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Optimism & Outrage: Shell’s $7 Billion Arctic Oil Gamble

Inside Shell’s $7 Billion Gamble for Oil in Remote Arctic Seas 3:18

At Royal Dutch Shell's operations center in Anchorage, the cries of outrage that greeted the start of offshore drilling in the Arctic are drowned out by optimism.

The energy giant's president, Marvin Odum, told NBC News that he's confident that the $7 billion already spent to find oil under the sea — a bet that no other company is making in the American Arctic — was the right business decision.

And he says he's also certain that Shell can handle any accident that might unfold during exploration or extraction, which wouldn't even happen until 2030.

"We have the ability to respond to a spill within an hour, which is unmatched anywhere in the world," Odum said. "My reputation is staked on that. And the reputation of the company is staked on that."

He realizes that on the North Slope of Alaska, more than reputations are at stake: the people's entire way of life could hinge on how Shell's quest for crude turns out.

If the company finds the oil and gets the go-ahead to remove it, those who live in cities like Barrow, America's most northern municipality, stand to gain much-needed jobs and funds for infrastructure and services.

But the prospect of year-round drilling in waters that are covered by ice for eight months a year has many worried that a spill could ruin communities inextricably tied to the ocean.

"Their spin and it's always been a spin, is that we had enough safety controls to make sure it doesn't happen," said Edward Itta, former mayor of the North Slope Borough.

"All well and good. Didn't I hear that before somewhere? Exxon Oil Valdez? The Horizon spill? I mean accidents will happen."

Itta's campaign slogan when he ran for mayor was a two-word rebuke to oil companies that had set their sights on the Chukchi Sea: "Hell no!"

Over time, Shell was able to convince Itta to support its exploration effort, but he's not sure the Arctic can afford full-scale production — moving oil from underwater to the shore and then to the pipeline.

"There's no spill technology in the world that can take care of a spill up here in the Arctic. Period," Itta said.

"I think the United States of America should suck all the oil dry first on land before you go offshore. Less risky."

Image: Edward Itta
Edward Itta, a former mayor of the North Slope Borough. Jake Whitman / NBC News

The Obama administration granted Shell permission to start drilling in mid-August for the first time in 24 years, sparking cries of hypocrisy from environmentalists.

They wonder why a president who wants to reduce the world's carbon footprint would help create more fossil fuel — one of the vehicles for the climate change that is already threatening Arctic ecosystems.

Odum said Shell believes in man-made global warming, but that shouldn't put the Arctic off limit. Even as the U.S. shifts to alternative energy sources, it will still need to pump or import oil for decades, he said.

"If it's done in the U.S. waters then we can control how it's done," he said. "And we can be sure it's done the right way."

Royal Dutch Shell President Marvin Odum, right, at his company’s Anchorage operations center. Jake Whitman / NBC News

Because there is no safety infrastructure in place, Shell was required to bring its own — 28 vessels in all, including the rigs — to the drilling site.

There has been no real-world testing of cleanup technology in the American Arctic, but Shell says tests in Europe prove it can be done. Critics say those same tests actually show the opposite.

A series of recent mishaps in the Arctic, including a 2012 incident in which a Shell rig ran aground, have added to the fears, but some Alaskans believe the danger of not drilling is just as great.

As whaling captain Crawford Patkotak sees it, the North Slope needs the oil money to survive.

"When we see people wanting to save the world at the expense of the people of the Arctic, something is wrong," said Patkotak, a leader of one of the native corporations.

If Shell does find oil in the next two years, it must go back to the federal government for more approvals to extract it. Odum says production wouldn't begin until 2030 at the earliest.

Odum is speculating that oil prices, now at $50 a barrel, will have risen enough to justify the enormous cost of an Arctic project.

"This venture has to be a commercial venture for us or it wouldn't make sense to pursue it," Odum said. "Our shareholders have certain expectations.

"But it's not only about that," he added. "It's only commercially viable if the communities involved are supportive."

Crawford Patkotak holds a photo of his great-grandfather. He and his kids are navigating a changing way of life in Barrow, Alaska. Jake Whitman / NBC News

Right now, the community is split down the middle. In addition to spill fears, some worry the noise from drilling will change the migration patterns of bowhead whales they have depended on for generations.

Doreen Lampe, executive director of the Inupiat Community of the Arctic Slope, sounds resigned when she talks about the offshore operations that she once deeply opposed.

"We've opposed it for over 30 years and they haven't stopped coming," she said. "It's a fact of life."

She doesn't share Marvin Odum and Crawford Patkotak's confidence that Shell can prevent or cope with a major mishap. If the decision was hers, there would be no drilling until there was more infrastructure and more transparency.

"There's no designated ports. There's no real search and rescue capabilities. Their method of transporting, exporting the oil, has not been discussed with all the stakeholders," she said. "There's nothing right now. Everything is all hush-hush."