by Kiley Kroh and Michael Conathan

This week’s grounding of Shell’s enormous Kulluk drilling rig near Kodiak Island, Alaska has not inspired confidence in its preparedness to drill for oil in the Arctic Ocean.

The rig was being towed from Dutch Harbor, Alaska to Seattle when its tow vessel lost control of the massive platform during a harsh winter storm. After numerous attempts to secure the equipment failed, it settled near the shore of uninhabited Sitkalidak Island in the western Gulf of Alaska on Monday night and remains there – with nearly 150,000 gallons of fuel and other fluids on board. The Coast Guard is coordinating a 500-plus person response to assess the damage, but neither they nor Shell has any idea when or how they will regain control of the foundering giant.

Adding insult to injury, on Thursday, the Alaska Dispatch reported that the reason Shell was working so feverishly to move the rig in such harsh conditions was to avoid paying millions of dollars in state taxes it would have owed if the rig was still in Alaska waters on January 1.

Far from an isolated incident, the latest fiasco is just the most recent in a litany of technical failures and struggles with Mother Nature that continue to accentuate Shell’s lack of preparedness to operate in the region. As Christopher Helman writes in Forbes, “It would be a comedy of errors, if the stakes weren’t so high.”

Each of these mishaps, warnings and troubling revelations would individually be reason for pause. Taken together, they offer overwhelming evidence that the oil and gas industry is not prepared for the enormous challenge and incalculable risk of offshore drilling in the remote and volatile Arctic Ocean. Exploiting Arctic offshore reserves is not an imperative and, in fact, is an absurd response to the devastating effects of climate change that are enabling offshore drilling in the first place. Despite investing more than $5 billion into an Arctic venture that includes top-notch crews and state-of-the-art equipment, Shell has stumbled every step of the way.

Here is a look back at some of the major mishaps Shell incurred and warnings they received during 2012:

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by Jessica Goad

Senators Ron Wyden (D-OR) and Lisa Murkowski (R-AK) have called on Secretary of the Interior Ken Salazar to investigate if U.S. taxpayers are getting shortchanged by companies mining coal from public lands and exporting the resource to other countries.

That’s according to a report from Reuters today.

Senator Wyden is Chairman of the Senate’s Energy and Natural Resources Committee, and Senator Murkowski is the ranking member.

Wyden and Murkowski said they were concerned that coal companies are not paying high enough royalties on coal mined on public lands.  According to another Reuters article in December, companies are valuing coal at lower domestic prices rather than higher international prices so they “can dodge the larger royalty payout when mining federal land.”

If any violations of the law have occurred, companies should be required to cure any gap in royalty payments and, if misconduct has occurred, civil penalties should be levied,” reads Wyden and Murkowsi’s letter.

Approximately 43 percent of the coal produced in the U.S. comes from public lands managed by the government and owned by all Americans. Public lands are home to some of the richest coal deposits in the nation, mostly located in Wyoming and Montana’s Powder River Basin.

However, as the use of coal for electricity continues to decrease, coal companies have been eying fast-growing Asian markets as a potential destination for U.S. coal.  In 2011, U.S. coal exports were the highest they have been since 1991, and companies like Arch Coal have predicted that they could be even higher over the next few years.

Shorting royalties isn’t the only way that taxpayers may be losing out. Some have called out the government for carrying out policies on public lands that keep coal cheap, and therefore shortchange American taxpayers.

For example, a report published by financial analyst Tom Sanzillo in July found that the Interior Department has offered coal leases non-competitively in the Powder River Basin rather than putting them up for auction, thus costing taxpayers  as much as $29 billion over the last three decades.

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In November of last year, British oil giant BP agreed to a historic $4.5 billion criminal fine in the aftermath of the 2010 Deepwater Horizon disaster that killed 11 workers and blew 5 million barrels of oil into the Gulf of Mexico.

While BP owned the Macondo well and was in charge of onsite operations, it leased the Deepwater Horizon rig and its crew from Transocean Ltd., one of the world’s largest offshore drilling contractors. And yesterday, the Justice Department announced that Transocean agreed to pay $1.4 billion to settle the investigation of its involvement in the oil spill.

From the DOJ:

Transocean Deepwater Inc. has signed a cooperation and guilty plea agreement with the government, also filed today, admitting its criminal conduct.   As part of the plea agreement, Transocean Deepwater Inc. has agreed, subject to the court’s approval, to pay $400 million in criminal fines and penalties and to continue its on-going cooperation in the government’s criminal investigation.

In addition, pursuant to the terms of a proposed partial civil consent decree also lodged with the court today, Transocean Ocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc., Transocean Deepwater Inc. and Triton Asset Leasing GMBH have agreed to pay an additional $1 billion to resolve federal Clean Water Act civil penalty claims for the massive, three-month-long oil spill at the Macondo Well and the Transocean drilling rig Deepwater Horizon. Under the civil settlement, the Transocean defendants also must implement court-enforceable measures to improve the operational safety and emergency response capabilities at all their drilling rigs working in waters of the United States.

“This agreement holds Transocean criminally accountable for its conduct and provides nearly a billion dollars in criminal and civil penalties for the benefit of the Gulf states.” said Attorney General Eric Holder.

The settlement concluded the Justice Department’s investigation into Transocean’s responsibility for the spill, a question that was often fraught with accusations and counter-accusations between the contractor and BP.

The hostilities  began on the rig itself, as investigations revealed deep disagreements over operations in the run-up to the blow out. “This wasn’t our accident,” BP’s chief executive declared at one point, laying blame on Transocean’s systems, equipment and people. Transocean later accused BP of hoarding results and information from its own investigation into the spill. The finger pointing inspired President Obama to criticize both companies, calling the public argument a “ridiculous spectacle.”

Transocean has not faced any felony charges at the personell or corporate level, but BP has pleaded guilty to 12 felony counts including “seaman’s manslaughter” and obstruction of Congress, as well as two misdemeanor counts under the Clean Water Act and the Migratory Bird Treaty Act. Two of its site leaders have pleaded not guilty to multiple felony counts of manslaughter, and one of its executives pleaded not guilty to misleading a congressional subcommittee. The company could also face up to $20 billion in civil fines under the Clean Water Act.

As for Transocean, its stock rose 7 percent following yesterday’s settlement announcement.

by Bill Becker

This is part 2 of a 2-part series on Congressional gridlock. You can read part 1 here.

The 112^th Congress is not the first that didn’t earn its pay.  President Truman criticized the 80^th Congress as a do-nothing bunch in the 1940s.  In December 1881, the New York Times printed this familiar complaint as the 47^th Congress was about to begin:

The manner in which Congress is commencing business fairly suggests the question, Will the session be worth its cost? The average expense of one session exceeds three million dollars…The last session yielded a slender return for this expenditure…What the country desires from Congress this Winter is that it shall act promptly and judiciously on the great public questions which stand open.

Today, the cost of running the Legislative Branch is approaching $5 billion a year. Few of us would disagree that we are getting far too little for our money; that Congress is better at worrying the country than worrying about the country; and that it is now so dysfunctional that it seems unable to face any significant issue without a crisis, and sometimes not even then.

Several readers who responded to Part 1 of this post were skeptical that Congress can be fixed. They pointed out that the gerrymandering of congressional districts has institutionalized polarity by dividing the country into red and blue; that unbridled campaign money and K-Street lobbying deeply corrupt the legislative process; and that members of both parties support customs and rules that deadlock the legislative process.

As I noted in Part 1, Congress’s dysfunction causes inefficiencies and waste not only in the Legislative Branch, but also the Executive by delaying passage of budgets and leaving key government jobs unfilled.  But the impacts go far beyond the Beltway.  Uncertainties about if Congress will act on critical national issues, and when it will act, cause economic instability, keep capital investment on the sidelines, delay infrastructure projects, confuse the stock market, add to the financial insecurity of the poor and elderly, undermine the ability of workers and their families to cope with joblessness, allow environmental degradation, and delay government help for our growing number of disaster victims. We need to take this personally.

The easiest reaction is to argue about who’s to blame – a conversation that dominated the responses to Part 1. Solutions are more difficult.  Is the Legislative Branch irretrievably broken, or is there something we citizens can do? Here are some questions I hope will advance a conversation about fixes.

Bright Spots? Are there opportunities for reform? There may be a few bright spots on which we might build. First, if 90-95% of Americans disapprove of Congress’s performance, are conditions ripe for a voter revolt?

One reader pointed out that voters are most willing to protest when their personal oxen are gored. In December, Congress threatened everyone’s ox at a sensitive time and personal level – higher taxes and fewer benefits in a high-unemployment economy.

Second, whatever we think of the Tea Party, it demonstrated that citizen movements can still have political clout.

Third, despite the Citizens United decision, special interests and billionaire kingmakers were not able to buy last November’s presidential election.  That offers some hope in a fight against the grip of special interests.  Being outspent does not mean being outgunned.

Given all this, one wonders whether it’s possible to launch a cross-partisan voter movement that makes the Tea Party look…well, like a tea party.  It would not promote any particular public policy; rather it would pressure members of Congress to do the  fundamental things they are elected to do.

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by Rob Honeycutt

Climate scientists are in the unfortunate position of being the messengers of bad news. So in a way, climate change denial is a massive attempt to shoot the messenger.

There are so many existing technologies to address climate change that are positive messages that too often get lost in the noise.  I want to share what I see coming from my industry, which is manufacturing.

Specifically, I want to address how things are manufactured rather than technological solutions.

The Big Picture

As we all know, over the past 30 years vast portions of the world’s manufacturing base has moved to Asia, primarily China.  What you find there is a spider web network of small factories supplying parts to each other forming a distribution chain of goods.  Those goods are all being delivered by many tens of thousands of these little blue diesel trucks, each belching out heavy particulates, CO2 and any number of unhealthy substances.  None of the factories are located in any rational proximity to each other; it’s fairly random.  The surface streets they travel are generally choked with traffic.  Then each of those factories is running on the Chinese grid, fueled by a lot of dirty coal.  Most factories also keep back up diesel generators running since the Chinese grid is often unreliable.  I’ve even seen small, clearly unregulated, coal fired generators tucked away back in various coves and backstreets putting out very heavy smoke.

Then, of course, all the finished goods are trucked to port, loaded onto an unending train of container ships crossing the Pacific and heading out to all corners of the world.  Each of those is burning bunker fuel, which is something akin to asphalt.  And on top of that you have designers, engineers and execs flying back and forth to Asia numerous times each year to manage their projects.  I have one friend who does 8 to 10 trips a year to China as a product designer, and that’s pretty normal.

Taiichi Ohno and Toyota

Some 70 years ago a man named Taiichi Ohno pioneered Toyota’s incessant quest to ferret out waste from their production systems.  His work heralded in a new wave of manufacturing efficiency.  You may perhaps remember how the Japanese were crushing the U.S. auto industry in the 1970s and 80s.  This was primarily due to systems developed by Ohno.

Taiichi Ohno identified what he termed the “seven forms of waste” or “muda,” as it’s referred to in Japanese.  One of the primary forms of muda is “transportation waste.”  Moving product was always to be kept at its barest minimum since it adds no value to the end product.  There are reams of research on this, and yet, over the past 30 years transportation waste has exploded to epic proportions.  None of it adding value.  All of it putting vast quantities of CO2 into the atmosphere.

Not even thinking of CO2, and only being focused on efficiency, what Toyota did to minimize this was to work in Keiretsu’s.  They were “families” of suppliers who maintained their facilities in near proximity to the main Toyota assembly plants and they operated their supply chain on hourly delivery schedules.  Over half a century ago Toyota and Taiichi Ohno showed us that operations should always be located as close together as possible.  This got lost in the mad rush to move production to China.

Efficiency Improves Quality

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Calls for federal scrutiny of Royal Dutch Shell PLC drilling operations in Arctic waters swelled Thursday with a request for a formal investigation by members of Congress. [Huffington Post]

The grounding of the Kulluk drilling rig caps a series of episodes that have dogged Shell’s effort to tap Arctic oil. Environmental groups this week said they would ask President Barack Obama to suspend all current and pending Arctic drilling permits until operators prove they can work safely in the region’s harsh conditions. [Bloomberg]

Offshore oil and gas drilling company Transocean has agreed to a $1.4-billion settlement with the Justice Department to resolve civil and criminal claims against the company for its role in the April 2010 Gulf of Mexico oil spill. [Los Angeles Times]

Even with the tax wind credit renewal, the wind industry is still likely to slump in 2013. And that’s partly because congressional support for wind is extremely erratic — never steady, and always on the verge of expiration. [Washington Post]

Analysis by the Met Office also suggests that the UK may be getting increasingly wetter as climate change causes warmer air to carry more water. Days of extreme rainfall – downpours expected once every 100 days – occurred every 70 days in 2012. [Guardian]

Hopes of avoiding millions in state taxes may have faded for Royal Dutch Shell when the clock struck midnight on Jan. 1 and 2012 became 2013. Just hours earlier, its Arctic drill rig, the Kulluk, had grounded on an island in the Gulf of Alaska, exposing Shell to a unique Alaska property tax on equipment dedicated to oil and gas development and exploration. [Alaska Dispatch]

Pipeline spills caused by flooding and riverbed erosion dumped 2.4 million gallons of crude oil and other hazardous liquids into U.S. waterways over the past two decades, according to a new report from federal regulators. [Associated Press]

According to ClimateWire, Facebook and 256 other Silicon Valley tech companies sit in a dangerous flood zone. As climate change becomes more of a reality and sea levels rise, they could all be in serious trouble. [Business Insider]

Natural disasters cost insurers $65 billion last year, with the United States accounting for nine-tenths of the bill and superstorm Sandy prompting payouts of $25 billion, a leading insurance company said yesterday. [Associated Press]