Blog 12: Arctic oil rush will ruin ecosystem, warns Lloyd's of London

The world’s largest insurance market, Lloyd’s of London has become the first major business organization to raise its voice about huge potential environmental damage from oil drilling in the arctic. The City institution estimates that $100 billion of new investment is heading for the far north over the next decade, but believes cleaning up any oil spill in the Arctic, particularly in ice-covered areas, would present multiple obstacles, which together constitute a unique and hard-to-manage risk. Richard Ward, Lloyd's chief executive, urged companies not to "rush in [but instead to] step back and think carefully about the consequences of that action" before research was carried out and the right safety measures put in place. The far north has become a centre of commercial attention as global temperatures rise, causing ice to melt in a region that could hold up to a quarter of the world's remaining hydrocarbon reserves. Cairn Energy and Shell are among the oil companies that have either started or are planning new wells off the coasts of places such as Greenland and Canada, while Total, currently at the centre of a gas leak in the North Sea, wants to develop the Shtokman field off Russia. Shtokman is the largest single potential offshore Arctic project, 350 miles into the Russian-controlled part of the Barents Sea, where investment could reach $50 billion. A series of onshore mining schemes are also planned, with Lakshmi Mittal, Britain's richest man, wanting to develop a new open cast mine 300 miles inside the Arctic circle in a bid to extract up to $22 billion of iron ore. But the new report from Lloyd's, written by Charles Emmerson and Glada Lahn of Chatham House, says it is "highly likely" that future economic activity in the Arctic will further disturb ecosystems already stressed by the consequences of climate change. Migration patterns of caribou and whales in offshore areas may be affected. Other than the direct release of pollutants into the Arctic environment, there are multiple ways in which ecosystems could be disturbed, such as the construction of pipelines and roads, noise pollution from offshore drilling, seismic survey activity or additional maritime traffic as well as through the break-up of sea ice. The authors point out that the Arctic is not one but several ecosystems, and is highly sensitive to damage that would have a long-term impact. They are calling for "baseline knowledge about the natural environment and consistent environmental monitoring". Pollution sources include mines, oil and gas installations, industrial sites and, in the Russian Arctic, nuclear waste from civilian and military installations, and from nuclear weapons testing on Novaya Zemlya. The report singles out a potential oil spill as the "greatest risk in terms of environmental damage, potential cost and insurance" – but says there are significant knowledge gaps in this area. Rates of natural biodegradation of oil in the Arctic could be expected to be lower than in more temperate environments such as the Gulf of Mexico, although there is currently insufficient understanding of how oil will degrade over the long term in the Arctic. Meanwhile, a taskforce is drawing up recommendations for the intergovernmental Arctic Council on an international instrument on marine oil pollution designed to speed up the process for clean-up and compensation payments, due for release next year. This may include an international liability and compensation instrument. The Arctic's vulnerable environment, unpredictable climate and lack of a precedent on which to base cost assessments have led some environmental NGOs to argue that no compensation would be worth the risk of allowing drilling to take place in pristine offshore areas. Others are campaigning for more stringent regulations and the removal of the liability cap for investors.

As I have been reporting on the issue of global pollution, I have tried to get a since of what is happening in different parts of the world. Many of these places have been single countries that have a single government that is responsible for overseeing their individual pollution issues. However each countries pollution will end up affecting us all. But the Arctic is a different story. It is not technically owned by any one country. This fact alone is going to make it even more difficult to reach a consensus on protecting the environment. Many of these companies aren't concerned about the possible damage that can occur. They are mostly focused on the enormous amount of resources that will make them rich. The Arctic doesn’t have any people there so moving in and exploiting a lower class of people won’t be an issue. However the wildlife is a huge concern that doesn’t have a voice of their own to speak up. Therefore these creatures are relying on company’s like Lloyd’s and other environmental organizations to help keep them protected. It would seem like this issue of exploiting the Arctic would be a mute point seeing that the safety history of many of these companies is sub par. If they can’t even make an oil well function correctly and clean it up in the Gulf of Mexico then what makes them think that they can clean up a disaster in such a harsh climate as the Arctic. It seems like the oil companies could care less about polluting and destroying the last pristine environment on the planet. Even if these companies have a disaster and have to pay for clean up and compensation, they will still be profitable and able to continue their practices. As long as our world is addicted to oil these companies will be able to have major influence on laws and regulations that will ultimately be in their favor. 

http://www.guardian.co.uk/world/2012/apr/12/lloyds-london-warns-risks-arctic-oil-drilling?newsfeed=true