Many associate the Arctic with dramatic icy landscapes spotted by glaciers and floating ice caps and filled with polar bears, walruses, sea otters, whales and migrating birds. The World Wildlife Fund describes it as a “keystone ecosystemthe whole web of relationships among a particular environmental habitat and the plants, animals, and human beings who depend on it. for the entire planet.” The Arctic acts as a global thermostat, influencing the world’s heat balance, ocean circulation patterns and the carbon cycle.¹

Beyond its role in regulating ocean currents and climate patterns, the Arctic is suspected to be home to 25 percent of the world’s undiscovered oil and gas.²  The U.S. Geological Survey (USGS) estimates that the Arctic may hold 90 billion barrels of oil, approximately 1,700 trillion cubic feet of natural gas, and 44 billion barrels of natural gas liquids. This estimate only takes into account resources that are technically recoverable considering existing technology and current climate patterns.³

With the permafrost thawing and the polar ice cap shrinking due to global warmingthe worldwide rise in temperatures that has been blamed for severe weather in many parts of the world., within 20 years, the Arctic Ocean may be ice-free during the summer. Oil companies are poised to take advantage of this opportunity.⁴  In July 2012, Shell will begin drilling test wells off the coast of northern Alaska.  The United States is not alone in its quest to pursue energy resources in the Arctic. Russia is already making plans with various oil companies to explore the Arctic region. Canada is hosting the largest auction of Western Arctic oil and gas rights in its history.⁵

This news analysis will examine international law and environmental challenges to Arctic development and their impact on American,
Russian, and Canadian efforts to develop the region.

Regulating Arctic Sovereigntycomplete and exclusive control of all the people and property within a territory

Before countries and companies can start drilling for oil and gas, the question of who owns the land, or in most cases, the oceans, must be answered first.

Canada, Russia, Denmark (Greenland and Faroe Islands), Norway, United States, Sweden, Finland, and Iceland all have territory in the Arctic.  These eight countries joined six indigenous communities to form the Arctic Council, a high-level intergovernmental forum for cooperation, coordination, and interaction. While the council has working groups, it does not, for the most part, produce any binding declarations. While serving many vital collaborative functions, it is not a governance body that supersedes national sovereigntycomplete and exclusive control of all the people and property within a territory. Currently, only one binding declaration has been passed regarding search and rescue.

One institution that has more authority in the region is the United Nation’s Commission on the Limits of the Continental Shelf (CLCS), which facilitates the implementation of the United Nations Convention on the Law of the Sea. CLCS makes recommendations to coastal states on matters related to the limits of their continental shelf. The commission gets involved when countries want to make claims beyond the accepted 200 nautical mile limit. State decisions on the continental shelf that are based on recommendations from this Commission are binding and final.⁶  Some scholars argue that “final and binding” only relate to the state making the claim, not to all states. Thus, the Commission’s real contribution to ocean-boundary making is as legitimator. It provides a procedure for legitimization, not legal or political approval.⁷

The United States is not a party to the Convention that formed the CLCS. Therefore it cannot submit claims, though it has submitted observations on claims made by other countries. Since 2001, the U.S. has been gathering data on the limitations to its own outer shelf. Canada, Russia, Norway, and Denmark are preparing Arctic territorial claims to be submitted to the CLCS.⁸

Furthermore, Russia is trying to map the Arctic Ocean’s underwater Lomonosov Ridge and demonstrate that it is an extension of Russia’s continental margin. If granted, this ridge would give Russia half of the Arctic area. Canada also claims part of this ridge. There are four other unresolved, territorial disputes between: 1) the U.S. and Canada over the Northwest Passage 2) the U.S. and Canada over a boundary in the Beaufort Sea, 3) U.S. and Russia over an area in the Bering Sea, and 4) Denmark and Canada over sovereigntycomplete and exclusive control of all the people and property within a territory of the Hans Island.⁹

In 2010, Russia and Norway signed an agreement to address a long-running dispute over the Barents Sea to spell out fishing rights and delineate joint development of future oil and gas finds. Also in 2010, Canada reaffirmed its intention to negotiate territorial settlements with the U.S. and Denmark.¹⁰

The legal battle for sovereign control of the Arctic and its bounty of natural resources is underway. It is within this light that the Arctic countries are working with multinationals to develop the Arctic. Every country wants to stake their claims first before major drilling is underway.

Environmental Challenges

Every aspect of developing energy resources in the Arctic from extraction to shipping and everything in between are fraught with potential environmental disasters. These disasters will be problematic because oil persists longer in the Arctic as it evaporates slowly and can get trapped under ice, which makes it less susceptible to bacteria degradation. Arctic wildlife is particularly at risk because many of the species have long life spans and slow generational turnover.¹¹ 

In 2010, a World Wildlife Fund (WWF) report examined the gap between the threat of a major oil spill in the Arctic and the capacity to respond to it. The report concluded that a major U.S. response to an oil threat is not possible because of the environment, the lack of U.S. capacity, the wide response gap. ¹²

In the Arctic, rescue crews face moving packs of sea ice, harsh storms, heavy seas, subzero temperatures, and around-the-clock darkness for most of the year. Near the Beaufort and Chukchi seas where Shell will be drilling, there are no industrial ports, airports, roads, housing for crew and support staff, and the nearest Coast Guard station is 1000 miles away.¹³  In March 2012, government auditors noted that the weather conditions and lack of infrastructure would hinder clean-up efforts.¹⁴ 

As of 2012, the Coast Guard’s two heavy polar icebreakers are not operational. One will be reactivated in December 2012 after it is repaired and will be good for the next seven to ten years. A medium-sized polar icebreaker is in service. A new polar icebreaker is slated to join the fleet after the heavy-polar icebreaker is retired. In a 2010 report, the Coast Guard stated that they need three heavy and three medium icebreakers to fulfill its statutory missions. Thus the current fleet is not adequate.¹⁵

Technologies

There are three main categories of responses to oil spills: 1) mechanical recovery, which uses skimmers and pumps to contain the oil, 2) non-mechanical recovery, which uses chemical countermeasures, burning or bioremediation to degrade or disperse oil slicks, and 3) manual recovery, which uses hand tools to remove the oil. In the Arctic, mechanical recovery and non-mechanical recovery, such as in situ burning and dispersant applications, are used to respond to spills. Mechanical recovery captures at best 20 percent of the spilled oil and is ineffective if the waters have more than 30 percent ice coverage.  In situ burning also can only be used under certain circumstances, though it is difficult to carry-out during most of the year.¹⁶

Major multinationals are investing in technology to address environmental concerns. Exxon has Extended Reach Drilling technology that is supposed to minimize the environmental impact and has a new dispersant gel. No technology exists to deal with oil that seeps into the ice pores.¹⁷

Impact of the BP Oil spill

The 2010 BP oil spill affected offshore oil drilling around the world. The U.S. issued a yearlong moratorium on offshore drilling. Shell strengthened its spill prevention and response plans, built a containment system modeled off the successful system used to cap the BP spill,¹⁸
installed an extra cut-off valve in case the first one fails and added extra ships to be in place in case of a spill. Also, Shell reduced its drilling period to three months so that it would be drilling in an ice-free area in the case of a blowout.¹⁹

After the BP oil spill, Canada developed new filing requirements for companies that want drilling permits for Arctic offshore drilling. No company has filled out the new permits though most of the major oil companies, Shell, BP, Exxon Mobil, and Imperial Oil have exploration licenses for the Canadian Arctic.²⁰

Arctic Oil Exploration

Despite the myriad of environmental challenges, countries and companies are starting to explore the Arctic to extract oil and natural gas.
United States. In 2011, President Obama streamlined the process to approve Arctic drilling by creating a multiagency task force. This allowed Shell to make plans to start drilling test wells in July 2012. If the explorations are successful, Shell plans to pump a million barrels a day of crude oilOil that has been extracted from the ground but not yet refined into usable form..²¹

Shell faced challenges form the Inupiat, a local native Eskimo community. While reliant on whales for sustenance and cultural heritage, the Inupiat also need the oil companies for jobs and community development. Shell has courted the local Eskimo communities to gain support for their efforts.  To assuage the Eskimo community (and probably environmentalists as well), Shell has agreed to stop drilling for the 10-day period of the bowhead whale migration through the Beaufort Sea.²²  If Shell finds oil, it will be another seven to ten years before Shell and the U.S. government are able to build the necessary infrastructure to drill, pump and transport the oil.²³

Russia

Approximately 60 percent of Russia’s federal budget derives from taxes on oil and gas production.²⁴  Russia needs an infusion of oil since major Siberian fields are declining. New fields will allow it to maintain a 10-million-barrels-per-day target production schedule until 2020. One of Russia’s main challenges is that only state-owned companies can explore offshore waters, unless a foreign company works in collaboration with a state-owned one. For many years, Gazprom and Rosneft sat on their licenses.²⁵

Russian offshore drilling took a hit in December 2011, when the Kolskaya offshore oil-drilling platform sank in the frozen Sea of Okhotsk. Fifty-three crew members were killed. Following the disaster, environmental groups called for a suspension of new Arctic project. This did not happen. Exploration continues despites Russia’s poor environmental record. It has more pipeline leaks than any country in the world, resulting in annual five million ton leaks.²⁶

Russia’s first offshore oil field in the Arctic is going to be the Prirazlomnoye in the Pechora Sea, which is supposed to start production in 2012. Gazprom does not have sufficient resources to clean up a spill at Prirazlomnoye. It only set aside seven million rubles ($233,000) to insure the platform against environmental risks. The company has ruled out oil leaks from the platform and stated that they can localize a spill within four hours, as required by the government.²⁷

In 2012, Russia passed new tax incentives to spur offshore development of the Arctic. Since then, there has been a flurry of activity amongst Russian energy companies and foreign multinationals. In April 2012, Rosneft and Exxon signed a partnership to prospect Russia’s Arctic Kara Sea. In return, Exxon granted Rosneft access to fields in the Gulf of Mexico and to shale oil wells in Texas. Also in April 2012, Rosneft signed an agreement with the Italian energy company Eni to jointly explore two areas in the Barents Sea located near Skrugard, a Norwegian sector of the Barents Sea where oil was discovered by Eni and Statoil, the Norwegian oil company. The first well will be drilled in 2020.²⁸

Russian oil companies are also collaborating with each other. In May 2012, Rosneft and Lukoil started formal talks to jointly develop areas in the Barents Sea. Lukoil will trade portfolios in West Africa in return for stakes in the Barents and Black Seas.²⁹

Conclusion

The only way to avoid oil spills in the Arctic is to leave the oil intact. That is unlikely given the world’s appetite for oil. Warm temperatures will only make it easier to access the Arctic.  Thus, safety and infrastructure are crucial to mitigating the eventual spills. Unfortunately it seems like no country is adequately prepared to handle spills. Multinationals are not the only ones to blame, the U.S. has not even set aside enough funds to support a Coast Guard response, let alone housing and other infrastructure needs to manage a spill. In a time, when countries highly protect their sovereigntycomplete and exclusive control of all the people and property within a territory, it is unlikely that existing bodies will pass binding resolutions that force countries to act responsively. One can only hope that by the time the spill takes place, there will be new technologies available to quickly contain it.

1  “Drilling for Oil in the Arctic:  Too Soon, Too Risky.” World Wildlife Fund. December 1, 2010.
2  Duffy, Aimie. “The Coming Boom in Arctic Drilling.” Daily Finance. April 12, 2012.
3  O’Rourke, Ronald. “Changes in the Arctic: Background and Issues for Congress.” April 5, 2012.
4  “Drilling for Oil in the Arctic:  Too Soon, Too Risky.” World Wildlife Fund. December 1, 2010.
5  Vanderklippe, Nathan. “Drilling for oil in the Far North’s great unknown.” Globe and Mail. May 24, 2012.
6  Commission on the Limits of the Continental Shelf (CLCS) Purpose, Functions and Sessions.
7  McDorman, Ted L. “The Role of the Commission on the Limits of the Continental Shelf: A Technical Body in a Political World.” The International Journal of Marine and Coastal Law. Vol. 17, no 3. 2002.
8  O’Rourke, Ronald. “Changes in the Arctic: Background and Issues for Congress.” April 5, 2012.
9  Ibid.
10  Ibid.
11  “Drilling for Oil in the Arctic:  Too Soon, Too Risky.” World Wildlife Fund. December 1, 2010.
12 Ibid.
13 Ibid.
14  Dlouhy, Jennifer. “Shell gives Alaska officials a look at its drilling rigs.” Anchorage Daily News. June 4, 2012.
15  O’Rourke, Ronald. “Changes in the Arctic: Background and Issues for Congress.” April 5, 2012.
16  “Drilling for Oil in the Arctic:  Too Soon, Too Risky.” World Wildlife Fund. December 1, 2010.
17  Filatova, Irina. “Safety, Cost Meet Head On in Arctic Oil Race.” Moscow Times. May 17, 2012.
18  Broder, John M. and Krauss, Clifford. “New and Frozen Frontier Awaits Offshore Oil Drilling.” The New York Times. May 23, 2012.
19  Birger, Jon. “Why Shell is betting billions to drill for oil in Alaska.” CNN. May 24, 2012.
20  Duffy, Aimie. “The Coming Boom in Arctic Drilling.” Daily Finance. April 12, 2012.
21  Broder, John M. and Krauss, Clifford. “New and Frozen Frontier Awaits Offshore Oil Drilling.” The New York Times. May 23, 2012.
22  Ibid.
23  Birger, Jon. “Why Shell is betting billions to drill for oil in Alaska.” CNN. May 24, 2012.
24  Kramer, Andrew E. “Russian-Italian Pact Opens Arctic Ocean to Drilling.” The New York Times. April 25, 2012.
25  Duffy, Aimie. “The Coming Boom in Arctic Drilling.” Daily Finance. April 12, 2012.
26  Filatova, Irina. “Safety, Cost Meet Head On in Arctic Oil Race.” Moscow Times. May 17, 2012.
27  Ibid.
28  Kramer, Andrew E. “Russian-Italian Pact Opens Arctic Ocean to Drilling.” The New York Times. April 25, 2012.
29  “Arctic Oil Drilling – Russian Companies Hold Talks.” MarineLink. May 7, 2012.