"What Small Teeth You Have"

Arctic oil spill response agreement weakened by conflicting interests

Arctic oil spills are a growing concern, but who will act to prevent and prepare for them? The Arctic Ocean coastal states are torn between their economic interests in developing offshore oil, and increasing public pressure for meaningful environmental protection. They recently opted for symbolism over substance by adopting an Arctic Oil Spill Response Agreement that adds little to international law.

The Arctic may contain 10-15 percent of the world's undiscovered oil reserves, with most of that oil located in the seabed of the Arctic Ocean. The US Geological Survey estimates there are 90 billion barrels of conventional oil north of the Arctic Circle, enough to fuel the entire world for three years at current consumption rates. 

(Photo: Getty Images)(Photo: Getty Images)

Most of the Arctic's oil is located within the uncontested jurisdictions of Russia, the United States (Alaska), Canada, Norway and Denmark (Greenland). This is because offshore oil is usually found in the sedimentary strata of continental shelves, and the law of the sea grants each coastal state absolute jurisdiction over the resources located therein. Thus, the five Arctic Ocean coastal states are almost solely responsible for regulating the development of Arctic offshore oil.

Oil spills at sea can occur in three ways. Oil tankers can founder or run aground due to human error, mechanical failure, or bad weather. In 1989, the Exxon Valdez spilled more than 80 million litres into Prince William Sound on Alaska's southern coast. Second, long-range cargo ships carry substantial amounts of fuel oil. In 2004, a Malaysian ship loaded with soya beans broke apart and spilled 1.2 million litres of 'bunker oil' while transiting Unimak Pass in the Aleutian Islands. Third, oil can escape during the drilling or extraction process. In 2010, the Deepwater Horizon, a drilling rig leased by BP, exploded and sank 65 kilometres off the Louisiana coast in the Gulf of Mexico. The ruptured wellhead spewed at least 800 million litres before it could be capped three months later.

Finding, extracting and transporting oil are particularly risky activities in the Arctic. Already, it is estimated that Russia loses more than one percent of its oil production through leaks and spills. Exacerbating the risk, oil degrades and dissipates very slowly in cold water. Almost a quarter of a century after the Exxon Valdez accident, the oil persists in the ecosystem along the Alaska coast. Great distances, extreme weather, sea-ice, seasonal darkness and an absence of coastal infrastructure can further impede clean-up attempts. Almost no oil was recovered after the 2004 accident in Unimak Pass, due to the remote location, weather, and near-complete absence of oil spill clean-up equipment in the Aleutian Islands.

(Photo: Getty Images)(Photo: Getty Images)Responsible exploitation of Arctic offshore oil requires high safety standards and close oversight, but it is not clear that all the Arctic Ocean coastal states would agree. The Arctic Council's 2013 Agreement on Cooperation on Maritime Oil Pollution Preparedness and Response in the Arctic ("Arctic Oil Spill Response Agreement") provides a useful lens through which to examine the tension between economic development and environmental protection that complicates these matters, especially for some states.

On the one hand, Arctic governments are eager to facilitate the development of offshore oil, including by encouraging investments from multinational companies. On the other hand, there is mounting public concern about the risk of oil spills and the contribution that Arctic oil would make to climate change. The result, so far, has been an "Arctic Oil Spill Response Agreement" that only weakly addresses the clean-up issue while deferring the more important issue of prevention to a subsequent set of negotiations, which are now underway.

The Arctic Oil Spill Response Agreement is just the second treaty negotiated under the auspices of the Arctic Council, an intergovernmental forum that has the five Arctic Ocean coastal states plus Iceland, Sweden and Finland as its members. The stated goal of the Agreement is to "strengthen cooperation, coordination and mutual assistance among the Parties on oil pollution preparedness and response in the Arctic in order to protect the marine environment from pollution by oil." But the Agreement does not create any new obligations. This is because all the Arctic Council member states had already made the same commitments previously – by ratifying the 1990 Convention on Oil Pollution Preparedness, Response and Cooperation (OPRC), a treaty negotiated within the framework of the International Maritime Organization.

Parties to OPRC are required to establish measures for dealing with pollution incidents, including the stockpiling of oil spill equipment, the development of clean-up plans, and the holding of exercises. They are also required to cooperate in the event of a spill; this may include providing equipment when requested by another party. The Arctic Oil Spill Response Agreement reiterates these obligations but adds no new ones.

Moreover, neither OPRC nor the Arctic Oil Spill Response Agreement require that states meet even minimal requirements concerning the positioning and deployment of oil spill equipment and personnel. A state could thus meet its obligations without spending the funds necessary for actual preparedness.

Most importantly, neither treaty includes any provisions directed at oil spill prevention, even though prevention will always be more effective than clean-up. Indeed, in parts of the Arctic, and throughout the entire region in winter, cleaning up a major oil spill would be an impossible task. This is what makes the negotiation of a meaningful agreement on prevention so very important. The agreement should require states to raise or remove liability caps, which are a form of public subsidy to the oil industry since potential costs above the limits are not factored into insurance costs, and therefore not into any assessment of the economic viability of a potential project. It should also require that companies be capable of drilling a so-called "relief well" during the same drilling season – so as to stop the flow of oil in the event of a blowout, before the winter darkness and sea-ice return.

To be fair, the Arctic Oil Spill Response Agreement does offer one benefit, in that it will result in more consultation, coordination and cooperation on oil spill preparedness and response among the Arctic Council member states. However, this is only because it provides a multilateral marine oil pollution response instrument that is specific to the Arctic states in terms of its membership. In other words, Arctic governments are more likely to work together on these issues, as a group, now that their obligations from the global instrument (OPRC) have been repackaged into a regional instrument.

Nevertheless, the Arctic Oil Spill Response Agreement is weak and inadequate, relative to the scale and scope of the challenges faced. And this raises the question as to why this is so. What were the motivations of the different negotiating states, and how might they – and other relevant actors – influence the recently launched negotiations on an Arctic Oil Spill Prevention Agreement?

Russia is the world's largest producer of oil, but most of its current oil production comes from on-shore wells in Western Siberia where production levels are falling. The low price of natural gas, another major export, is putting additional pressure on the Russian treasury. Not surprisingly, Russia is moving rapidly to develop its Arctic offshore.

The Kremlin has modified its regulatory and tax regime so as to attract multinational companies with the experience, technology and capital needed to develop Arctic offshore oil. In April 2013, Russian state-owned Gazprom entered into a partnership agreement with Royal Dutch Shell. The deal was considered of such importance that Russian President Vladimir Putin attended the signing ceremony. In June 2013, Russian state-owned Rosneft concluded a similar agreement with ExxonMobil that could lead to investments of up to $500 billion – if expectations concerning offshore reserves hold up.

Russia has also been partnering with China. In 2010, China provided Russian state-owned Rosneft and Transneft with $25 billion to build an oil pipeline from Siberia to China. Already, the pipeline carries 300,000 barrels per day. This year, China paid Rosneft an additional $60 billion to develop offshore oil fields in the Arctic. As with the first $25 billion, the investment was an advance against future production.

However, Russia's on-shore environmental record (which includes the above-mentioned one percent loss of production due to leaks and spills) raises serious questions about its ability to engage in safe offshore oil exploration, production and transport. These doubts were reinforced in 2011 when a floating oil platform capsized and sank while being towed in the Sea of Okhotsk in Russia's Far East. The rig was owned by Gazprom, which just a few months earlier had announced it was sending another floating platform to engage in exploratory drilling in the Pechora Sea north of Siberia. The Prirazlomnaya rig is designed to store 136 million litres of oil between visits from tankers.

Because of this headlong rush into Arctic offshore oil, it would be surprising if Russian negotiators sought an Arctic Oil Spill Response Agreement that went beyond existing rules.

United States
Successive US administrations have supported offshore exploration north of Alaska as part of an effort to reduce the country's reliance on foreign sources of oil. However, an exclusive reliance on private companies that generally oppose strong regulations puts that effort in conflict with growing public concern about the environmental risks of Arctic offshore oil.

BP and Shell are the two industry "super-majors" with substantial lease-holdings in the US Arctic offshore, and both have struggled there. In 2010, BP's Deepwater Horizon blowout in the Gulf of Mexico caused the US government to temporarily suspend all offshore drilling. It also imposed huge financial and reputational costs on BP from which the company has yet to recover.

Shell has encountered multiple difficulties drilling exploratory wells in the Chukchi Sea north of Alaska, where it has invested more than $2.2 billion. In 2012, the company failed to complete a single well after mechanical problems, delays in meeting permitting requirements, and unexpected sea-ice. Then, at the end of the drilling season, Shell lost control of a floating oil platform as it was being towed south for repairs. All these setbacks provided fodder for environmental groups opposed to the drilling, and Shell suspended its efforts in 2013.

The United States' general reluctance to ratify treaties has contributed to the challenge of establishing meaningful international standards for Arctic offshore oil. The United States did ratify OPRC, which lacks imperative obligations, and has accepted an equally weak Arctic Oil Spill Response Agreement. However, the United States prefers to regulate offshore pollution risks through its own domestic legislation. For example, it refused to ratify the 1969 International Convention on Civil Liability for Oil Pollution Damage and the 1971 International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage. All other Arctic countries have ratified these conventions, both of which concern spills from tankers.

In addition to impeding the development of meaningful international standards, the United States' reluctance with respect to treaties could create problems for industry. Although multinational companies will adapt to different regulatory regimes, a lack of uniformity imposes costs, particularly in locations like the Beaufort Sea where oil fields could straddle international boundaries.

More than 130 exploratory wells were drilled in Canada's Arctic offshore during the 1970s and 1980s. At the time, Canada led the world in providing a regulatory regime for Arctic offshore oil, including a requirement that companies have a same-season relief well capability. Offshore drilling ceased in the 1990s after government subsidies for Arctic exploration were eliminated. However, as oil prices have risen, multinational companies have purchased large leases in the Canadian portion of the Beaufort Sea. Some of the leases are for deep-water areas where drilling a well is a multi-year exercise. For this reason, the leaseholders asked the Canadian government for a relaxation of the same-season relief well requirement. In 2011, the government complied with the request, stating that any applicant for drilling authorization who wished to depart from the requirement "would have to demonstrate how they would meet or exceed the intended outcome" using other means.

Canada has been so eager to re-open its Arctic offshore that, in 2012, it allowed tiny British-based Franklin Petroleum to secure leases over 9,060 square kilometres in the Beaufort Sea. Franklin Petroleum was the only company to make a bid, and it won the leases after promising to spend just $7.5 million on exploration. Given this recent record, Canada would make an unlikely champion for meaningful spill response or prevention obligations that would, necessarily, raise the cost of operating in the Arctic offshore.

(Photo: GettyImages)(Photo: GettyImages)

Canada and Norway are both major oil exporters, but there are significant differences in their approach to the Arctic offshore. Canada began privatizing PetroCanada in 1990, and sold its final stake in 2004; Norway retains a controlling share in Statoil. The continuity of political and financial support has enabled Statoil to become the world leader in offshore technology and, as a result, Norway is the only country to operate a commercially successful Arctic offshore drilling regime.

In 2011, public concern arising from the Deepwater Horizon blowout in the Gulf of Mexico prevented the opening of drilling around the Lofoten Islands, an ecologically significant chain of offshore islands just to the north of the Arctic Circle. But as oil production declines in the North Sea off southern Norway, Norwegian public opinion has supported opening up new areas further north. In 2012, Oslo announced that it was opening bids on 72 exploration blocks in the Barents Sea and a further fourteen in the Norwegian Sea.

Public support for Arctic offshore oil in Norway is linked to the country having some of the highest safety standards in the world, including a longstanding requirement that companies be able to initiate a relief well shortly after a blowout. But while Norway's Arctic expertise and technology is sought around the region, it has not been able to inspire a similar culture of safety within the other Arctic states – with the possible exception of Greenland.

Resource development is an essential component of Greenland's move towards financial and political independence from Denmark. After achieving jurisdiction over natural resources in 2008, Greenland began issuing offshore exploration licenses. These were snapped-up by multinational companies attracted by geological indications of considerable oil and gas potential off the island's west and north-east coasts.

At the same time, Greenland adopted Norway's standards. When Cairn Energy, a Scottish oil company, drilled a number of wells in Davis Strait in 2010 and 2011, two drill ships were required to be in the area at all times, leaving one available to drill a relief well if a blowout occurred. Several "ice-management vessels" were also kept on standby to tow threatening icebergs away.

Despite the standards, and despite knowing that environmental groups were monitoring its activities closely, Cairn Energy took risks that were later deemed unacceptable. Specifically, the company used more than 160 tonnes of Ultrahib, a drilling lubricant that is "red-listed" under European regulations because it breaks down very slowly in the environment. Although the Danish national environmental research agency gave Cairn permission to use Ultrahib in 2011, it later said the amount used was "unacceptable" and "in violation of international resolutions."

Cairn Energy ultimately failed to discover oil or gas off Greenland and wrote off $1 billion in losses. That failure, combined with the company's lax approach to environmental safety, may have contributed to the decision of Greenland's new government – elected in March 2013 – to suspend the sale of offshore exploration licenses.

Unfortunately, Greenland's dedication to oil spill prevention is not easily transformed into international influence. In May 2013, Greenland boycotted an Arctic Council ministerial meeting to protest the fact that its representatives had to attend as part of Denmark's delegation. The dispute was later resolved when it was agreed that Greenland can sit at the table when matters under its jurisdiction are discussed.

Indigenous Peoples
Greenland's limited influence is supplemented by the influence achieved by the Inuit via the Inuit Circumpolar Council, created in 1977 to represent the Inuit of Alaska, Canada, Greenland and Russia. The Inuit Circumpolar Council played a decisive role in the negotiation of the 2001 Stockholm Convention on Persistent Organic Pollutants, which requires that states stop the production of toxins that are carried atmospherically to the Arctic – where they accumulate in the fatty tissues of animals at the top of the food chain, such as seals, bears and ultimately humans.

The Inuit Circumpolar Council works closely with the Saami Council, created in 1956 to represent the Saami of Norway, Sweden, Finland, and Russia. In 1996, the two groups secured the status of 'Permanent Participants' at the Arctic Council for themselves and other Arctic indigenous peoples. As Article 2 of the Ottawa Declaration on the Establishment of the Arctic Council makes clear: "The category of Permanent Participation is created to provide for active participation and full consultation with the Arctic indigenous representatives within the Arctic Council."

In 2008, the Danish foreign minister invited representatives from the other four Arctic Ocean coastal states to a meeting in Greenland. The Inuit, who were excluded along with the other Permanent Participants as well as Iceland, Sweden and Finland, saw this as a threat to their hard-fought role at the Arctic Council. They responded by lobbying US Secretary of State Hillary Clinton in the run-up to the next meeting of the so-called "Arctic Five", held Canada in 2010. Clinton responded by publicly chastising her hosts for having excluded the Inuit: "Significant international discussions on Arctic issues should include those who have legitimate interests in the region," she said. No Arctic Five meetings have taken place since.

The influence of the Inuit could spell trouble for Arctic offshore oil. In 2009, the Canadian government signed a memorandum of agreement with a local Inuit group concerning a proposed marine conversation area in Lancaster Sound north of Baffin Island. The next year, without consulting the Inuit, the government chartered a German icebreaker to conduct seismic testing of the area. The Inuit responded by seeking and obtaining a court injunction. The icebreaker, which had already crossed the Atlantic en route to Lancaster Sound, had little choice but to turn around.

Environmental Groups
Greenpeace, the World Wildlife Fund and other environmental groups have launched campaigns against Arctic offshore oil. Their motivations include concerns about oil spills and climate change, and perhaps the emotional resonance of the Arctic for potential donors. A focus on media advocacy, including the use of iconic symbols such as the polar bear, has given these groups substantial political leverage. Their influence may affect the positions that governments take in international negotiations, the content and enforcement of the laws they adopt, and the quality of services and infrastructure they provide to companies operating in the Arctic. It also raises the stakes for oil and shipping companies, since a significant public relations backlash can now be expected in the event of a spill.

The influence of environmental groups is limited in undemocratic countries such as Russia, where non-governmental organizations receiving foreign funding are required to register as "foreign agents". A similar attitude has surfaced in at least one democratic country when, in 2012, the Canadian minister of natural resources wrote a letter to the Wall Street Journal in which he complained about "environmental and other radical groups" using "funding from foreign special interest groups to undermine Canada's national economic interest." That said, Russian President Vladimir Putin's photo-ops regularly take place in the Arctic wilderness, which suggests that even he is attentive to public opinion on these matters.

Crafting a meaningful Arctic Oil Spill Prevention Agreement
Public opinion, driven and stoked by indigenous peoples and environmental groups, could create the possibility of a meaningful Arctic Oil Spill Prevention Agreement as early as the next Arctic Council ministerial meeting in 2015. Such an agreement could force oil companies to internalize the full costs of offshore drilling in the region, for instance, by raising or removing liability caps and imposing a region-wide same-season relief well requirement.

Although oil companies are usually resistant to increased regulation, such measures are unlikely to chase them away from the Arctic. The region's potential and political stability make it attractive as a long-term source of oil. Oil companies will develop and implement the enhanced measures needed to operate safely in the Arctic, but only if they are required to bear the full cost of the damage caused by spills. The negotiators who are currently involved in the early stages of the new agreement should be aware of these realities, and not bow to industry pressure this time.

The 2013 Arctic Oil Spill Response Agreement is a weak and incomplete response to the risks associated with Arctic offshore oil. But it does provide a useful indicator of how the intersection of priorities might influence the upcoming negotiation of an Arctic Oil Spill Prevention Agreement.

Although some of the Arctic Ocean coastal states oppose meaningful environmental protections that could impede economic development, others support such measures. Which camp prevails might ultimately be determined by public opinion – as led, increasingly, by indigenous peoples and environmental groups.

Nor is this simply a question of environmentalism versus economic development, for a meaningful Arctic Oil Spill Prevention Agreement could provide benefits to the Arctic Ocean coastal states. It would, for example, enable them to present a common front to international oil companies, thus preventing a regulatory 'race to the bottom'. It could also confirm their preeminent role in governing the region via the Arctic Council.

However, any such agreement has to be negotiated soon, before economic interests become more deeply vested and a perhaps fleeting political opportunity disappears. It is time for governments to get serious about protecting the Arctic environment. It is time to develop meaningful standards for Arctic offshore oil that apply across the region.

Michael Byers holds the Canada Research Chair in Global Politics and International Law at the University of British Columbia. He is the author of International Law and the Arctic, recently published by Cambridge University Press.

Mark Stoller is a PhD student at the University of British Columbia, where he studies Arctic energy and environmental policy.


More Articles...

  1. At the Heart of the Arctic

Download Network Feasibility Analysis


Online features on the project website are an online series of commentary articles discussing a variety of issues facing the Arctic today with the aim at engaging policy makers, stakeholders and the general public on Arctic issues in different countries. It is a venue for public interaction and communication between the public, scientific researchers, policy makers and stakeholders through online comments in order to enhance the transfer of knowledge into action.

The features are written by a broad selection of authors, including leaders, experts and locals in the Arctic community.

Each feature focuses on one of the different trends chosen for impact assessment in the methodology report from Work Package 2 of the project: Climate and environmental changes in the Arctic; Increase in maritime transport; Increase in mining and exploitation of hydrocarbons; Changing nature of Arctic fisheries; Turbulent modernization of Arctic societies and cultures; Increasing research in the Arctic


twitter facebook

Hosted and Designed by the Arctic Portal