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September 29, 2011

Arctic oil: an environmental disaster waiting to happen?

Resource exploitation could pose a serious threat to the arctic, but could new laws help open this treasure chest? Nicholas Newmann reports on the lack of coherent legislation regarding extracting arctic oil and finds out more about the threat of contamination in this fragile environment.

By Daniel Garrun

The Arctic is facing many threats to its environment and including problems posed by human activities, including resource exploration and exploitation. The trouble is many of the current Arctic environmental laws, guidance and regulations can be best described as dysfunctional.

The law regarding territorial rights in the Arctic is complex and full of conflicting claims, observes Sergei Vinogradov, senior lecturer at the Centre for Energy, Petroleum and Mineral Law and Policy at the University of Dundee, UK.

The Arctic Ocean is governed by the UN On The Law of the Sea Convention, which all Arctic nations have ratified except for the US. The Arctic’s territorial waters extend 12nm from shore. This means coastal states have extensive powers over foreign shipping, as is the case with US requirements for double hulled tankers visiting Alaskan ports.

"At present, there is no one overarching piece of Arctic regulation notes Ben Ayliffe of Greenpeace."

In addition, nations have absolute rights over seabed resources such as oil and gas. However, between 12 and 200 miles, within the exclusive economic zone, coastal states have no powers over foreign shipping but absolute rights over petroleum resources.

Beyond 200 miles, coastal states retain their rights over seabed resources – wherever they can demonstrate scientifically that the ocean floor is a ‘natural prolongation’ of the continental shelf closer to shore. That is what Russia is trying to demonstrate by planting a flag at the North Pole ocean floor, because Moscow claims the Lomonosov Ridge was an extension of its continental ocean floor territory.

US Geological Survey estimates suggest there could be between 44 to 157 billion barrels of oil and 299 to 1,547 trillion cubic feet of gas, mostly off the Arctic coastlines of Alaska and Russia, while Jean Laherrère, a French consultant petroleum geologist, forecasts that the Arctic could contain just 50 billion barrels of oil and 1,000 TCF of gas. This would suggest by using the latest drilling technology, perhaps only 25%-35% of Arctic oil and gas reserves is economically recoverable.

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Drilling activites

There are several Arctic E&P schemes at various stages of development, apart from the Cairns Energy scheme that is drilling off Greenland. In the Pechora Sea, near Novaya Zemlya , Russia, the Sevmorneftegaz’s Prirazlomnoye offshore project is due to come on stream in 2012.

This scheme is designed to produce 7.55 million tons of oil per annum, for the next 20 years. Elsewhere, the much delayed Gazprom Shtokman Development in the Barents Sea, once fully complete, will have a design capacity of 71.1 billion cubic meters of gas a year, similar to Norway’s annual production.

Preliminary work has just been completed on the semi-submersible drilling rigs (SSDR) to drill production wells in the Shtokman field. However, Royal Dutch Shell’s Beaufort Sea drilling project off the North coast of Alaska, has moved a step forward recently after it secured conditional clearance from US federal regulators to drill exploratory wells in the Camden Bay area of the Beaufort Sea, beginning in 2012.

Lastly, Exxon Mobil and Rosneft has signed an agreement to explore the Russian Arctic in 2015 with production expected to start in the beginning of the next decade. The $2.2 billion deal allows Exxon to participate in the exploration in the East-Prinovozemelsky licensed block, (which is east of the island of Novaya Zemlya ) which is estimated to hold 36 billion barrels of oil.

Has this legal quagmire frozen over?

The Arctic Council has developed a set of voluntary Arctic Offshore Oil and Gas Guidelines standards for technical and environmental best practices, management policy, and regulatory controls.

"It is no surprise that Greenpeace has expressed serious concerns about Cairn Energy drilling off the coast of Greenland."

According to the WWF this isn’t enough, a brand-new legal system needs to be devised by the United Nations to regulate polar environmental, shipping and oil exploration issues. The current set of international and domestic laws and guidelines are deemed inadequate to meet the new conditions facing the Arctic, on such issues as the standards required up oil spills on sea ice.

At present, there is no one overarching piece of Arctic regulation notes Ben Ayliffe, senior climate campaigner at Greenpeace. Currently, international law does not give ownership to the central part of the Arctic Ocean that surrounds the North Pole, observes Michael Byers, a Professor of global politics and international law at the University of British Columbia.

This is because the North Pole lies at least 400 miles from the nearest coast. At present, despite the urgings from environmental groups such as the WWF for a new UN convention to protect the Arctic Ocean, instead polar region governments have preferred to restrict debate to current laws, notes David Leary Fellow at the UN University.

Domestic initiatives – more or less good intentions?

At a domestic level, the resources, powers and responsibilities vary. Much of the environmental legislation is packed full of good intentions, but often have inadequate budgets to meet current demands let alone future burdens. Take Alaska, where there have been moves in Congress to weaken environmental protection further to encourage Arctic drilling.

By contrast Greenland, since it is part of the European Economic Area, has been encouraged by Brussels to strengthen its regulatory regime as part of European environment protection directives.

BP’s Deepwater Horizon oil spill in the Gulf of Mexico is an example of how inadequate the US regulatory regime and BP’s response plan were in dealing with an incident close to major population centres. BP needed 6,500 vessels to deal with the Gulf of Mexico’s spill, which cost BP upwards of £20bn. They employed 50,000 people (that is the population of Greenland) in the clean-up, observes Ben Ayliff.

Similar scale disasters in the remote Arctic are likely to be even more difficult for stakeholders to tackle. In Alaska the US Coast Guard has an admitted lack of response capacity in the Arctic; it does not have any infrastructure on the North Slope to hangar its aircraft, moor its boats or sustain crews. As with the Gulf of Mexico, immediate responsibility would fall on the industry and their oil spill response contractors.

The environmental concern

Leaving the clean-up to the industry is what worries environmental groups such as the WWF and Greenpeace. Examining available Arctic Oil Spill Response Plans suggest to many experts that they are triumphs of hope over expectation, suggests Damian Carrington, the Guardian’s environment columnist.

Although the industry claims it is prepared, Aqua Guard Spill Response in Canada admits "there really is no solution or method today that we’re aware of that can actually recover [spilled oil] from the Arctic." A study by oil engineers for the WWF concluded that US plans for dealing with an Arctic accident were based on ‘imagineering, not engineering’.

"The law regarding territorial rights in the Arctic is complex and full of conflicting claims."

The WWF concluded "if a major spill were to occur in Arctic waters, clean-up crews would have to spend, on average, three to five days of each week simply standing by, watching helplessly as the blowout or spill continued to foul fragile Arctic ecosystems." Due to such extreme conditions, it has been estimated that it could take two or three years to drill an Arctic relief well to plug a leak.

It is no surprise that Greenpeace has expressed serious concerns about Cairn Energy drilling off the coast of Greenland with just a dozen support vessels. Professor Richard Steiner, formerly at the University of Alaska and an authority on oil spills, said the Cairn response plan understates the potential size and impacts of a blowout while exaggerating the potential effectiveness of any spill response. Even Cairn’s admits in its response plan that conventional approaches to capturing spilled oil will be of ‘little or no use’ and ‘very inefficient’ in Arctic conditions, reports analysis from Greenpeace and Steiner.

Clearly, both the current legal systems that are in place and technologies for dealing with Arctic oil spills are not fit for purpose at present.

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