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Senate Democrats Urge SEC to Impose More Transparency About Possible Offshore Drilling Threats

Twelve Senate Democrats on Tuesday called on the Securities and Exchange Commission (SEC) to require more transparency from exploration and production companies concerning  "real and potential threats" that offshore oil and natural gas drilling poses.

In a letter to SEC Chair Mary Jo White, the 12 senators, all of whom are opposed to offshore drilling, urged that companies be required to disclose to the public and investors the threats offshore operations pose to their companies and the economy "should there be a spill or other environmental catastrophe."

The missive was sent one day before the Department of Interior is to hold its next Gulf of Mexico (GOM) lease sale (see Daily GPIJuly 21March 3). Sale 246 includes 4,083 blocks that cover roughly 21.9 million acres, mostly offshore Texas.

The letter follows the Obama administration's decision on Monday that allows Royal Dutch Shell plc to proceed with planned exploration offshore Alaska in the Chukchi Sea (see related story). The senators want the SEC to conduct a "full review of the disclosures of companies currently drilling or planning to drill" offshore in the GOM, as well as the Atlantic, Pacific and Arctic oceans, "and take necessary action to protect investors and maintain the integrity of the market."

Senators requesting the review were Barbara Boxer of California, Richard Blumenthal of Connecticut, Brian Schatz of Hawaii and Dick Durbin of Illinois, as well as Ben Cardin of Maryland, Elizabeth Warren of Massachusetts, Bob Menendez and Cory Booker of New Jersey, Oregon's Jeff Merkley, Rhode Island's Sheldon Whitehouse, and Vermont's Patrick Leahy and Bernie Sanders.

The decision to allow Shell to proceed offshore Alaska was made "only weeks after it was made public that Shell had not disclosed risks inherent to drilling at unprecedented depths in one of the world's most fragile ecosystems," the senators said.

"Despite these realities, Shell has provided investors with boilerplate generalities about the potential for an accident and insisted that the company has a sufficient plan for response and cleanup. Shell, however, has not disclosed that its techniques have not been fully tested in Arctic conditions or that they are highly unlikely to be as effective as the company has claimed.  Shell also has obscured disclosure of serious equipment problems (such as in 2012) and has not provided investors with an estimate of the likely costs of a spill and funding a subsequent response.

"Furthermore, Shell's annual reports reveal a pattern of failing to disclose litigation that concerns the aforementioned issues," said the senators. They said they worry "that other companies have also failed to disclose similar vulnerabilities."

The SEC should conduct a review of disclosures by other companies currently or planning to drill in the U.S. offshore "and take necessary action to protect investors and maintain the integrity of the market," the letter said. "Full and timely disclosure of material risk is necessary to protect investors by enabling them to make informed investment decisions."

The country has "never been more energy secure with an abundance of domestic oil," the group noted. "There is no need to expand drilling into waters less able to recover from a spill."

Cardin pointed to BP plc's Macondo well blowout in the deepwater GOM in 2010 as a reason for more disclosure.

"The potential for another Deepwater Horizon-type catastrophe is not worth the risk to companies or the environment," said Cardin. "If America continues to allow companies, foreign or domestic, to drill off our coasts we put everybody in jeopardy, from the families of seine fishermen in Alaska and oystermen on the Chesapeake Bay, to investors and local businesses, and well beyond. If we are going to drill, we need the utmost transparency and risk assessment ahead of any activity. The SEC should make investors aware of the risks to their individual and economic futures."

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