State-Market Interrelations in the US Onshore and Offshore Oil and Gas Sectors

On 9 September 2012, Noble Discoverer, a Royal Dutch Shell’s drill ship, began drilling in the Chukchi Sea 70 miles off the Alaska coast, signifying the return of active offshore exploration in the US Arctic (Broder, 2012a). Another Shell drill vessel, Kulluk, commenced drilling in the Beaufort Sea on 3 October 2012 (Shell, 2013). Yet Shell’s foray into the US Arctic offshore was brief — the exploratory drilling in the Chukchi Sea lasted just over a week and in the Beaufort Sea for three weeks (Krauss, 2012). Shell’s 2012 US Arctic campaign was also unproductive. After spending over US$4.5 billion, Shell had only two top holes to show for it at the end of the season.1 The main reason why Shell was not allowed to drill into the hydrocarbon-bearing reservoir is because it was not authorized to do so by the US government. The drilling permits issued by the Bureau of Safety and Environmental Enforcement (BSEE)2 were limited to drilling top holes because Shell failed to deploy the Arctic Containment System fully tested by BSEE before commencing drilling activities (DOI, 2013, p. 16).