Review finds company had failed to plan for short drilling season and its equipment did not stand up to harsh conditions
A government review found the oil company was not prepared for the extreme conditions in the Arctic, which resulted in a series of blunders and accidents culminating in the New Year's Eve grounding of its drill rig.
Shell announced a "pause" in Arctic drilling last month. But Ken Salazar, the interior secretary, told a reporters' conference call that the company will not be allowed to return without producing a much more detailed plan, one tailored specifically to the harsh Arctic conditions.
"Shell will not be able to move forward into the Arctic to do any kind of exploration unless they have this integrated management plan put in place," said Salazar, in one of his last acts before standing down as interior secretary. "It's that plain and simple."
The findings of the review could mean further costs and delays for Shell, which has spent years and $4.5bn securing permits to drill in Arctic waters.
But it did not satisfy some environmental groups which said the review demonstrated the government should never have allowed drilling in the first place.
Salazar and other officials said Shell had not been prepared to drill last year, when a season of blunders and accidents was capped with the New Year's Eve grounding of one of its drilling rigs.
"Shell screwed up in 2012 and we are not going to let them screw up after their pause is removed," Salazar said.
The review said Shell had failed to plan for the short drilling season in the Arctic, and the extreme weather conditions. Its equipment, in particular, did not stand up to the harsh environment.
The review did not focus on the government's failings to anticipate last summer's near-disasters in the Arctic, and administration officials admitted in the call: "The government has a lot to learn."
Instead the review reserved its harshest criticism for Shell's management of its contractors. The review said the company failed to make sure its contractors were up to operating in Arctic conditions. The makers of Shell's oil spill containment device – which failed on an early test in relatively calm waters off Seattle – only had experience in the Gulf of Mexico.
In a further attempt for a more stringent oversight regime, the review also recommended that any future Arctic plans put forward by Shell be subjected to third-party audit.
The review won cautious praise from some environmental groups as a "first step" towards improving safety in Arctic drilling.
"We are pleased the interior department has conducted this public review, it's an important first step towards preventing future drilling accidents in the Arctic Ocean," said Marilyn Heiman, director of the US Arctic programme for Pew Charitable Trusts.
However, Greenpeace said Shell had got off too lightly. "The government should be embarrassed for granting Shell the permits it did this year," the campaign group said. "This report merely gives big oil a slap on the wrist."
Conservation group Oceana said that the review had dodged a key question of the administration's failure to anticipate that Shell would not be prepared to drill in the Arctic.
"The department of the interior must accept responsibility for the failures that resulted in approvals and permits being granted to a company that was obviously not ready," Oceana said in a statement.
"The government should suspend activities on leases in the Arctic Ocean until and unless companies prove they can operate safely and without harm to the environment and without harm to opportunities for the subsistence way of life."
Salazar ordered the review of Arctic offshore drilling after a Shell drilling vessel ran aground off the coast of Alaska on New Year's Eve.
After ordering the review, Salazar told reporters he had doubts about whether drilling could ever be done safely in a region as harsh and remote as the Arctic Sea.
On Thursday, however, Salazar and other officials told reporters that the Obama administration remained committed to drilling for oil in the Arctic.