The Arctic offshore holds a bundle of natural gas and oil prospects awaiting discovery but there is "near unanimous consensus" that the United States isn't prepared to address the changing dynamics as global commercial interest grows, Brookings Institution energy experts said Wednesday.
The United States has to "decide if it is an Arctic nation or not and what our vital interests in the region are," a trio of experts who work for Brookings' Energy Security Initiative (ESI) said. The policy brief, "Offshore Oil and Gas Governance in the Arctic: A Leadership Role for the U.S.," was unveiled Tuesday by authors Charles K. Ebinger, who directs ESI, and John P. Banks and Alisa Schackmann. The brief, which took a year to prepare, precedes the United States becoming chair of the Arctic Council from 2015-2017.
In 2009, before drilling technology expertise helped to unlock unconventional stores of gas and oil, the Arctic was estimated to contain at least 83 billion bbl of undiscovered oil, which at that time was about 4% of the world's remaining conventional reserves (see Daily GPI, June 2009). The U.S. Geological Survey at that time said about 30% of the world's undiscovered gas could be trapped beneath the land and waters of the Arctic.
"Based on our analysis and conclusions, we believe that it is in the U.S. national interest to lead in strengthening the Arctic offshore oil and gas governance regime," said Ebinger. "The cornerstone of U.S. leadership should be enhancing oil spill prevention, control and response through the development of Arctic-specific standards, and resource sharing arrangements to ensure adequate standards, procedures, financial resources, equipment, and infrastructure are in place and available."
The changing Arctic region "is outpacing the government's current policy and institutional structure to deal with it," he said. "This requires a shift from viewing the Arctic primarily as a security threat in a strictly military and geopolitical sense, to focusing on a safety threat in the Arctic in the context of climate change, sustainability of indigenous communities, and protection of the environment."
To begin with, the existing U.S. governing framework for Arctic offshore oil and natural gas activities has to be strengthened, particularly for oil spill prevention, containment and response.
"There is growing awareness and criticism that the current, multi-layered regulatory framework is too fragmented and is not tailored to the unique conditions of the Arctic marine environment. There are concerns that national laws and regulations in place vary in their overall systemic approach and ability to be enforced, and that they are not sufficiently Arctic-specific or Arctic-tested to address operations taking place in ice-covered regions. Furthermore, the standards should be supported by equipment and infrastructure in place, as well as resource sharing arrangements, that allow timely and appropriate preparedness and response in the event of an accident."
The best approach is not to start over but to strengthen the existing framework. Considerable room also exists for better communication, coordination and information sharing between all of the countries involved. And don't forget the private sector, said the ESI team. "Since hydrocarbon development in the Arctic will be undertaken by companies, they need to be involved in the process of establishing standards."
As a result of their research, several facts became increasingly clear. "First, climate change is opening new regions of the Arctic for commercial development. Second, not only is there a strong prospect for extensive oil and gas discoveries, but there is also growing commercial interest and activity in the region's hydrocarbon resources, with all the littoral states having enacted policies to enable their development. Third, the Arctic environment poses unique challenges to offshore oil and gas development."
The Macondo well blowout in the deepwater Gulf of Mexico in 2010 and setbacks for Royal Dutch Shell plc offshore Alaska in the past few years "have had a major impact on this evolving policy environment, specifically on drilling in fragile frontier areas. Opponents of developing offshore Arctic hydrocarbons are skeptical that the risks associated...can be reduced to an acceptable level." Since Macondo U.S. regulators have issued more stringent operating procedures for offshore operators.
In addition to oil spill prevention measures, the ESI experts recommended that the United States:
Create a diplomatic post of Arctic Ambassador;
Establish a regional bureau for polar affairs within the Department of State;
Accelerate ongoing development of Alaska-specific offshore oil and gas standards;
Strengthen bilateral agreements with Russia for the Chukchi Sea and with Canada for the Beaufort Sea;
Support an industry-led Arctic-specific organization for spill response and safety; and
Support establishing a circumpolar Arctic Regulators Association for Oil and Gas.
"The Arctic is estimated to hold large undiscovered oil and gas resources -- the vast majority located offshore," said the ESI brief. "As a result of climate change and the retreat of Arctic sea ice, the waters of the region are increasingly open for longer periods of the year. Despite unique environmental conditions, regulatory uncertainties and high costs, there is broad agreement that there will be increased offshore hydrocarbon activity in the future. The Arctic coastal states support offshore oil and gas development, and there is significant commercial interest and growing activity in the region."