Paul Stevens, the CEO of Foss Maritime, is sick of Seattle politics messing with his business.
The head of the 125-year-old shipping company, which is based in Seattle, came to last night's meeting of the Manufacturing Industrial Council to talk about why he feels this way.
Foss, as you may have heard, is currently ramping up its pursuit of business opportunities in the Arctic, which right now means sticking close to the oil and gas industry. But after Foss signed a lease allowing Shell Oil's Arctic drilling fleet to refurbish and resupply at the Port of Seattle, a PR problem exploded at Stevens's feet.
Environmental groups, the city council, Mayor Ed Murray, and—most recently—the state Department of Natural Resources have all objected to various parts of the Shell-aiding operation. On May 16, kayaktivists swarmed the Shell Arctic drilling rig that's parked at the port's Terminal 5, thanks to Foss leasing that space from the port. And last weekend, a 20-year-old student even strapped herself to an Arctic drilling support barge for 63 hours. (Though that was in Bellingham and not, technically speaking, Foss's headache.)
This is all rather unpleasant for Foss.
And in Stevens's mind, that unpleasantness compromises Foss's vision for the future of Seattle as a possible staging ground for Arctic oil and gas development. He also had a number of things to say at the Tuesday meeting about Mayor Murray's concern over Arctic drilling (Murray's office had promised to stay "neutral," Stevens said), as well as the timeline for Foss and Shell's activities going forward.
Here's what we learned from Stevens's statements last night:
Foss is jumping into the melting Arctic (thanks, climate change!) with both feet.
Foss has been expanding its Arctic capabilities for quite some time. And Stevens is betting a lot on Arctic opportunities going forward. "The Arctic is going to be the main growth engine for this region for the next 50 years," Stevens said.
In Stevens's mind, Seattle can be part of Shell's staging ground for future Arctic oil and gas development—or miss out on all that sweet oil industry action.
"Now, whether Shell goes from exploration to development, that's an entirely different question, by the way. What they're doing today is trying to figure out what's down there. What's there? They think they know, but they're not sure. And they have to drill so many wells to figure it out. And then they'll make a decision on whether they'll go to the next step, which is a whole lot more expensive. There's a whole lot more activity to this city if you embrace it. We're talking about miles of pipeline and roads and equipment and all that—all that—will come through Seattle. Or it'll come through someplace else. So we have a lot of choices to make. And how we deal with Shell today is going to be how they feel tomorrow. And they're a big company that spends a whole lot of money and [unintelligible]. So we can decide to participate or not."
Discussions about Shell with the port started back in June of 2014. (Though the proposal for Shell's lease wasn't made public until early January of 2015.)
Shell had awarded Foss a contract to host its fleet "pending completion of the lease with the port." Foss also asked for confidentiality from the port while other proposals for the space were being considered during that same time.
And discussions with the mayor's office started in the fall of last year, too—back in November of 2014.
"We had a very high-level [discussion] with the mayor's office in November of last year," Stevens said. "And we outlined the plan, the terminal plan. So for the mayor to say he didn't know or didn't understand is not accurate."
Stevens said that Mayor Murray "promised not to say anything, but he can't help himself."
When I asked Stevens to clarify what he meant by that, he said that a woman in Murray's office—he didn't remember who—told Foss that the mayor's office would remain "neutral" on the issue. In writing? No, this is politics, Stevens said. Viet Shelton, mayoral spokesperson, denied that such a promise was made. "I am not aware of any promise made by the Mayor to not ever say anything about the issue," Shelton told me by e-mail. "Which is to say he never made that promise."
Foss invested $15 to $20 million of its own money to get Terminal 5 ready for Shell.
They did this with "full assurances from the port" that they would be able to move forward with Shell's plan to host its Arctic drilling fleet here. This much is curious given that Shell did not have conditional federal approval of its plan to go drilling in the Chukchi Sea until May of this year.
Despite the state and city's (marginal) efforts at making life difficult for Shell by reexamining permits and such, Stevens said: "By the time any of those get into any real kind of discussions, we should have every asset that we have for the Arctic on its way to the Arctic."
The Department of Natural Resources gave Shell until June 1 to answer its recent questions about the use of Terminal 5. A little more than a week after that deadline, Shell could leave. This is sort of like someone saying "I already put in my two weeks," in response to, "You're fired." According to Stevens, the city's other enforcement actions—like its notice of permit violation—and the ongoing lawsuit from environmental groups also do not impact Shell's timeline.
The Polar Pioneer, for example, is supposed to leave between June 10 and June 15.
And there will be "some other investments" coming into T5, too, Stevens said. There are about 30 vessels that will support Shell's rigs in the Arctic and they're scattered all over Puget Sound.
According to Foss, port management is totally supportive of this.
"Together, frankly, port management and Foss were pretty much standing arm-in-arm on this," Stevens said.
So, if this is true, the idea that the port commission did anything contrary to Foss's interests—at any point in time—is pretty much bullshit. That's including the rather weak motion the port passed earlier this month asking Foss to delay servicing Shell's Arctic drilling equipment.
This is just "business."
"Foss Maritime is in the marine services business," Stevens said. "That's what we do. We support the oil and gas industry. That's what we do. I'm not here to judge Arctic drilling. I'm not here to judge fossil fuels and climate change. I am in the marine services business. And the port is in the commercial business of loading and unloading cargo."
That's the view from the guy at the top of Foss Maritime. Here are three quick counterpoints that Stevens did not discuss:
Arctic oil and gas development is not a given, despite the framing used by Foss and Shell.
In fact, the companies face real risk of stranded assets if the world decides to take action on climate change.
Here's why: Right now, Shell's readying for oil and gas exploration. The production phase would still be at least a decade out. But Stevens's calculation that the Arctic is going to be a major growth area for the next 50 years—in oil and gas specifically—relies on a set of risky expectations. For one, it assumes that the United States and the rest of the world do nothing on the supply side to keep temperatures below a rise of two degrees Celsius. That means we keep developing new oil and gas resources in spite of research showing that's incongruent with preventing the worst consequences of climate change.
Climate and energy market modeling also shows that we'll burn through our easiest-to-access oil and gas resources first. The Arctic? Not easy and super expensive. So if world leaders come together and decide to dramatically decrease our dependence on oil, even gradually, Shell could be left with a bunch of unused infrastructure and losses in the billions.
Even if the assets are on their way to the Arctic, they still have to come back... somewhere.
Stevens made it clear in his talk to the MIC that the reason Shell chose Seattle is because of the depth of Terminal 5. The Polar Pioneer is like an iceberg—it's got a lot going on beneath the surface that requires at least 50 feet of water below. Not too many port terminals have that kind of depth. The other reason Seattle is ideal is because of its amenities—hotels, restaurants, the works. When executives and roughnecks come to town, they need places to stay. And the North Slope of Alaska? As the University of California-Berkeley's risk management expert Bob Bea put it, "There is no Home Depot on shore." So don't underestimate the importance of Seattle in Shell's calculations. "Right now we're going to fight to the death to stay where we are," Stevens said.
This is not just business.
Stevens has criticized Seattle politicians like Mike O'Brien and Mayor Murray for being "political" in their handling of the T5 issue. But capitalizing on Arctic oil and gas development is a political choice, too.
It is a choice to disregard what happens in Paris later this year as world leaders meet to come to some kind of international agreement over climate change. It is a choice to invest in political candidates who support a future that doesn't involve acting to preserve a livable climate for humanity. And Shell's success in the Arctic—and by extension Foss's—relies on a future scenario, still several decades out, in which all its explorations go well and its very expensive Arctic assets aren't stranded by natural or political forces. That means it relies on a future that is still dependent on unconventionally-obtained fossil fuels, despite the fact that climate modeling shows that we need to do the opposite—that we need to take serious action on climate change and mandate net zero emissions during that same timeframe.
If this is just business, would Amazon's investors want Jeff Bezos to make the same kind of future calculations that Shell and Foss are making right now?