got most of what it wanted (except oil).

Last May, four months before the oil giant Royal Dutch Shell suspended exploration in offshore Alaska, Christopher Putnam needed to get something off his chest.

Putnam is 44, originally from Texas, a trained wildlife biologist who also served as an Army infantry sergeant during the Iraq War. For almost six years he has worked in Alaska for the U.S. Fish and Wildlife Service, protecting marine mammals. It has been his job to ensure that Shell’s plans to drill more than 60 miles offshore in the Chukchi Sea—the wild Arctic water between Alaska and Siberia—wouldn’t harm Pacific walruses, particularly the juveniles, calves, and nursing mothers that dominate the Chukchi during the drilling season.

Putnam’s relationship with Shell had always been amicable—until the company began insisting that walrus protection should take a backseat to economics and efficiency, and making it clear that it would fight any regulatory speed bumps placed in its way. That kind of determination made Shell a regular caller at the White House: Company president Marvin Odum was a guest there at least six times in the administration’s first two and a half years, and lobbyist Sara Glenn visited even more frequently, according to a 2012 New York Times article. In light of his “all of the above” strategy to foster energy independence, President Obama obliged by creating a task force to help clear Shell’s path through the bureaucracy, the Times reported.

Odum met in 2014 with then-presidential counselor John Podesta to discuss Chukchi drilling, though the exact details are unknown. The following year Putnam began noticing leaders within the USFWS’s parent agency, the Department of the Interior, discussing in conference calls how to accommodate Shell’s demands. “Some people were working on various options—how we could interpret our regulations in such a way that were favorable that would allow Shell to do what they wanted to do,” he says. “When there’s discussion about changing the meaning of the regulations specifically to accommodate a company like Shell, then that started to become concerning for me.” By law, rulemaking is a public process. “These discussions that were taking place behind the scenes, with no input or public accountability, were getting to the point that I simply wanted to put on the record that I had concerns.”

In a May 26 email, Putnam unloaded. “Shell has clearly stated that they think minimizing disturbance to walruses is irrelevant,” he wrote to his then-boss, Mary Colligan, who is now the USFWS’s Alaska assistant regional director. “Shell insists it is not they who must comply with Federal regulations, but we who should change the regulations to accommodate Shell.”

Putnam then addressed the “voices” within the Interior Department that he says wanted to reinterpret the rules without involving the public. “I think it would be disingenuous, mendacious, and unethical,” he wrote. “Such a course of action may even be illegal.” If Shell were successful at skirting walrus-protection measures, what would come next? Would oil companies quietly try to lift industrial noise limits in the Arctic? Or weaken measures protecting denning polar bears? “Where,” he wrote, “would it end?”

After Shell received its approvals and started drilling in July, its first well came up dry, leading the company to withdraw from offshore Alaska “for the foreseeable future.” In its September pullout announcement, Shell laid some of the blame on the “challenging and unpredictable federal regulatory environment.”

But an Audubon investigation based on government documents—some filed in court and others obtained by Earthjustice, a nonprofit environmental law organization, through the Freedom of Information Act—point to a regulatory system that, while tougher than before the 2010 Deepwater Horizon explosion and BP oil spill in the Gulf of Mexico, still cut corners and stretched its own capacity in order to accommodate Shell’s drilling timeline. While USFWS scientists fought to protect marine mammals, they did so under crushing time constraints and at the expense of other conservation efforts. Meanwhile, at the Interior agency tasked with approving Shell’s oil leases and exploration plan, the Bureau of Ocean Energy Management (BOEM), decision makers authorized overtime, weekend, and holiday work to deliver Shell a speedy decision, while failing to keep pace with climate and ecosystem science.

These findings mirror, in part, a new investigative report, released December 7 by Interior’s Inspector General’s office. It detailed how some BOEM employees considered the agency’s timeline so aggressive that, in the words of one professional, a key environmental analysis was “absolutely compromised” and “full of errors.”

These efforts to accommodate a multinational energy company happened under the watch of President Barack Obama, who is reviled, ironically, by drilling advocates and eager to cement his legacy as a climate warrior.

Shell declined several requests for interviews for this article. “This story is not relevant anymore,” wrote spokesman Curtis Smith.

In fact, though, the story is just as relevant as ever. In October’s third-quarter earnings call, Shell CEO Ben van Beurden emphasized that while the first foray proved unpromising, “there are of course other potential prospects in our Chukchi leasehold, as well as other areas offshore of Alaska.” And after the current leases expire in four years, there could be more to come. A BOEM draft plan calls for new Arctic lease sales starting in 2020. Legislation pending in Congress at press time would require regular sales starting in 2023, even as new science cautions against Arctic drilling. Things might be quiet off the Alaskan coast right now, but that tranquility could very well prove temporary.

When Shell won the vast majority of the drilling rights in the 2008 Chukchi lease sale—a.k.a. Lease Sale 193—it called its $2.1 billion acquisition a victory for energy independence. “This is an opportunity to develop a proven and prolific basin to supply energy security for North America,” company vice president Annell Bay told reporters.

Conservationists couldn’t imagine a worse place to drill, a place more fertile, more unspoiled, more vulnerable to climate change. Along with walruses, the Chukchi teems with polar bears, ringed seals, and bowhead and beluga whales. “Coming from the Lower 48, you don’t see areas like this, that are untouched by development,” says Leah Donahey, senior campaign director for the Alaska Wilderness League. Donahey recalls flying over the Chukchi in 2011 and watching thousands of belugas swimming below her. Inland she saw bears running on the tundra, and massive herds of caribou. There were no roads, no infrastructure—“just these small communities and then vast ocean.”

Those communities rely on the ocean’s bounty: Subsistence hunting of marine mammals feeds many native Alaskans. “If we don’t have the animals to provide for our nutritional needs, we won’t survive,” says Faith Gemmill, executive director of Resisting Environmental Destruction on Indigenous Lands (REDOIL), a grassroots organization. “It’s not just about food security. We’re talking about our entire way of life.” In Iñupiat villages, during traditional whale hunts, she says, “the stories are taught. The values are taught. Knowledge is passed down from the elders to the younger people.”

Even before Shell bought its leases, REDOIL and the Alaska Wilderness League joined other groups, including the National Audubon Society, in suing the Bush administration to stop the sale. The 2008 lawsuit, filed by Earthjustice, noted that rising temperatures are already stressing polar bears and walruses. (The Arctic is warming twice as fast as the planet as a whole.) The Interior Department, said the plaintiffs, was selling leases without fully gauging the impacts on climate change, the likelihood of a spill, or the damage to wildlife caused by the deafening air guns used during seismic surveys. Nor, they added, did the government adequately consider harm to Steller’s and Spectacled Eiders, both threatened ducks.

It was the first of several hard-fought legal cases over drilling in the Chukchi—cases that continue today, outlasting Shell’s pullout announcement.

As the litigation meandered through the courts, two disasters gave ammunition to critics of Arctic drilling. First, the BP oil spill exposed lethal flaws in the regulatory system. It prompted new safety regulations and President Obama’s dissolution of BOEM’s predecessor, the Minerals Management Service, where staffers infamously accepted gifts from, and indulged in sex and cocaine with, their energy-industry contacts. Second, Shell itself threw the perils of Arctic drilling into focus when it suffered a series of setbacks during its first season of exploration in 2012, culminating in the grounding of the drill ship Kulluk on Sitkalidak Island as it was towed through the Gulf of Alaska during a storm.

In January 2014 the Ninth Circuit issued a key decision in Earthjustice’s lease-sale challenge—and highlighted the government’s efforts to help clear Shell’s path. The judges noted that BOEM based its environmental analysis on the “lowest possible amount of oil that was economical to produce.” By estimating just one billion barrels, the agency lowballed the possible impacts on habitat, climate, and bird populations. “BOEM considered only the best case scenario for environmental harm,” the court wrote. The decision led BOEM to revise its studies. For the environmental impact statement (EIS) finalized in February 2015, it chose a new and more reasonable estimate of 4.3 billion barrels—and, based on that, calculated a 75 percent chance of “one or more large spills” during the 77-year Chukchi production cycle.

BOEM maintains that such an accident would probably not be “catastrophic” in scale; its “likely” projected large spill from a production platform, based on the median size of similar spills, is 214,200 gallons, or less than 1/600th the volume of the BP disaster. But experts note that cleaning any discharge in the Chukchi would be a formidable, even impossible, task. Unlike the Gulf Coast, the region lacks basic infrastructure: There are no roads connecting villages or even rooms to house cleanup workers. The nearest Coast Guard station is a thousand miles away. There’s little research about how to keep marine mammals away from a spill—and only enough equipment to clean five oiled polar bears at a time. And, perhaps most alarming, there’s no comprehensive method for ridding icy water of oil; most cleanup studies have focused on temperate climates.

“We’re talking about killing the environment,” says Robert Bea, a professor emeritus of civil and environmental engineering at the University of California-Berkeley, who spent decades working for Shell and other energy companies. “Just think about an ice slushie with oil, with beluga and bowhead whales swimming around. If you do harm, it’s going to be extensive and it’s going to be long-term.”

With delays piling up, Shell was nonetheless resolute about resuming exploratory drilling in 2015. Two months after the Ninth Circuit ruling, in April 2014, company president Odum sent a letter to Interior Secretary Sally Jewell, whose department oversees BOEM. He asked her to “devote the resources necessary to removing, expeditiously, any current regulatory obstacles” that might slow down his company’s plans. Odum encouraged Jewell to “obtain any necessary additional resources to complete the work” on Shell’s schedule, which the company outlined in a one-pager called “Getting to Yes 2015—Must Have Timeline.”

Numerous internal agency emails and memos suggest that BOEM—while not promising Shell a specific outcome—did its Chukchi drilling evaluation at a breakneck pace. “We are keeping to this schedule to allow Shell the opportunity to make a decision about next year’s open water drilling season,” Assistant Interior Secretary Janice Schneider said in August 2014, according to an email by BOEM’s Alaska regional director, James Kendall.

The agency drew up its own timetables, filled with various notations. “This schedule includes working overtime and weekends and holidays,” said one footnote. Requests for annual leave, training, and even office visitors would face “critical review.” Environmental analyses would receive “compressed review time.” And the hastened process, noted an agency document, might interfere with other major tasks like developing new air-quality regulations.

In August Kendall sent an after-hours email to BOEM deputy director Walter Cruickshank. “Yes, its [sic] Saturday night and I’m in the office. . . . But I’m not alone, others are here as well,” he wrote. Kendall reported on a conversation with Assistant Secretary Schneider, aboard a government airplane, about the plan for completing the environmental impact study on time. “She . . . expressed her view (repeatedly) to me of just how absolutely difficult this was, almost bordering on impossible . . . and that it was obvious that there is absolutely NO WIGGLE room.

“Folks are exhausted, blurry eyed, working long hours,” Kendall continued. “There are a number of folks on the floor with me as I type this. Emotions are running high. . . . Given the fact that folks will now have to run a marathon at a sprinters [sic] pace for some months now, we are working out a strategy for crossing the finish line on time.” 

Not everyone crossed the finish line. According to the recent Inspector General’s report, Interior knew of at least six BOEM employees who quit or retired early because of the EIS race. One fish biologist said the process was so “crushed” that she didn’t have time to review her own work for consistency or to peer-review others. She retired early, in October 2014, to preserve her own “personal and scientific integrity.” Another biologist said his collaboration with colleagues was limited to 15 to 45 minutes for a 700-page document. A sociocultural specialist said her section on public health was “gutted.”

The Inspector General concluded that BOEM officials did not alter scientific findings. But the attorneys at Earthjustice, in a brief filed in U.S. District Court in August 2015, nonetheless identified two fundamental flaws in the EIS that was released in 2015 after the Ninth Circuit decision.

First, BOEM decided, because of its fast-tracked schedule, not to place certain sectors of the Chukchi, which scientists had recently identified as ecologically important, off-limits to drilling. Interior had begun its first environmental review a decade ago, when “information about the Chukchi Sea environment, habitat, and marine life was starkly limited,” wrote the lawyers. Since then the research has evolved, particularly about Hanna Shoal, a large, shallow area where the ice persists late into summer. Bowhead whales feed there, and great herds of walruses forage for clams. BOEM itself calls the shoal a “biological oasis,” and last year President Obama protected some of it from future, but not current, lease sales. Yet in its court-ordered update to the EIS, BOEM decided not to consider a new drilling footprint that would exclude Hanna Shoal. The agency said “sufficient protections” exist to safeguard marine mammals. Earthjustice points out in its brief that there’s a big difference between reducing harm and barring drilling from an area altogether.

Second, Earthjustice charged that BOEM all but ignored what advances in climate science have revealed about the impact of drilling. It insisted there was “no reliable methodology” to determine how Lease Sale 193 would affect global energy consumption. The EIS didn’t mention, even in its 69-page bibliography, a January 2015 paper from the journal Nature concluding that “all Arctic resources” must stay in the ground to keep the planet within two degrees Celsius of pre-industrial temperatures. “The impact of a single discrete project’s contribution to climate change cannot be covered in more detail due to scientific uncertainty,” the EIS said, adding that recent papers calling for undiscovered hydrocarbons to remain undeveloped “are noted.”

Contacted for an interview, BOEM referred questions to the Interior Department, which declined the request without offering a reason. In a short emailed statement, BOEM spokeswoman Connie Gillette said her agency conducted a “robust and rigorous” environmental review “consistent with a court-ordered timeline.” In fact, the court did not impose a timeline but rather directed BOEM to develop its own. In the Inspector General’s report, Interior officials acknowledged the rush. They said it wasn’t designed to help Shell but rather to shield the department from “blame” if Shell missed out on drilling in 2015.

Former and current Interior staffers say BOEM’s efforts to accommodate Shell are not unusual. “Once you’ve granted a lease, there is internal pressure to propagate the regulatory process,” says Paul Bledsoe, who was an aide to Interior Secretary Bruce Babbitt during the 1990s and more recently advised President Obama’s national commission on the BP oil spill. “There’s certainly pressure from the industry.” Others say the agencies regulating offshore production tend to draw employees sympathetic to drilling—environmentalists rarely study petroleum engineering. Add to that President Obama’s support for Arctic oil, and his desire not to be seen as stifling production, and the scale ends up being tipped.

BOEM, according to those who interact with it, is a more responsible operation than its predecessor, the Minerals Management Service, where former staff scientists say their work was suppressed and where, in 2010, Alaska employees enjoyed a cake decorated with the words “Drill, Baby, Drill.” Environmental protection is, in fact, written into the agency’s mandate. Still, “science-based” energy management—leasing fossil fuel reserves and approving drilling plans—are at that mandate’s core.

“Even though some of the names shifted around, a lot of the culture of the agency remains the same,” says attorney Miyoko Sakashita, oceans director at the Center for Biological Diversity, a plaintiff in the Earthjustice case. “The deep reforms that a lot of us were hoping to see after the Deepwater Horizon oil spill were in name but not actually in practice.”

One of Shell’s hardest-fought battles in the Chukchi was over the rules protecting Alaska’s estimated 129,000 Pacific walruses. According to the USFWS’s Mary Colligan, concentrated industrial activity can cause grave harm to marine mammals, including walruses. “At the extreme, if they avoid an area because the disturbance is so high, and have to feed somewhere else, maybe the prey base isn’t as calorie-rich,” she says. That, in turn, can jeopardize survival or reproduction. Industrial noise can damage hearing and impede vocal communication.

In 2013 the USFWS developed regulations governing exploratory drilling in the Chukchi. One rule mandated a minimum 15-mile separation between active rigs. That buffer would help reduce the risk of hearing loss among walruses and give them safe passage if they needed to escape. Christopher Putnam, the wildlife biologist and Iraq vet—and Colligan’s colleague—helped craft that rule.

Shell fought the 15-mile rule. The Chukchi well sites were tightly clustered within a 300-square-mile prospect, and the company wanted to position its rigs at the two most promising sites—just nine miles apart. It would already be spending the resources for a second rig because, in its exploration plan filed with BOEM, Shell had agreed to have a backup vessel in the vicinity to drill a relief well in the event of a blowout. According to Robert Dillon, a senior adviser to Alaska’s senior senator, Republican Lisa Murkowski, Shell didn’t want that rig sitting idle when it could be drilling for oil.

However, if the activity would affect certain marine mammals, Shell couldn’t drill until the USFWS issued a letter of authorization. Like their colleagues at BOEM, Fish and Wildlife staffers felt compelled to make their decisions in time for the 2015 drilling season. “We understood how important it was for Shell,” says Colligan. “They certainly communicated that to us very clearly.” Colligan calls this a courtesy the USFWS extends to all drillers because of the complex timing of their operations. “They’ve got ships staging here and there,” she says. “They’ve got decisions they have to make. That’s the environment that we were in.”

The company conceded that drilling two wells located within nine miles of each other would flood more of the sea with noise, but pushed to prioritize other considerations. “Various distances may be required between rigs to effectively, efficiently, and economically explore the geological positioning of the oil and gas resources,” said an analysis Shell filed with the USFWS in April 2015. “Spacing of the rigs needs to be determined by these characteristics rather than an attempt to further minimize potential behavioral disturbance of walruses.”

With that the oil company put its foot down. “Shell, as part of their 2015 proposed drilling operations, indicates it is not willing to comply with all required mitigation measures,” said a USFWS document. The company’s absolute stance struck Putnam as odd. “It’s not their decision,” he says. “Not to put too fine a point on it, but we’re the federal government.”

Shell claimed, in an April 2015 letter to Fish and Wildlife, that a nine-mile separation would have “negligible impact” on the animals. USFWS biologists remained unconvinced. They said Shell had undercounted the walrus population and failed to factor in such disturbances as the Sikorsky S-92 helicopters flying by 40 times a week. “The S-92,” Putnam wrote in an email to an Interior Department lawyer, “is one of the loudest helicopters on earth.”

With that much air traffic, Putnam says, a helicopter could startle thousands of animals resting on the ice. “They stampede into water, and you’ve got how many dead or injured walruses.” Chronic stress from loud noise could potentially trigger hormonal changes that threaten population size, he adds.

Dealing with Shell’s insistence became a full-time job for Putnam. “I lost half a year,” he says. "Our entire department was almost exclusively focused on that one company, that one issue, for the entire period of time.”

Putnam says he was supported by his Alaska colleagues in holding firm to the regulations. “We were reaching up the chain to make sure everyone was aware,” he says. “As you go higher and higher up, people become less and less aware of the details and nuances of the issue.” Hence the conference calls where Interior officials were groping for new interpretations of the rules, he says.

He found one call particularly upsetting. An Interior staffer he had never met suggested that the Alaska office was misinterpreting the intent of the mammal-protection rules—rules that Putnam himself had helped author. “It was a little bit offensive,” he says, “for someone who’s never been involved to tell me what I was thinking at the time when I wrote them.”

Shell would not be deterred by the USFWS’s scientists. It enlisted Senator Murkowski, a drilling advocate, whose staff contacted the Interior Department to press the case. “That’s our job: to be the advocates for Alaska,” says Murkowski spokesman Dillon.

Then, in May, Allyson Anderson, associate director of Interior’s Bureau of Safety and Environmental Enforcement, emailed her boss about a phone call with an Alaska colleague. “Shell intends to take the wildlife issue all the way up through the White House via murkowski [sic],” she wrote.

Dillon says that, to his knowledge, Murkowski did not take the walrus issue that far. “I believe they [Shell] may have raised it with the White House,” he says—a plausible notion given the company’s past access—adding that that’s how Washington works: “Environmental groups clearly take their case directly to the White House on a regular basis. The right to seek the assistance of one’s government without fear of punishment or reprisals is enshrined in our Constitution.”

What eventually preserved the 15-mile mandate in Shell’s drilling authorization, Colligan says, was “procedural”: There was no system for waiving the rule. Fish and Wildlife did promise to “consider making appropriate changes” to the rule through a public process, though that wouldn’t come in time for the 2015 season.

In the end, notes Putnam, Interior officials narrowly defined “active” rigs as those actually drilling. As a result, Shell was allowed to locate its rigs nine miles apart as long as they didn’t drill simultaneously. The problem, according to Putnam, is that a non-drilling rig is still staffed and “active”: It requires helicopter support, noisy anchoring operations, icebreakers, and generators. In other words, there were still two industrial operations within nine miles of each other.

In a bigger sense, though, the 15-mile rule might have been a deciding factor in Shell’s decision to pull out of offshore Alaska—because the Arctic’s short drilling season ended up limiting the company’s activity to a single well in 2015, and that one was a dud. After seven years of political and legal wrangling, countless raucous grassroots protests, and $7 billion in Arctic investments, Shell’s foray into Lease Sale 193 halted rather suddenly. Drilling supporters like Lisa Murkowski placed the blame for Shell’s pullout partly on the Obama administration’s “destructive pattern of hostility” toward energy production. “We’re seeing decisions out of the Interior that are really destroying our hope to be independent as a state,” Murkowski said at an October meeting of the Senate Energy and Natural Resources Committee, which she chairs. She was displeased with Interior’s cancellation of two upcoming Alaska lease sales because of low industry interest, and with its refusal to extend Shell’s current leases.

The federal government plans oil and gas lease sales in five-year increments. The next plan, set to be finalized this year, will cover 2017–22. The current draft calls for sales in the Beaufort in 2020 and the Chukchi in 2022. Beyond that, Murkowski’s proposed Offshore Production and Energizing National Security Act of 2015 (Senate Bill 2011) would require Interior to sell three Chukchi and three Beaufort leases during every five-year program, starting in fiscal year 2023.

But drilling opponents see Shell’s withdrawal as a chance to take a breath and rethink the country’s approach to the Arctic’s energy reserves. They consider it a window of time available to overhaul the regulatory system further to reflect a post-BP world, and to examine whether the industry’s Arctic drilling ambitions should be scaled back or abandoned altogether. “The United States has been myopic for far too long in making decisions about the Arctic,” says Peter Van Tuyn, an Alaska attorney who has represented environmental and native Alaskan groups in challenging drilling. “Why not take the opportunity for the Obama administration to do a big-picture planning effort in the next year?

“We have a fresh opportunity,” Van Tuyn continues. “For the first time in the Obama administration’s seven years in office, they do not have to make a decision about the future of the Arctic with some existing weight on the development side of the scale.” The $7 billion that Shell invested to drill a single well made for quite a heavy weight. “Now,” Van Tuyn says, “that scale can be leveled.” 

CorrectionAn earlier version of this story stated that under Senate Bill 2011 the Interior would be required to sell the Chukchi and Beaufort leases starting in fiscal year 2022—it is in fact 2023.