Market News

 July 19, 2012
The Consequences Of Offshore Oil Drilling In Arctic Waters

 The Arctic is undergoing rapid changes accelerated by a warming planet, opening up new potential shipping routes, tourism opportunities, and fossil fuel reserves.

Royal Dutch Shell is leading the charge in oil extraction. The company has already shipped its fleet of rigs up to Alaska where it is waiting for the go-ahead from the federal government to begin exploratory drilling in icy Arctic waters.

Other companies such as Exxon Mobil, Gazprom, Statoil, and Total are also planning on expanding future operations in the Arctic.

But a growing group of disaster-response officials, political leaders, environmental groups, and scientists are all raising concerns about the environmental impact of this new drilling activity. With virtually no infrastructure in place to clean up an oil spill, the consequences of a well blow-out could be disastrous.

The long-term consequences could be equally bad. As Arctic sea ice continues its death spiral, fossil fuel companies seeing new opportunities under the waters are swooping in --- increasing the extraction of carbon-based fuels that are contributing to global warming.

In this podcast, linked above, we'll speak with Michael Conathan, director of oceans policy at the Center for American Progress, who has been watching the activity in the Arctic closely. He'll discuss a new report, Putting a Freeze on Arctic Ocean Drilling, and talk about the various environmental and infrastructure challenges in the region.

Michael Conathan:Now as climate change has taken its toll up there and the sea ice has receded, we're really starting to see that the Northwest Passage is likely to become a reality in the coming years. So what that's doing is increasing activity, sort of, across the board, industrial activity in the Arctic. Everything from the long sought after shipping route to ice retreating and exposing areas of the intercontinental shelf that are thought to contain massive oil and gas reserves.

There are also issues of fisheries opening up. There is basically an untapped fishery resource in the Arctic and the world has to decide how they are going to manage that. Are they going to manage it like all other international fisheries or, because it is this untapped resource is there the ability to do something different up there in that regard.

Cruise Lines are starting to look at the Arctic as potential destinations.

So really there is a big of a gold rush going on in the Arctic right now.

Stephen Lacey: What has Shell proposed as it moves into the Arctic to do exploratory drilling? This is a new phenomenon, they are not quite sure what they're going to find. There are estimates of massive amounts of reserves but they're not quite sure. This is anybody's guess...

MC: They're not sure but Shell has spent several years and over $4 billion trying to get access to these resources in the Arctic, so obviously they believe strongly that there is a significant resource there for them to tap into. Where we are right now is that over the past year or so the Obama Administration has been moving towards issuing permits for Shell to drill 5 exploratory wells. In the Beaufort Sea and the Chuckchi Sea which are bodies of water of the north slope of Alaska.

These are wells that are basically test wells. Shell believes, based on seismic testing, based on geology, that there are significant deposits and resources up there for them to tap into. This is sort of the "lets prove it" mechanism.

SL: The real scary thing here is not just that we are focusing our resources on more oil and gas, that could accelerate the problem of climate change, but that locally there is no infrastructure in place to deal with an oil spill, if it did take place. Talk about what you've found out about when evaluating infrastructure needs and ecosystem constraints.

MC: Yeah there are a couple of issues in that regard. I think, paramount, what we found in our report is the remarkable lack of infrastructure on the north slope of Alaska. This really is the last frontier. It's incredibly distant. Its 1,000 miles away by air from the closest coast guard station. There is one highway that goes from Anchorage, Alaska, through Fairbanks to the North Slope. There is no rail access. There are no major airports up there. There is just these tiny little communities up there on the North Slope that are not connected by road. Everything is connected by small plane air traffic. The communities themselves, they have no hotels. There is one hotel on the North Slope of Alaska, in Barrow. There is an incredible lack of infrastructure in this region.

When you compare that to the Gulf of Mexico, where most of our current drilling operation takes place, and where the Deepwater Horizon incident occurred, where we had tens of thousands of people who could rush to that area and have places to sleep and wash and eat and take care of the basic needs of, effectively and army of responders. There is nothing like that on the North Slope of Alaska. If there is an accident on the North Slope of Alaska, the infrastructure to deal with it simply does not exist. You can't get resources there, you can't get people there, you can't put them up when they are there.

From an environmental perspective, there is an incredible lack of information about what happens to oil when it's in icy, Arctic water. It's a very different situation from when it's in the warm waters of the Gulf of Mexico. The weather conditions, the drilling season will occur from July 1st to either the end of September in the Chukchi Sea or the end of October in the Beaufort Sea. And as you get towards then end of those drilling seasons, that's when the ice starts to roll back in. And if a spill happens towards the end of that drilling season, now you are dealing with a situation where you have to clean up, you have to respond as the temperatures are getting colder, the light is disappearing, the ocean is literally icing over.

SL: And they may literally have to just keep the spill under the ice if it's at the end of the drilling season.

MC: Shell has said in their response plans that one of their contingencies is that if a spill occurs at the end of the drilling season and it is iced over, that they let it sit until it melts in the spring and then they deal with it then.

SL: Have you evaluated what they could feasibly recover? They've said that they could recover an extraordinarily high amount of oil and when you look at previous oil spills, you are looking at a small fraction of what was actually spilled. Can you go over some of those numbers and what did you find about the feasibility?

MC: There have been wide reports that Shell's response plans stipulate that they can recover 95% of any spilled oil. That's a bit of an interpretation of what's actually in their drilling plan but, regardless, they talk in pretty significant detail about recovering a large percentage of spilled oil; which is difficult to conceive given that they will also acknowledge that we don't know what oil does in icy water and that you're going to let it sit under ice for an entire Arctic winter and that you are potentially going to somehow be able to recover an extraordinarily higher percentage of oil than has ever been recovered from any oil spills even under ideal circumstances. So that is a definite concern. That needs further investigation.

SL: So what have the folks at agencies responsible for responding to an oil spill, what have they said about the lack of infrastructure? Have they responded to some of the analysis that you've put together? What are people saying publicly about what's going to happen in this region?

MC: Well one of the, interestingly, the Coast Guard is the primary agency that responds to oil spills. They are sort of our EMTs, our first responders in these instances. Initially, Admiral Robert Papp who is the commandant with the Coast Guard, said that 'we really don't have the capacity to respond to a spill in the Arctic.' He's on record as talking about that. Subsequently, he's backed away from some of those statements, saying, you know, 'we will be able to do what's required for this upcoming drilling season.'

The Coast Guard will have one of their three new ships onsite in the Arctic for the entirety of the drilling season. National Security Cutter is a state of the art Coast Guard cutter and it is really sort of the new flag ship of the Coast Guard fleet. So it will spend the summer up there in the Arctic, watching over Shell's drilling operations. Sort of left unsaid in the argument is what else that ship would have been doing if Shell had not been doing in the Arctic this summer.

Is it the taxpayer's responsibility to effectively be up there overseeing a private operation? Which, on the one hand, you've got the scenario where sure, if something happens we want our best response capabilities on scene. On the other hand, if Shell is ultimately the entity that is going to profit from these operations, I think that's a tough thing to say. Especially because having that response capability there takes it away from somewhere else. The Coast Guard is an agency that's stretched extremely thin.

SL: What I'm hearing you saying when your outlining many of the potential challenges in the Arctic, is that when we think about oil spills, typically we're looking backward. Why is that way of thinking, always looking toward the previous problem, in this case the Gulf oil spill, why is that problematic when thinking about this range of new issues that we're presented with in the Arctic?

MC: Yeah, I think it's not just oil spills where we do that. We do that in everything, we do that in homeland security. You know the shoe bomber tries to take down an aircraft and now we all take our shoes off when we go through security. We all put our liquids in little plastic bags. We're always responding to the previous threat and that's certainly the case with oil spill response.

When we really think back at all, you also have to remember that when Deepwater Horizon occurred, that was the first big oil spill after the Exxon Valdez, that was the last real big major focusing event of an oil spill. I don't want to minimize spills that happened in the interim, but those are sort of looked at as sort of the two major focusing events when it comes to offshore oil spills.

In between those occurrences, we really did nothing to improve our oil spill response technology. We simply didn't fund the research. So when the BP spill happened, we were still using Exxon Valdez era technology. So we weren't, in that instance, we weren't even looking at the last problems, we were looking at no problems, when we were in the down period sort of in between major accidents. Now in the aftermath of BP, everybody is talking about blowout preventers and capping stacks and do you have a vessel on site to drill a relief well? And those are important things and they are important questions to answer but, again, we're still looking at drilling in the context of the Gulf of Mexico, where you have ideal weather conditions, ideal response capacity, very experienced personnel, lots of scientific research. None of that exists in the Arctic.

So what we really need to be doing is saying 'given the conditions we have in the Arctic and given that we need to know more about these ice operations and that we need to know more about weather patterns and ocean circulation and just the chemistry of what happens with oil in this very different kind of water,' those are areas that are really lacking research and we really haven't looked at those.

SL: So ultimately when we talk about this it's impossible not to talk about it within the context of climate change. The environment in the Arctic is changing rapidly and that is opening up potential operations for oil and gas drilling. By doing so, you are drilling for more oil and gas and accelerating the problems that are opening up this area to begin with. The Administration itself has recognized that but has encouraged this process to move forward anyway. How do we talk about this within the climate context and why is it important to continue that discussion given the political discussion that we are having about this?

MC: Well, I think you have to talk about it from a climate perspective because , you're right, the tragic irony of opening up the Arctic to offshore drilling is that if it were not for climate change, we wouldn't be able to open the Arctic for offshore drilling. The changing climate has caused the ice sheets to retreat and has allowed access to these resources, which, once extracted, are going to accelerate the negative feedback loop of climate change. That's just how this process unfolds and so the climate question is integral.

We chose to look at this from the infrastructure perspective, because in addition to the climate conversation we also have to look at the political realities of offshore drilling and of the conversation that is going on today in this country from a political and economic perspective. And if this is going to move forward, it is our job to ensure that it is done in the safest way possible and the problems that it potentially poses and the issues that it raises in terms of environmental damage to this pristine ecosystem are dealt with in the strongest way possible.