The EAC heard written and oral evidence on the current status of climate change science in the Arctic including the likelihood and possible consequences of reaching (or having already passed) 'tipping points' where Arctic climate change impacts could accelerate rapidly, and the expected knock on effects beyond the Arctic if this happened.
Shell and Cairn discussed with the EAC historic and renewed plans for oil and gas exploration made possible by higher oil prices and greater accessibility due to retreating ice cover. The EAC was unconvinced of the current readiness of operators to mount effective oil spill response in Arctic conditions. As a result, it has recommended that UK Government strategy should include pressing for a moratorium on Arctic drilling for oil and gas pending additional safeguards and standards being agreed at the international level.
The EAC recommend a moratorium be maintained until:
- the regulatory regimes of all Arctic states impose the highest available environmental standards, and require the best available and safest technology to be used for all components of drilling to reduce risks beyond the as low as reasonably practicable standard to 'As Low as Possible'.
- a pan-Arctic oil spill response standard is in place.
- a much higher, preferably unlimited, financial liability regime for oil and gas operations is in place throughout the Arctic, requiring companies operating there to demonstrate that they have adequate funds, financial guarantees or insurance, to meet the costs of responding to an oil spill, and consideration of setting up a liability deposit bond scheme administered by the Arctic Council.
- an oil and gas industry group is set up to peer-review companies' drilling and spill response plans and operating practices, reporting publicly.
- further independent research and testing on oil spill response techniques in Arctic conditions is conducted, including assessing the environmental side-effects of such techniques and only once response techniques have been independently proven to be as effective as those used for temperate latitudes should drilling be permitted to go ahead.
- an internationally recognised environmental sanctuary is established in at least part of the Arctic.
The prospects of the Government agreeing to push for such a moratorium might be slim given the possible tax revenues which would presumably flow from UK based oil companies tapping new Arctic resources, as well as the benefits for national energy security in the face of looming decommissioning of ageing North Sea production wells. There is also the question of the UK's political capital to pursue this path given the Arctic is beyond our sovereign jurisdiction to regulate: a point not lost on the Department for Energy and Climate Change.
The Arctic states1 (including those with Arctic coastline and which consequently do have rights to regulate oil and gas exploitation over their respective portions of the Arctic continental shelf), meet together with organisations representating Arctic indigenous people in the Arctic Council. The Artic Council was formed in 1996 to promote co-operation and co-ordination on issues of sustainable development and environmental protection. The EAC heard that the Council is now engaged in developing a binding agreement amongst its members on Arctic marine pollution.
While the UK has observer status and attends regular meetings, the Council members do not welcome non-member participation in the process of drawing up binding agreements. As such, the UK's influence is much reduced.
A statement from Caroline Lucas MP in the press release announcing the EAC report suggests that implementation of such a moratorium should start at home with UK registered companies seeking to operate in the Arctic:
"The UK government now has a responsibility to respond to this EAC report and show vital leadership on the issue by doing all it can to urgently secure a moratorium on Arctic drilling – starting with companies registered in this country."
Quite how this is intended to be implemented is not clear. A unilateral moratorium would put UK oil and gas companies at a disadvantage to non-UK registered competitors and would be strongly resisted.
However, similar calls are being made at European level in the European Parliament by MEPs busy formulating their position on the draft Regulation issued by the EU Commission in October 2011 on the safety of offshore oil and gas exploration. For example the Environment Committee of the Parliament has now voted2 in favour of adding the following to the text:
"On the basis of the precautionary principle and taking into account the remaining oil spill response gap and lack of effective intervention capacities, Member States shall refrain from authorising any offshore hydrocarbon exploration and extraction operations in the Arctic".
However only a Member State with relevant licensing jurisdiction over continental shelf within Arctic territory would be affected and hence currently this is likely to be largely a policital statment only. Norway, which does adopt EU legislation of relevance to the European Economic Area, does not propose to adopt this Regulation. The Industry committee of the Parliament will now essentially determine whether the above suggestion is put forward in the Parliament's position in the negotiations with the Council and Commission that will follow in December at the earliest.
We shall shortly be issuing a separate bulletin on progress with the draft EU offshore safety Regulation, covering other key issues such as liability for licensees and operators with respect to major incidents.
The full EAC report can be found here: http://www.publications.parliament.uk/pa/cm201213/cmselect/cmenvaud/171/17102.htm