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A sit-down with Shell's Alaska boss

Craig Medred

As if possibly seeking guidance from God, Shell Alaska boss Peter Slaiby on Thursday glanced at the ceiling as he pondered the likelihood his company will start drilling for oil off the Arctic coast of the 49th state this summer. Then, he let his gaze roam the conference room of company headquarters in Midtown Anchorage.

"This is bad," he said at last.

Bad, indeed. Since shortly after a BP Plc exploratory well blew out beneath the Gulf of Mexico on April 20, all U.S. offshore drilling has been put on hold in Alaska as elsewhere. The BP blowout and resulting fire sunk the oil rig Deepwater Horizon, killing 11 people and leaving a volcano of oil spewing on the ocean floor nearly a mile down.

As the oil bubbled to the surface, as it continues to do, and as a monster oil slick grew to rival that in Alaska's Prince William Sound 21 years ago, public concern turned to public outrage. Royal Dutch Shell's plans to explore for oil beneath the Chukchi and Beaufort seas off Alaska 3,000 miles north of the Deepwater Horizon spill ended up caught in the political blowback.

This is bad if you work for Shell or worry about a state economy bound to the oil industry.

And only a little over a month earlier, things looked so, so good for the company some in Alaska hoped would find the next elephant-size field to help fill up a trans-Alaska oil pipeline now running only one-third full.

The liberal, U.S. Ninth Circuit Court of Appeals had just held in favor of Shell in a lawsuit environmentalists, usually the darlings of the Ninth, filed to try to block drilling. President Barack Obama had endorsed the company's hunt for new oil offshore in the Arctic. Permits to drill were on their way.

Then the oil hit the surface of the Gulf, and the oil storm only got worse by the day. The first estimate was 40,000 gallons of crude a day. That was quickly upped to 220,000 gallons per day. BP said this week it managed to put a tube into the volcano and send some of the outflow to a ship a mile above. The company estimates it is getting about 220,000 gallons per day, but a significant amount of oil continues to leak into the ocean, making clear the spill is larger than the earlier guesstimate.

The national press has taken to beating BP about the head with that. The guesstimates from "independent sources," as opposed to the U.S. National Oceanic and Atmospheric Administration that came up with the 220,000 figure after consultations with BP, are now up to 3 million gallons per day, though no one really knows the real volume.

There is no gauge on the leak, nor any control whatsoever on the media spin that follows a unified narrative: Environmental disaster of the new century. Evil oil company. Someone must pay.

Shell might be one of those that pay. With offshore drilling on hold, federal officials are reviewing drilling procedures. A report is due to President Obama by May 28. After the report, he may or may not allow Shell and others to drill off America's coasts. In a sit-down with Alaska Dispatch reporters Thursday, Slaiby, vice president for the Shell Alaska Venture, said the company can't even get a good read on what's likely to happen.

At one point in what was a surprisingly open and free-wheeling discussion about Shell's future in Alaska (Slaiby said the company is here to stay) and the dangers of offshore drilling, one of Slaiby's comments on summer drilling was prefaced by the statement "in the unlikely event we start."

Shell remains hopeful, Slaiby stressed. It is proceeding now as if drilling were still a done deal. If the company is to be ready to go in the short July-to-September drilling season in the Arctic, it has no choice. But a company planning to gamble hundreds of millions of dollars on looking for oil hopefully worth billions is obviously troubled.

The country is not in an oil-drilling mood, at least not offshore. The BP spill has done more than just flood Gulf of Mexico waters with oil; the BP spill has set aflame the U.S. body politic.

"Ultimately, what this spill shows is that offshore oil drilling simply cannot be done safely," Sen. Frank Lautenberg, a New Jersey Democrat, said last week.

Shell is trying to make the case Lautenberg is wrong. It is an uphill battle on a crude-greased slope despite the oil industry's good safety record in near-shore waters. Brent Ross, Shell's Alaska operations manager, and a man who has worked in the Arctic before, notes the drilling Shell plans to do both west and east of Prudhoe Bay is simpler than the deep-water drilling BP was undertaking in the Gulf. He notes Shell had ordered extras safeguards anyway.

And he underlines that the environment under the seabed in the Arctic is radically different. BP hit a gas pocket 20,000 feet beneath the sea that filled its drill pipe with gas at a pressure of more than 4,000 pounds per square inch. Shell, which has drilled in the arctic off Alaska in the past without problems, doesn't expect to hit gas at more than 100 PSI.

The difference here, in simple terms? 100 PSI will fill your garage with gas. 4,000 PSI will blow up your house.

Ross is of the belief that even if Shell had a blowout, as BP did in the Gulf of Mexico, the well wouldn't even contain enough pressure to continue flowing. Drilling mud alone would seal it shut, he said. It wouldn't become the sort of undersea volcano that has been gushing 50 miles off Louisiana.

Of course, everyone just sort of has to take the words of the drilling experts and scientists on this -- Shell drillers and Shell scientists, along with scientists and bureaucrats. now with the embattled U.S. Minerals Management Service. Secretary of the Interior Ken Salazar, who oversees the MMS, has accused his employees of being too cozy with the oil industry.

So why should anyone trust Shell, Slaiby was asked.

"That's a good question," he said.

The answer, provided by Slaiby and Ross, took most of an hour, but it boiled down to this:  Shell should be trusted because it drilled safely in the Arctic before. Shell should be trusted because in the wake of the BP spill every company is going to be more careful. Shell should be trusted because the cost of screwing up -- as BP is now showing to the tune of an estimated $10 million per day in cleanup costs and payments to fishermen -- is so high. Shell should be trusted because spilled oil is oil on which it loses money instead of makes money.

But then, critics would counter, those are the same things BP might have said before the Gulf of Mexico spill.

Contact Craig Medred at craig(at)alaskadispatch.com