Shell vs. EPA in Alaskan Offshore Oil & Gas
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Royal Dutch Shell has reentered the Alaskan offshore oil and gas market and met all Environmental Protection Agency (EPA) and legislative prerequisites to conduct regional exploration. However, in spite of going above and beyond requirements, the EPA has continually rejected approval of Shell exploration in Alaska’s Chukchi and Beaufort Seas.
Can you describe Shell’s progress in attaining offshore permits in Alaska?
Smith:When it comes to permits you need about 1,000. You either get them all or you don’t drill. We have spent over $3.5 billion on leases, start-ups and asset investments since we first reentered Alaska in 2005. We’re 5 years into this now, and several billions of dollars, without having drilled a single exploratory well!
Murkowski: When the Interior Department processes exploration plans of this nature for the Gulf of Mexico, the average length of time for approval is just 43 days. The EPA’s failure to process a competent permit is inexcusable. It’s the most costly example of regulations needlessly stalling economic recovery and creating a terrible business environment that you’ll find anywhere in America. When the EPA did finally issue a permit, it was invalidated by its Environmental Appeals Board. The EAB basically changed the rules on Shell in the middle of the process.
Has Shell met all the safety and environmental requirements necessary?
Smith: We have a world-class Arctic tested oil spill response fleet. Our whole ethos is that we keep the oil that we find in the pipe, and history suggests that we do that very well. But in the unlikely event of a blowout, our oil spill response team would be onsite and recovering that discharge within one hour. That’s unprecedented.
Murkowski: Shell has assembled an unprecedented oil spill response program that includes an onsite oil spill response fleet, near-shore barges and response vessels, and onshore support teams. Since the Gulf of Mexico spill, Shell has updated its spill response plan to include a subsea oil containment system to capture and recover oil if there is a blowout, an upgraded and more frequent testing of its blowout preventer, and a second drilling rig capable of drilling a relief well, if needed.
How can Shell’s offshore activities in Alaska benefit the state’s economy?
Murkowski: Responsible development of our oil and gas resources in the Chukchi and Beaufort seas is a big part of the future of oil production in our state. Without new production, the trans-Alaska oil pipeline will move closer and closer to shutdown. If that happens, oil production on the North Slope is over and with it will go thousands of well-paying jobs.
Smith:Senator Murkowsi along with Senator Mark Begich have been very proactive for making Alaska’s case—the industry’s case as well—in framing the need for the thousands of jobs created, new domestic energy production, and new oil for the Trans-Alaska pipeline that is desperately low. The pipeline here in Alaska is only a third full.
Do the economic benefits outweigh the environmental risk?
Murkowski: You have to strike the proper balance. Risk is inherent in any type of energy production but you have to take steps to mitigate it to the greatest extent possible. I believe Shell has taken steps to do that.
There are a couple of points that are important to remember when we’re talking about the risk of offshore exploration. The first is that the proposed exploration in the Beaufort and Chukchi is all in shallow water of around 150 feet. Second, don’t forget that 65 wells have been drilled in the Beaufort and Chukchi since 1983 without incident.
Do you believe there may come a time in this century when oil can successfully be replaced with renewable, less environmentally risky alternatives, or should oil reserves be exploited to their maximum potential regardless of renewable options and environmental degradation?
Murkowski: I think that reduction of fossil fuels is a goal we should continue to strive for, but we also have to be realistic and acknowledge that we’re going to use oil for many, many decades to come. What we can do, though, is make sure we dedicate a sizable portion of the revenues we earn from oil production to investing in alternative energy sources. But that means we actually have to be producing our own resources first.
Can you comment on the Senate not passing a recent bill—approved by the House of Representatives—that would have expedited offshore permitting?
Murkowski: It’s disappointing we couldn’t agree on legislation to advance responsible production. I think the Republican plan was a pretty good compromise. It wasn’t everything I would like to see, but it was a good start. Now we have to see if we can’t find some common ground in the committee process. Our focus should be on legislation that advances safety, production and a fair return of revenue to coastal states.
(Note: Energy Digital reached out to the EPA’s Deputy Press Secretary on several occasions to participate in this question and answer feature, but no reply was granted.)
Technology revolution for water retailers
In April 2017, the UK’s water retail market in the world opened for business – the single biggest change to the water sector since privatisation. This development allowed businesses, charities and public sector organisations to shop around for the best deal.
However, like any industry, this change hasn’t been without its sticking points; here, Paul Williams, CTO at Everflow Tech (pictured far right), discusses how retailers can harness technology to their advantage
Quotations could take up to a week to produce, billing software had to be manually updated and brokers were unable to manage the complete customer journey in one place – all of which took time, cost money and allowed for human error.
The more complexity that was involved in billing or quoting, the more contact end customers needed to have with their retailers, pushing up the cost to serve for every SPID. This meant retailers – ourselves included – found themselves in a situation where profits were simply eaten up by service costs.
We also note that it can traditionally be hard for retailers to stay on top of balancing what they are charging their customers with what they are being charged by the market. To further exacerbate this, the longer a change goes unnoticed, the more trouble it can be to balance the issue.
It was these issues that Josh and his (at the time) small team wanted to ameliorate, creating their own technology in the absence of anything else.
This technology evolved into our award-winning retail sales, billing and customer management platform for the water retail market, and Everflow Tech was launched as a standalone venture in 2018, selling the software externally for other water retailers and their customers to benefit from.
What retailers want
As a relatively new entrant to the world of utilities competition, the water market could be seen to be lagging behind, particularly when it comes to innovation.
In fact, as recently as 2019, Ofwat said it expected the industry to be making technological advances and to be working with a culture of innovation, collaborating with companies both within and outside of the sector.
And with cost-savings for consumers traditionally lower than for other utilities, retailers need to be offering something more – whether that’s better support, energy-efficiency advice or more accurate data.
What’s more, consumers have had a taste of the power of technology, and they’ve come to expect nothing less from retailers across the board.
Another key issue – thrown into sharp relief during the past 12 months (and counting) of a pandemic – is rising levels of arrears, which are likely to increase bad debt beyond margins that retailers originally allowed for when the market was created.
In such a low-margin industry, there is a limit to the amount of debt retailers can take on, especially as recovering costs can be a very slow process. Ofwat has signalled that this issue could be addressed as early as this year, with a mechanism for recovering bad debt to be established during 2021/22.
The market needs simple solutions to better serve the end user, and we were perfectly placed to develop those solutions. At Everflow, our software is designed for the water retail market, by the water retail market.
As well as simple billing, clear-to-understand workflows, and a revenue assurance system to allow retailers to quickly compare market charges, Everflow has also introduced a complete debt solution, allowing missed payment dates to drive late payment charges and escalations automatically.
Retailers are able to design and put out their own bill and quotes, tailoring customer journey and overall experience – whatever the circumstances.
What does the future hold?
Automation is key to any industry; we’re heading into an age of driverless cars and smart homes, and this drive for tech will filter through to our industry, and we need to catch up.
The Internet of Things – a network of physical objects connected to each other – means human error (and effort) can effectively be removed from many everyday tasks, which goes for meter readings too. However, in the 21st century, the water market is still not leveraging previously emerged technology in the form of smart meters to provide accurate billing.
Consumers are also becoming more empowered, both to ask for information and change their preferences if they don’t like what they learn. Retailers need to be armed with this information, not next week, not tomorrow, but now – and, at Everflow Tech, we’re putting that information at their fingertips.
But the retailers themselves need to speak up too, and we will always work with them to get the best ideas on what needs to be developed and when.
Our strong bond with Everflow Water, along with other key customers, means we have a direct interest in making sure our systems serve the water market in the best way they can.
For us, the goal is to make sure retailers on our platform can grow as much as possible, leaving behind laborious daily processes to focus on their own strategic growth and, most importantly, helping their customers.