Arctic drilling: US setting policy to protect environment, indigenous people

The United States is set to unveil a five-year scheme for offshore oil and gas leases that it says will open more of the Arctic Ocean to exploration while protecting the environment and the livelihoods of indigenous peoples.

The US is planning the move as Royal Dutch Shell prepares to sink two exploration wells in US Arctic Ocean waters – one in the Chukchi Sea between Alaska and Siberia and north of the Bering Strait, the other in the Beaufort Sea north of Alaska.

“We are currently in the final stages of a rigorous review of Shell’s proposal to drill exploratory wells ... this summer,” said David Hayes, deputy secretary of the Interior, in a conference call with reporters on Tuesday, adding that he anticipated Shell would be granted permission to proceed.

In granting new offshore oil and gas leases outside the Gulf of Mexico, the Obama administration is seeking to minimize impact on the environment and indigenous people with a policy dubbed targeted leases.

Instead of opening vast tracts of sea floor for leases, the administration is trying to focus on areas with the highest potential for oil and gas, while excluding exploration in environmentally sensitive areas or areas important to the livelihoods of indigenous people along the coast of the Arctic Ocean.

Most details await the Interior Department’s release of the five-year program, but federal officials, including Interior Secretary Ken Salazar, previewed the broad outlines in the conference call.

The approach, which aims to put science, environmental issues, and indigenous uses on a more equal footing with barrels of oil and cubic feet of gas, comes at a time when countries bordering the Arctic are trying to craft what Secretary Salazar calls an integrated approach to oil and gas development at the top of the world.

Russia already has drilled a handful of exploratory wells in its Arctic waters. On Tuesday, Norway announced plans to issue oil and gas exploration permits for up to 86 offshore tracts, most of them in Arctic waters, by the end of 2013.

“We have seen very strong interest in the Arctic ... and the oil industry is clearly moving north,” Norwegian Petroleum and Energy Minister Ola Borten told Reuters.

By some estimates, the undersea reserves are enormous. The US Geological Survey has calculated that the Arctic sea floor caps 13 percent of the world's undiscovered "conventional" oil reserves and 30 percent of undiscovered natural-gas reserves.

The increased interest in its ocean resources has been driven by the melt-back of summer sea ice caused in part by global warming. The extent of summer sea ice has been declining since satellites first began keeping track in 1979. On June 18, the observed extent of sea ice eclipsed the record low for the day set in 2010 and was significantly lower than the same date in 2007, which saw a record at the end of the melt season in September. More open water during the summer widens the opportunity for exploration.

But the Arctic is a harsh workplace – meaning expensive. A US Energy Information Agency report on the Arctic's potential points out that rigs must be armored against ice floes. Supply lines are long. And pay envelopes have to be fatter to attract workers to an inhospitable location.

The unique demands of working in the Arctic, which include environmental and indigenous concerns, mean that “the Arctic demands its own approach,” Salazar said.

As a result, representatives from the US, Canada, Russia, Norway, and Iceland are meeting in Trondheim, Norway, to try to come up with an integrated "step-by-step approach" that gives due consideration to these concerns, while incorporating the latest science into decisionmaking.

The meeting aims to “create what we believe would be the gold standard for how to approach any oil and gas activites in the Arctic,” says Deputy Secretary Hayes.

Underscoring their new policy, US officials are holding a spot in the Chukchi Sea known as Hanna Shoal off the list of candidate exploration sites. The area is a critical habitat and foundation for marine mammals and other species in the area, says Tommy Beaudreau, director of the federal Bureau of Ocean Energy Management.

The shoal “has to be closely analyzed and scrutinized before we develop the configuration of any potential lease sale in the Chukchi,” he said.

The five-year program will also set up a 35-mile-wide buffer zone along the coast within which no drilling can take place.

Officials say they anticipate opening the Chukchi Sea to leases in 2016 and the Beaufort Sea in 2017, after similar studies are conducted elsewhere in the region.

The targeted-lease approach and efforts to devise a common approach to opening Arctic Ocean waters to oil and gas exploration are "heartening to hear," says Thomas Leschine, director of the School of Marine and Environmental Affairs at the University of Washington at Seattle and vice chairman of the marine board at the National Research Council in Washington, D.C. "It's the kind of caution people are looking for."

Indeed, he continues, Shell’s approach bears the hallmark of the new direction:

• Federal inspectors will be on the rigs 24 hours a day.

• The oil company has agreed to suspend exploration efforts while whales are in the area around one of its sites so noise from the activities do not disturb the whales that indigenous people hunt.

• The company is moving into the region with vessels capable of responding to emergencies even in ice-covered waters.

• On Monday, the company reported completing tests of the technology it would need to cap a well should a blowout occur.

The new direction appears to meet many concerns environmentalists have raised, but indigenous peoples remain conflicted over the prospect of oil and gas exploration in Arctic Ocean waters, some specialists say.

While Shell “clearly is trying to be the model citizen, because they are the first and this is what we call frontier-area leasing,” Dr. Leschine says, “my concern is that it's not Shell that's going to go in there and have a disaster. It's what comes after.”

The leasing system that the US currently has, a “drill, baby, drill” attitude among many lawmakers, and an impression among the public that the faster the oil comes on line, the faster oil prices will fall, he suggests, could work against any attempt at sustaining a “gold standard” for exploiting the oil and gas in an environmentally responsible way.