The Earth’s atmosphere will soon contain more than 400 parts per million of carbon dioxide for the first time in human history. In related news, another large oil company made billions of dollars selling the world more fossil fuels.

Royal Dutch Shell pulled in nearly $8 billion in profits for the first quarter of this year, a 3.5 percent jump from the same three months last year. The corporation is Europe’s largest oil and gas company. The higher profits were made possible, per the BBC, from “strong refining and trading performances” and higher natural gas prices in the United States. Shell is looking to double its share in the global gas business:

Shell now has about 7 percent of the world L.N.G. business, with ambitions to more than double that share through new projects and acquisitions. Last year, L.N.G. and related businesses earned Shell $9.4 billion of its $25.1 billion in profit.

CEO Peter Voser, who started as CEO in 2004, announced his retirement next year, and warned the industry of “significant” price volatility due to global instability. Here are some key facts on Shell from this quarter:

• Shell raked in $7.95 billion in profits in Q1. Fox News focused on the fact that “net profits” were down from $8.74 billion to $8.18 billion from the first quarter of last year.
• Bloomberg’s survey of 11 analysts predicted Shell would make just $6.4 billion.
• Oil and gas production was up 2 percent from first quarter 2012, to 3.6 million barrels of oil equivalent per day.
• The company has $17.6 billion in cash-on-hand.
• Shell received a $200 million annual tax break in 2011.
• Dividends increased 5 percent from first quarter 2012, while Shell spent half a billion dollars to buy back 16.1 million shares.
• Outgoing CEO Voser’s pay package, when combined with a significant bonus from last year, totaled $6.7 million. Bonus stock shares add millions to the total package.
• Shell spent over $2 million on lobbying in the first quarter of 2013. For context, Shell was the top lobbying spender of the oil and gas industry last year, totaling $14.4 million.

What does Shell have to look forward to this year? It will partner with the Abu Dhabi National Oil Company to develop the Bab gas field, which contains “sour gas, a poisonous and foul smelling product.” One thing it will not be doing is drilling in the Arctic Ocean. After spending about $5 billion on preparing to drill in such risky conditions, Shell suspended operations last year and announced it would not attempt to drill again in 2013. Other oil companies are starting to realize Arctic offshore drilling is a bad idea as well.

A top exec at Russia’s second largest oil company — and the largest non-governmental driller — has no interest in taking a gamble on high-risk Arctic Ocean drilling.

In an interview with the Financial Times this week, Lukoil vice-president Leonid Fedun said it would be much cheaper and less risky for oil companies to pursue Russia’s onshore shale reserves than offshore drilling in its Arctic oceans, citing Shell’s high-profile setbacks in the region as a warning sign.

“If someone asked me to invest money in Arctic exploration and development, I wouldn’t give a kopeck,” he said. “We have many more investment opportunities that carry less risk.”

Lukoil is not the first major oil company to publicly back away from Arctic offshore drilling. Last year, Total S.A., the fifth-largest oil and gas company in the world, announced last year that it wouldn’t seek to drill in the Arctic because an accident there would be a “disaster.”

And after watching Shell’s string of mishaps from the sidelines, Norway-based oil and gas company Statoil said last month that it would consider walking away from its Arctic offshore leases if exploration proves too risky and expensive. Tim Dodson, Statoil’s executive vice president of global exploration, acknowledged the numerous challenges associated with Arctic offshore drilling and reiterated his company’s cautious approach to exploration in the region, saying, “We’ve [said] we wouldn’t drill before 2015. Whether that means we drill in 2015, or maybe not until 2016 or whether we’d drill at all, I think maybe the jury’s still a little bit out on that.”

Other corporate voices have weighed in as well. Insurance giant Lloyd’s of London issued a report warning companies that responding to an oil spill in a region “highly sensitive to damage” would present “multiple obstacles, which together constitute a unique and hard-to-manage risk.” German bank WestLB also announced last year that it would refuse financing to any offshore oil and gas drilling in the region because “the risks and cost are simply too high.”

The risks of Arctic Ocean drilling are multifaceted and stem from an overwhelming lack of knowledge, preparedness, infrastructure, and technological capabilities. The unpredictability of this remote and isolated region is only compounded by the onslaught of climate change, which is affecting the region more than any other place on Earth and further complicating the ability to make informed decisions — and smart investments.

Shell has invested seven years and more than a few kopeks (about $5 billion, to be exact) into its Arctic drilling endeavor and came up with nothing but damaged equipment and a bruised ego. Shell’s multiple failures and the concern expressed by fellow corporations clearly demonstrate that the current level of risk in Arctic offshore drilling outweighs the potential reward. Thus, the question remains: How many more influential private sector voices will need to voice their concerns before the government responds and halts Arctic offshore drilling?

Kiley Kroh is the Associate Director for Ocean Communications at the Center for American Progress

By Kiley Kroh

After a year full of mishaps and failures in its quest to drill for oil off the coast of Alaska, Royal Dutch Shell announced today that it would not pursue exploratory drilling activity in the Arctic Ocean this year.  The decision comes as the Obama administration nears the end of its high-level, 60-day review of Shell’s troubled Arctic drilling program, which was announced on January 8.

Last year was fraught with problems for Shell as the company attempted the first Arctic offshore exploratory drilling activity in decades. Technical failures, permit violations, struggles with the harsh and unpredictable Arctic conditions, and warnings from a wide range of voices all combined to discredit the company’s claims that such operations could be carried out safely and responsibly.

Shell made clear it sees this announcement as a hiatus, not a cancellation of its plans to tap the Arctic reserves. Marvin Odum, Shell’s Director of Upstream Americas said, “Our decision to pause in 2013 will give us time to ensure the readiness of all our equipment and people following the drilling season in 2012.”

Following mishaps this year, both of the company’s Arctic drilling rigs, the Kulluk and Noble Discoverer, require substantial repairs and will be towed to Asia.  The Kulluk was damaged when it was grounded near Kodiak, Alaska on New Year’s Eve and the Noble Discoverer was recently cited for multiple safety and environmental violations – now the subject of an investigation that was handed over to the Department of Justice this week.

As articulated in the recent op-ed co-authored by John Podesta and Carol Browner, the Center for American Progress was open to the possibility of offshore drilling in this remote region provided the Administration took significant steps to strengthen safeguards and improve response capacity, and the industry could demonstrate it was prepared for the extreme risk. Instead, Shell proved precisely the opposite – the oil and gas industry is not prepared for the enormous challenge of drilling in the Arctic Ocean.

As we’ve detailed numerous times, there is a tremendous and incalculable risk associated with any offshore operations in the Arctic. First, the region lacks even the basic infrastructure that would be necessary to mount a large-scale response to an oil spill or other major incident – roads, major airports, ports, a permanent Coast Guard facility, adequate facilities to house and feed responders. These obstacles, coupled with the extreme and volatile conditions in which companies would be operating, led the insurance giant Lloyd’s of London to warn companies that responding to an oil spill in a region “highly sensitive to damage” would present “multiple obstacles, which together constitute a unique and hard-to-manage risk.” And Total SA, the fifth largest oil and gas company in the world, announced it wouldn’t seek to drill in the Arctic because an accident there would be a “disaster.”

Rushing into Arctic offshore drilling is not an imperative and thus should not be attempted unless and until independent auditors determine the industry and the government are capable of acting responsibly and responding to a true worst-case scenario. No operation is foolproof, but when even the most carefully watched drilling operations repeatedly fail to attain safety certification, then are hit with routine air pollution violations, and marred by twice letting major pieces of equipment be cast adrift, the American people have no reason to continue taking oil companies at their word when they tell us they can operate safely and responsibly in this remote and dangerous region.

Related Resources:

• TIMELINE: Documenting Shell’s 2012 Arctic Drilling Debacle
• Putting a Freeze on Arctic Ocean Drilling
• VIDEO: The Risks of Drilling in Alaska’s Arctic Ocean

– Kiley Kroh is the Associate Director for Ocean Communications at the Center for American Progress

Kulluk oil rig after running aground near Alaska. (Photo: U.S. Coast Guard)

By Kiley Kroh

As the question of whether to move forward with high-risk Arctic offshore drilling in 2013 looms large, there’s a chance Shell Oil may take that decision out of the Obama administration’s hands. In another costly setback to its long and problem-filled quest to drill for oil off Alaska’s shores, Shell said yesterday that the company will be towing its two Arctic drilling rigs to Asia for major repairs, instead of Seattle as was originally planned.

The announcement comes as the company’s Arctic drilling program is the subject of a high-level review by the Department of the Interior – the biggest question now being whether the vessels could even be ready to resume drilling operations this year.

Despite a year full of technical problems, permit violations, and failures to meet safety standards, company spokesman Curtis Smith said in an email to Forbes:

“The pace of our Alaska operations will always be dictated by safety. The lessons learned from 2012 will be applied to all future exploration programs. Having said that, the drilling program we executed in 2012 was safe and successful. We look forward to building on that progress in the future.”

The Kulluk oil rig sustained damage to its hull and electrical systems during the New Year’s Eve grounding of the vessel, after it encountered a massive storm while being towed from Dutch Harbor.

Smith said Shell’s second rig, the Noble Discoverer, has problems with its propulsion system and could require a full engine replacement. In July, Shell briefly lost control of the Discoverer as it nearly ran aground in Dutch Harbor. And in November, it was damaged by an explosion and fire while in port in the Aleutian Islands. Critics have long been skeptical of whether the aging vessel — built in 1966 and converted from a log carrier — was capable of operating in harsh Arctic conditions.

The grounding of the Kulluk in January was only the latest in a litany of mishaps and struggles with Mother Nature that characterized Shell’s entire 2012 Arctic drilling season. The company’s own troubles were added to a growing number of entities voicing their opposition to Arctic offshore drilling, due to the extreme risk and cost accompanying any operations in the fragile and remote area.

As the Center for American Progress has detailed numerous times, the region lacks even the basic infrastructure — roads, railroads, ports, a permanent Coast Guard facility, adequate facilities to house and feed responders — that would be necessary to mount a large-scale response to an oil spill or other major incident. These obstacles, added to the extreme and volatile conditions in which companies would be operating, led the insurance giant Lloyd’s of London to warn companies that responding to an oil spill in a region “highly sensitive to damage” would present “multiple obstacles, which together constitute a unique and hard-to-manage risk.” And Total SA, the fifth largest oil and gas company in the world, announced it wouldn’t seek to drill in the Arctic because an accident there would be a “disaster.”

These concerns, coupled with Shell’s repeated demonstrations that the oil and gas industry is not prepared to meet the enormous challenge of Arctic offshore drilling, led CAP’s John Podesta and Carol Browner to call on the federal government to take its cautious approach to Arctic Ocean drilling a step further. In a recent Bloomberg op-ed they stated:

“The Obama administration shouldn’t issue any new permits to Shell this year and should suspend all action on other companies’ applications to drill in this remote and unpredictable region.”

If Shell’s rigs cannot be repaired in time to resume exploratory drilling operations this July, it may give the administration the breathing room it needs to consider the myriad risks that were exposed last year. Rushing into Arctic offshore drilling is not an imperative, and the decision to move forward must be based on a clear demonstration that the industry is fully prepared for the realities of Arctic operations. Right now, the American people have no reason to continue taking oil companies at their word when they tell us they can operate safely and responsibly in this far-flung and dangerous region.

Kiley Kroh is the Associate Director for Ocean Communications at the Center for American Progress.

Last summer, Interior Secretary Ken Salazar expressed his faith in Shell’s ability to handle drilling in Arctic waters.

“I believe there’s not going to be an oil spill,” said Salazar.

But after Shell lost control of two drilling rigs, crushed its oil-response equipment, and received more than 30 safety and environmental warnings that forced regulators to dock one of its ships, Salazar seems ready to re-consider the implications of offshore drilling in the region six months later.

Yesterday, the Interior Department said it would conduct a two-month review of Shell’s drilling plans. This morning, Salazar elaborated on concerns at the department about Shell’s recent “troubling…series of mishaps.”

Bloomberg reported on his comments:

Interior Secretary Ken Salazar said a 60-day assessment of drilling in Alaska’s Beaufort and Chukchi seas will be used in considering future permits for Arctic exploration. Environmental advocates said the review should lead to tighter government rules, or even force Shell to suspend its efforts.

“It’s troubling that there was such as series of mishaps,” Salazar said today at during a Washington meeting of an agency offshore-drilling advisory panel. If the drill ship, the Kulluk, is damaged, “it may be that Shell isn’t even ready to move forward in 2013” with oil drilling, he said.

Shell has spent $4.5 billion over the last five years to prepare for drilling offshore for oil in the Arctic — a region melting quickly due to carbon pollution from fossil fuels. Last year, the Interior Department granted Shell permits for exploratory drilling in the Beaufort and Chukchi seas, allowing Shell to move equipment up Arctic waters and begin drilling test wells.

As problems piled up for Shell in its first summer drilling in the region, Environmental groups reacted by calling on the Interior Department to revoke permits for the company, saying the risks are too high to warrant continued operations.

For a full re-cap of Shell’s year in the Arctic, see our timeline.

After a year of warnings, mishaps, and legal violations, the press is paying closer attention to Shell’s efforts to drill offshore for oil in Arctic waters.

But few have depicted what it really means to drill in such a remote region with almost no infrastructure to deal with an oil spill.

Now that people are coming to grips with the kind of emergencies that could take place in the remote region, it’s helpful to revisit an important resource put together last year by my colleagues on the oceans team at the Center for American Progress. They documented roads, airports, disaster response staging areas, coast guard stations, and everything else needed to respond to an oil spill in the Arctic. They then compared that infrastructure to the Gulf Coast, where response crews dealt with a massive well blowout in 2010 that spewed 5 million barrels of oil into ocean — a crisis that lasted three months, even with an all-out emergency response.

So what would happen if there’s a major blowout in Arctic waters? Here’s a stunning visual representation of just how little is available for response. (Click to enlarge). An explanation follows below.

In 2011, the Admiral of the U.S. Coast Guard, Robert Papp, summed up the situation pictured above in testimony to Congress: “If this [an oil spill] were to happen off the North Slope of Alaska, we’d have nothing. We’re starting from ground zero today…We have zero to operate with at present.”

When we consider all of Shell’s mishaps this year, most of them occurred in very benign settings where help was close by. When Shell’s underwater oil spill containment unit failed during testing and “crushed like a beer can,” it was in the Puget Sound — a completely different setting from the harsh conditions of the Arctic.

And when Shell’s Kulluk drilling rig ran aground near a remote Alaskan island during a nasty storm, the company was lucky enough to have a permanent Coast Guard station 50 miles away. As a result, the situation was under constant monitoring and the Coast Guard was able to respond quickly to the incident. By comparison, the closest permanent Coast Guard station to Shell’s proposed offshore drilling site is 1,000 miles away by plane, and more than 2,000 miles by sea.

Here are some more stark comparisons between the Gulf Coast and the Arctic in that recent CAP report, called “Putting a Freeze on Arctic Drilling“:

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The Noble Discoverer. Photo: Shell

The problems continue for Shell’s Arctic offshore drilling operations.

After getting its Kulluk drilling rig stranded off the coast of Alaska on New Year’s Eve — capping off a series of operational mishaps throughout 2012 — Shell’s other Arctic drilling ship is being investigated by the Coast Guard for pollution violations.

According to CBS, criminal investigators boarded the Noble Discoverer last November to look into safety and pollution problems, eventually grounding the ship for violations. The Noble Discoverer is a 572-foot drilling ship owned by the Noble Corporation and contracted by Shell for Arctic offshore drilling exploration:

The revelation that another Noble ship working for Shell may have been operating with serious safety and pollution control problems bolstered allegations from environmental activists that the oil industry is unable to conduct safe oil drilling operations in the Arctic Ocean.

The Coast Guard conducted a routine marine safety inspection when Noble’s Discoverer arrived at a Seward, Alaska port in late November. The inspection team found serious issues with the ship’s safety management system and pollution control systems. The inspectors also listed more than a dozen “discrepancies” which, sources tell CBS News, led them to call in the Coast Guard Investigative Service (CGIS) to determine if there were violations of federal law.

After the Coast Guard’s initial inspection of the Noble Discoverer, on Nov. 30, Capt. Paul Mehler, the Officer in Charge of Marine Inspection in Western Alaska issued a Port State Control Detention for the Noble Discoverer, effectively grounding the ship until safety violations were fixed. By Dec. 19, the ship was released from Port Detention but still remains in Seward for additional repairs.

This is not the first time Shell’s Arctic drilling operations have been targeted for environmental infractions. Last May, an inspection of the Noble Discoverer revealed over a dozen problems, including issues with its electrical system, water management system, and its engine. The Kulluk, a drilling rig owned and operated by Shell, has also received three warnings for excess pollution and nearly 20 warnings for problems with maintenance systems, reports CBS.

Shell also experienced a massive failure with its oil spill response equipment. During testing last September, the company’s oil spill containment dome was “crushed like a beer can” during testing. Just two years before, Shell promised that it had “designed and equipped the most robust oil spill response system in the Arctic known to the industry.”

For the last week, Shell has been dealing with a public relations nightmare after losing control of its Kulluk drilling rig near a remote Alaskan island. The Coast Guard has been working to help Shell tow the vessel back out to sea. And this isn’t the first grounding incident either. Last July, the Noble Discoverer slipped anchor and was beached for a short time in Dutch Harbor, Alaska.

Concerned about the range of problems Shell has faced in the region over the last year, environmental groups have called on the Obama Administration to revoke the company’s drilling permits for Arctic waters.

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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Photo: Jon Klingenberg / US Coast Guard

by Kiley Kroh

It appears 2013 will begin much like 2012 ended for Shell’s Arctic Ocean drilling efforts – with yet another mishap.

After several failed attempts to secure the equipment in harsh weather, Shell’s enormous Kulluk drilling rig ran aground near Kodiak Island, Alaska late Monday night. With approximately 143,000 gallons of fuel and 12,000 gallons of lubricating oil and hydraulic fluid on board, the Coast Guard is now preparing for the “salvage and possible spill-response phase of this event.” Two Coast Guard flyovers on Tuesday did not detect any leakage but a severe winter storm – with winds up to 70 mph and waves as high as 50 feet – has prevented crews from conducting a full assessment of the damage.

After an initial exploratory drilling season plagued with technical failures, struggles with Mother Nature, and numerous warnings about the lack of preparedness to operate in the region, the oil company’s woes have only continued. In November, the challenging and unpredictable Arctic conditions created a logistical nightmare as Shell struggled to get the Kulluk out of the Beaufort Sea as winter sea ice encroached.

As the Anchorage Daily News reports, the rig was headed to Seattle for maintenance last week when a mechanical failure in the tow vessel halted its progress and left “crews struggling against worsening weather and a mobile drilling unit that was unmanned with no propulsion capability of its own.” Huge winds and fierce swells thwarted numerous attempts to reattach tow lines and bring the rig to safety. Once grounding appeared inevitable, crews worked to steer the vessel to an area where it would have the least environmental impact.

Fortunately for Shell, this latest incident occurred in close proximity to the Coast Guard station in Kodiak, which enabled the helicopter rescue of 18 crew members on Saturday in extremely challenging conditions. The station also happens to be the closest permanent Coast Guard facility to where the oil company intends to use the Kulluk when they resume drilling this summer – over 1,000 miles away or 3 to 4 hours by plane in ideal conditions.

Like each of the incidents before it, the ongoing crisis with the Kulluk underscores the numerous challenges presented by operating in the Arctic, as well as the industry’s lack of preparedness to anticipate and overcome them. Drilling for oil in the Arctic Ocean carries an enormous amount of risk – a fact pointed out not just by environmentalists but a major insurance company, bank, legislative body, and even a fellow oil major among others.

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