SHELL VS. THE ESKIMO: How One Of The Largest Oil Companies In The World Negotiates For Drilling Rights

shell arctic negotiatoin

Photo: Shell via YouTube

If you think oil executives wearing suits march into communities and use muscle and intimidation to secure drilling rights, then you’re flat out wrong.This summer, barring a last-minute stay, Shell will begin exploratory drilling off Alaska’s North Slope (literally, on top of Alaska) in the hopes of finding oil deposits.

The drilling has been opposed by conservation groups, who fear an oil spill in such a remote area would be unmanageable and endanger whales and polar bears.

But as it turns out, the residents who actually live on the North Slope — 9,430 as of the 2010 census — are much more sanguine.

As reporter Bob Reiss writes in his latest book, “The Eskimo and the Oil Man” (Business Plus), the largely Inupiat Eskimo community there recognise the need for jobs, income and cheap energy that drilling would bring to not just  them but the entire country.

As Barrow, AK mayor Edward Itta, the central figure in Reiss’ book, says:

“It is a high being an American. I know the country needs energy. I have to find a balance.”

Reiss was given unprecedented access to Shell’s negotiations, led by Shell’s Alaska VP Pete Slaiby, with Itta as well as its lobbying preparations in Congress. 

We put together a few fascinating facts we learned about how an oil company makes its pitch on such a sensitive topic.

Shell knew it wasn't going to pull the wool over anyone's eyes

The company aimed the bulk of its efforts at winning over Itta, who had sued in the past to stop companies from drilling. 'We put significant weight on what he would say,' a Shell spokesman told Reiss.

Shell's Slaiby said the difficultly level of getting drilling approval was 'nine out of 10.'

Source: Bob Reiss, 'The Eskimo and the Oil Man'

The company was willing to give ground on a host of topics.

While some Shell's plans were court-ordered, Shell agreed to stay away during the community's whale hunting weeks. It also signed up to bankroll joint scientific studies in proposed drilling areas, and it agreed to backhaul drilling discharge.

Source: Bob Reiss, 'The Eskimo and the Oil Man'

Not all oil men are hard-driving southerners.

Slaiby grew up in Connecticut. His favourite book is Jack Kerouac's 'On the Road.' A college buddy said Slaiby was a bit 'like Ben Stiller in the movie 'There's Something About Mary' ' in his youth -- though he also described the Shell VP as responsible and considerate.

Now in his early-50s, Slaiby has lived everywhere from Cameroon to Brunei. His wife is Brazilian.

'Pete Slaiby is not a smooth talker,' an aide to Itta said. 'He's a blunt guy. He knows he's going to walk out of a meeting with a black eye. But he says what he thinks.'

Source: Bob Reiss, 'The Eskimo and the Oil Man'

Locals greet Greenpeace with as much, if not more, scepticism as they do with oil companies

Barrow residents found the group distrustful and its tactics overly confrontational. 'It's not our way,' says a researcher in the region's Wildlife Department.

Itta said environmental groups, if they got their way would 'create a new dangered species. Us.'

Source: Bob Reiss, 'The Eskimo and the Oil Man'

The Deepwater Horizon disaster was a game changer.

It came just as Shell was beginning negotiations with Itta, in the spring of 2010. The government issued a moratorium on offshore drilling, and the Interior Department ordered new technical requirements for all offshore drilling companies. 2011 was described as a lost year. In total, Shell spent $3.5 billion -- including this five-part video series -- just to get permission to drill.

'The Gulf wasn't our problem, but in a way it was,' Shell's Slaiby says.

Source: Bob Reiss, 'The Eskimo and the Oil Man'

Competition between oil companies in Alaska is far more cut-throat than between companies and residents.

That's because, in Alaska, companies may only submit a single, sealed bid for a given drilling lease. As a result, dirty tricks are not uncommon. Shell said that when it first moved into its main offices in Anchorage, it found five listening bugs in the walls.

The auction for the first leases on the North Slope were described by one exec as exciting as an Ali-Frazier fight.

Source: Bob Reiss, 'The Eskimo and the Oil Man'

Shell promised the moon when it came to clean up technologies.

'Not doing it right here would destroy our reputation around the world,' Shell President Marvin Odum told Itta. 'It's so sensitive that there's no room for mistakes. This will be our most important operation worldwide.'

Itta seem to be convinced.

'I'm more comfortable with Shell,' he said. 'They are making a sincere effort.'

Source: Bob Reiss, 'The Eskimo and the Oil Man'

The real culprit in Reiss' book turns out to be the federal government.

It emerges as discombobulated, indecisive, equivocal and dilatory.

'If there were a better system for mainstreaming our ideas and concerns,' the North Slope's agonizingly prolonged negotiations with Shell could have been avoided.

Source: Bob Reiss, 'The Eskimo and the Oil Man'

As a result, Slaiby is able to claim, not without some justification, that Shell was the underdog in the fight.

'The process had become a never-ending do over game,' Reiss writes. 'Every decision was made, remade, challenged, rechallenged and then litigated.'

Source: Bob Reiss, 'The Eskimo and the Oil Man'

Bottom line: Getting permission to drill in offshore is like beating Contra.

That is how Alaska Lieutenant Governor Mead Treadwell describes the process:

'If you want to get permission to drill of here it's like the most complicated video game you've ever seen where every piece of floor could be a trapdoor, everything above you could drop down and eat you in a moment.'

Source: Bob Reiss, 'The Eskimo and the Oil Man'

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