Environmental, Cost Concerns Drive Arctic Oil Exploration Reticence

Posted April 29, 2014 at 4:04pm

The United States has become a global leader in developing previously inaccessible oil and gas reserves by revolutionizing drilling technology, but one area has remained just out of reach — the Arctic Ocean.

This is in part because the Arctic is such a hostile environment, and because the boom in shale oil in the Lower 48 has made Arctic oil development less economically attractive to energy companies.

It also is because of the environmental risks of oil and gas drilling in the fragile far north — risks accented by the Deepwater Horizon oil spill in the Gulf of Mexico in April 2010, which brought a new wave of regulation for offshore energy projects.

On the other side of the equation, though, is a growing sense of urgency about development in the Arctic. Climate change is thinning sea ice and making exploration at high latitudes more feasible; some companies have their sights set on being pioneers in the region at some point in the future. Meanwhile, other nations bordering the Arctic Ocean, principally Russia, are already exploring a sea floor estimated to harbor 13 percent of the globe’s undiscovered oil and 30 percent of its natural gas.

This urgency means that regardless of whether the United States approves an Arctic drilling program, Russia and others probably will, and the U.S. government needs to ensure it can protect its waters and its shores should there be a spill.

“We’re not in the Arctic alone,” Mark Fesmire, Alaska region director at the Interior Department’s Bureau of Safety and Environmental Enforcement, said earlier this month at a Resources for the Future seminar on offshore drilling.

“If we don’t develop our resources,” Fesmire said, “the Russians undoubtedly are going to develop theirs, and so we need to have the ability and the research and have done the research to be able to clean up whatever will come to our shores — whether it originates in our waters or originates someplace else.”

The problem is, the United States is nowhere near prepared. A report released last week by the National Research Council found that the country lacks the infrastructure needed to respond to a major spill, either from drilling operations or from the increased volume of shipping through the Arctic. On top of that, more research is needed to determine the most effective way to tackle Arctic oil spills — for example, if oil were to become trapped in sea ice for an extended period.

For now, Arctic offshore development is at a standstill in the United States. Companies with leases are waiting for the Interior Department to rewrite an environmental impact statement for oil and gas activity in the Chukchi Sea, after the Ninth Circuit Court of Appeals threw out the George W. Bush administration’s version in January. The court found the plan’s estimate of 1 billion barrels of economically recoverable oil in U.S. Arctic waters to be arbitrary and capricious — the higher the estimate, the more companies will probably be interested and the higher the environmental risk from an accident.

Shell Oil Co. delayed exploratory activities in the Beaufort and Chukchi seas for a second year in a row after that decision, but the company has had some mishaps already, including damage to a drilling rig in December 2012.

“I think there are major questions about whether and when in the next few years there will be any offshore Arctic activity,” said Michael Bromwich, a former Interior Department regulator who managed a major overhaul of its offshore energy agencies after the Deepwater Horizon spill, the worst environmental disaster in U.S. history. And Shell’s problems don’t even address the larger question, he said, “of whether we are really ready.”

An Icy Environment

While much is known about how oil behaves in ice-covered seas and how spills can be mitigated, the National Research Council said in its report that more studies should be conducted in real-world conditions to validate current and emerging spill response technologies. The study’s authors recommended “carefully planned and controlled field releases” to study the oil’s behavior.

Obtaining a permit to deliberately dump oil into open waters is understandably difficult — the last one was in the early 1990s — but the federal government is showing interest in field releases.

The research council report also notes that one spill response method that may be a viable option in some situations is to do nothing. But the prospect of any oil release into the Arctic beyond natural seeps is anathema to environmental groups, who say the report represents further proof that oil companies are not ready to do business at the top of the world.

“Having yet more evidence that we are not ready to move forward safely, will the government and companies continue their blind leap into the offshore Arctic oil and gas race?” Chris Krenz, Arctic campaign manager and senior scientist for Oceana, said in a statement.

Regardless of U. S. oil exploration, Obama administration officials say the United States must assert its influence in a region shared by seven other countries, including Russia.

“We have to think about not only how our actions affect our resources here domestically, but also how we can make sure that we’re taking a leadership role internationally,” said Chris Smith, principal deputy assistant secretary for fossil energy at the Energy Department. “And for the Arctic, that point is particularly important.”

The current federal regulatory environment is “significantly better” at preventing accidents than before Deepwater Horizon, Bromwich said, but the government cannot rely on tough rule-makings alone. “We have to look at things squarely,” he said, “and recognize that we will never, ever reduce the risk to zero.”