Is Shell an environmental and financial risk in the Arctic?
Posted June 22, 2012
The Environmental Risks
For four years the focus of this blog has been to highlight the great risks of opening America’s Arctic, the Beaufort and Chukchi seas, to offshore oil development. We started by explaining the extreme fragility of the Arctic Ocean ecosystem and the many significant gaps of scientific understanding regarding the functioning of the ecosystem. The ecosystem is at once extremely harsh, yet highly productive in the summer. Then we tried to paint a picture of this last pristine and vast wilderness with its awesome beauty and diverse wildlife including the endangered polar bears, bowhead whales and several species of birds. Americans and people from around the world have fallen in love with the region’s marine mammals. Who doesn’t enjoy seeing pictures of a mother polar bear with her cub on the ice pack, Pacific walrus hauling up on an ice floe to use as a resting platform, a pod of beluga whales swimming by, or a bowhead whale with her offspring at her side gliding through an open lead? But, we may lose all these species in the next generation.
The Arctic’s climate is warming at a greater pace than any other region on the planet and these highly adapted species are stressed. These species have adapted over the millennia to be suited for this extreme environment, but now, as the polar ice retreats, the environment is changing in a geologic blink of an eye. With the summer Arctic ice pack roughly half its historical size, polar bears are drowning in vast open water stretches, walrus have to haul up on beaches due to the loss of ice floes and seals don’t have the protection of the ice edge because ice floes have melted much earlier and further north. Coastal erosion up to 30 feet in a single storm has been observed. The ecosystems of the Arctic are changing rapidly and we lack even the scientific baselines to understand these massive ecosystem changes.
Now, to add insult to injury, man is launching a huge and risky experiment—the exploration and potential development and production of oil and gas. America’s Arctic remains a frontier. The lack of infrastructure is striking; there is no permanent road system few airports and minimal port facilities. The two major towns, Barrow (pop. 4200) and Prudhoe Bay (pop.2200), lack the lodging facilities to support even a fraction of the perhaps thousands of personnel required for a spill response. In America’s Arctic, the closest Coast Guard station is over 1,000 miles away.
During BP’s Deepwater Horizon disaster, the blowout remained uncontrolled and spewed oil for 87 days, just two years ago, and less than 8% of the crude was recovered even though the disaster occurred in relatively calm waters and state-of-the-art cleanup equipment and abundant shore-side support were available. And the Gulf was greatly benefited by a great abundance of micro-organisms that helped to break down the oil. These micro-organisms do not exist in the Arctic in quantities even close to the same degree.
There is currently no effective technology to clean up oil spills from drilling in broken ice waters. Shell’s disaster plan for the Arctic relies heavily on skimmers which become ineffective with as little as 10% ice cover. A 2011 USGS report included a summary of oil recovery techniques. It estimated that mechanical means of recovery in ice-free, calm Arctic water could recover only 5 to 30% of spilled oil. If ice is present, the range would be from 1 to 20%, mainly because booms and skimmers, which contain and remove the oil, are only marginally effective in water that is more than 10% ice-covered. Field exercises in the Beaufort Sea during the summer of 2000 showed that sea ice could shut down on-water recovery at very low ice concentrations. Ice can clog skimmers, make vessel operations more challenging and can make it difficult to deploy equipment. Oil spreads under ice making it more difficult to track and clean up. Delays can make cleanup harder as the oil weathers or emulsifies with seawater, the USGS report says. Clean-up methods are just as primitive now as they were for the Exxon Valdez accident in 1989. “Containment and recovery at sea rarely results in the removal of more than a relatively small proportion of a large oil spill, at best only 10 to 15 percent and often considerably less,” according to the International Tanker Owners Pollution Federation. A study commissioned by Canada's National Energy Board, found that in the best season oil spill cleanup is impossible one day in five (20%) and this deteriorates to more than three in five (65%) by late in the season.
Another clean up option is "in-situ burning" (ISB) which some believe is more promising. However, its effectiveness is highly dependent on the weather, ice conditions, oil thickness, oil type, winds blowing at less than 10 meters per second and other conditions and would likely eliminate only a few percentage points more of the oil. There is also concern about the toxicity of chemicals used to aid the burning of oil slicks.
A third option is breaking up slicks with dispersants. However, this creates a surface area of emulsified oil that is 5 to 50 times greater than the original spill. This, in turn, quickly releases 5 to 50 times the volume of toxic aromatics, especially "polycyclic aromatic hydrocarbons," into the surrounding ocean and atmosphere raising questions as to the impact on life. If the waves are higher than three meters, dispersants cannot be used. The USGS report recommended that “substantial scientific and technical work as outlined by various expert groups still must be done before dispersants can be considered a practical response tool for the Arctic".
This summer, to lessen the risk of a late season accident response effort being cut short by the ice shelf freeze, the Bureau Ocean Energy Management is requiring Shell to stop Chukchi drilling activities early. This requirement does not extend to Beaufort drilling activities. If there is an October spill in the Beaufort, the ocean could easily freeze over before control of the blow out was regained. Oil would freeze into the ice and continue to flow all winter under the ice until the following summer. The oil would move with the natural flow of the ice up to hundreds of miles during the course of the winter. The destruction would be unprecedented.
With the potential for enormous impacts from oil and gas accidents (even destroying entire ecosystems), our lack of scientific understanding of Arctic ecological processes, our poor oil spill response methods and technologies, our insufficient and ineffective preparedness, and our lack of infrastructure to facilitate an effective and timely response, petroleum exploration and development in the Arctic is simply irresponsible. Coast Guard Admiral Robert J. Papp, Jr., testified before a U.S. Senate subcommittee in August 2011,"We have extremely limited Arctic response capabilities…we do not have any infrastructure on the North Slope...I have only one operational icebreaker." Before preceding, any oil company should have to 1) demonstrate that it can operate without having accidents, and 2) demonstrate the capacity to effectively clean up any spill quickly. But, despite having not demonstrated either of these things, Shell is still moving to commence exploratory drilling in the Beaufort and Chukchi in early July.
Another significant risk is from major storm tracks, typical of the North Pacific and Bering Sea, shifting north, increasing storm frequency and intensity. Spring and summer fogs have become more frequent and persistent and are expected to worsen. The area features frigid temperatures, ice, extensive darkness much the year, gale-force winds, and rough seas. Cold water breaks down oil much more slowly than warm water does. To sum it up as Rick Stein, an Alaskan marine biologist puts it, "if you put a million barrels of oil in the Arctic Ocean, it would be there for decades."
And finally we must establish a comprehensive marine reserve system that preserves and protects the wide variety and diversity of life in the Arctic Ocean. My colleague here at NRDC, Lisa Speer, along with the International Union for Conservation of Nature have identified some of the most ecologically essential and vulnerable spots in the Circumpolar Arctic including America’s Arctic. These and other potential additional areas should be seriously considered for protection as part of a marine sanctuary.
The Business and Financial Risks
It comes as no surprise that Shell routinely ignores the warnings of environmental groups; our message doesn’t fit in their business plan. What is surprising, though, is when Lloyd’s of London, the world’s largest insurance company, a syndicate of professionals focusing on risk assessment and management, issued a report essentially echoing our concerns, the warnings were equally ignored. You would think if Shell isn’t going to listen to us, they would at least listen to one of the world’s foremost financial institutions.
On April 12th, Lloyd’s of London in conjunction with the Chatham House think tank issued a report that reiterates many of the environmental concerns. Lloyd’s CEO, Richard Ward, warns “The environmental implications of further development of the region are significant… exploration can have devastating consequences on local environments.”
The report predicts there will be “winners and losers” as the Arctic is developed and cautions:
“The businesses which will succeed will be those which take their responsibilities to the region’s communities and environment seriously, working with other stakeholders to manage the wide range of Arctic risks and ensuring that future development is sustainable.”
Is Shell taking the risks of offshore drilling in the Arctic seriously? You decide. Click here for the entire report. Below are selected sections. Imagine your insurance agent is telling you all of this. Would you decide to proceed?
The Fragility of the Arctic
“The Arctic environment is, in general, highly sensitive to damage. Relatively simple ecosystem structures and short growing seasons limit the resilience of the natural environment, and make environmental recovery harder to achieve. Damage to the Arctic environment, if it occurs, is likely to have long-term impacts. However, the Arctic is not one ecosystem, but comprises a variety of ecosystems and environmental conditions. The vulnerability of each ecosystem depends on a range of factors, including its complexity and structure. In all cases, baseline knowledge about the natural environment and consistent environmental monitoring is a prerequisite for measuring and understanding environmental impacts.”
“In the meantime, there are huge infrastructure and knowledge gaps across the Arctic, constraining development and increasing the risks of frontier projects.”
“There are also additional risks…; they range from a uniquely challenging range of operational risks, to the inevitable environmental risks caused by increased industrial activity and the constant possibility of environmental catastrophe with regional fall-out.”
“Many parts of the Arctic are geographically isolated, bringing operational challenges, entailing substantial costs and amplifying the potential consequences of risk events. The infrastructure and capability to manage accidents may be distant or unavailable.”
Calls for Further Research
“…considerable further research and analysis are required to fully assess the range of hazards of Arctic operations and the vulnerabilities of technical systems, equipment and the Arctic environment to disruption and harm.”
“The increasing rate of disruption to Arctic ecosystems makes their future structure increasingly hard to predict. It also makes establishing environmental baseline data – against which change is measured and potential future changes are assessed – even more important.”
Oil Spill: The Greatest Risk to the Arctic
“…the risk of an oil spill, with multiple implications for the way in which oil and gas companies drill and operate in the Arctic… represents the greatest risk in terms of environmental damage, potential cost and insurance.” “However, cleaning up any oil spill in the Arctic, particularly in ice-covered areas, would present multiple obstacles which together constitute a unique and hard-to-manage risk... There is significant knowledge gaps in this area. Rates of natural biodegradation of oil in the Arctic could be expected to be lower than in more temperate environments such as the Gulf of Mexico, although there is currently insufficient understanding of how oil will degrade over the long term in the Arctic. The presence of sea ice could assist in some oil-spill response techniques such as in situ burning and chemical dispersant application. However, the techniques for keeping oil in one place has their own environmental impacts, notably air pollution and the release of chemicals into the marine environment without knowing where moving ice will eventually carry them.”
Despite these warnings from preeminent risk management professionals, Shell is poised to begin drilling in the Arctic as soon as the receding ice allows. Shell needs to be environmentally responsible as well as financially responsible. They owe it to the Unipiat, the indigenous Eskimos, all Americans, all future Americans, all citizens of the world, as well as their stock holders. Infrastructure needs to be in place to address crisis situations. Baseline environmental studies need to be completed. A marine reserve system must be established to protect the wide variety and diversity of life. Clean-up technology suitable for Arctic situations needs to be developed. The risk of environmental catastrophe is too great to allow Shell to proceed with offshore drilling in the Arctic until basic knowledge gaps are addressed.
Clint Kincaid aided Chuck Clusen with this post.