How to Navigate the Risks of Drilling in a De-Iced Arctic Circle

In 2008, the U.S. Geological Survey (USGS) estimated that the Arctic region contains "90 billion barrels of oil and 1,669 trillion cubic feet of natural gas. For relative context, these natural gas estimates are more than six times U.S. domestic reserve estimates. Put another way, one third of global undiscovered, potentially recoverable natural gas reserves lie in the Arctic.

As Arctic ice coverage shrinks, industry is expanding exploration in this region, asserting that extraction and accident response technology is appropriate for this environment. Advances include production rigs that operate on the sea bed and reinforced tankers that break through ice. As put by Geir Utskot, an Arctic executive for Schlumberger Oilfield Services, "Technology will not hold up Arctic resource development." (See Shell's video presenting their Arctic preparedness, though note their containment systems are conceptual designs, not existing technology.)

However, exploring unchartered territory is arguably a situation that warrants caution, not haste, and requires more than technology to get it right. Recent oil spills in the Gulf of Mexico and Yellowstone National Park -- supposedly mature operations -- illustrate the importance of examining the presumed norms of industry operations, not just technology, in order to avoid undermining culture, reputation, perceived capabilities, and, potentially, license to operate.

As stated in a 2011 USGS report, with minimal industrial development in the Arctic to date, this provides the "unique opportunity to determine the future land use and resource management of this area and 'get it right.'" The report presents more questions than answers, highlighting a number of gaps in knowledge and preparedness for development, stressing the need to understand cumulative impacts.

The harsh Arctic environment -- whether it's severe cold, near 24 hours of darkness in winter or unpredictable ice flows -- further complicates risk mitigation and preparedness.

A former manager of the Alaskan state oil spill program stated, "Based on my experience, the likelihood of being able to contain and clean up and control a well blowout in the Arctic is slim."

The commission on the Gulf spill stated there are "serious concerns" and "special considerations" regarding Arctic drilling and spill response, while the U.S. Coast Guard asserted that responding to and containing any offshore Arctic spill would be a major challenge, with no infrastructure available to mount such an operation, let alone mobilizing and housing anywhere near the thousands involved in the Gulf clean-up.

Concurrently, these are issues related to Arctic exploration that cannot be addressed by technology alone, thus the reason why one of the USGS' report's overarching themes was "a more transparent and inclusive planning and decision-making process."

This is a reflection of the rapidly emerging reality for extraction industries, whereby the license to operate -- formally and informally -- must be earned upfront, rather than be challenged in an incident's aftermath. (Shell's Arctic drilling plans still have many hurdles and likely court challenges to go).

An industry's technological and risk management capability is no longer presumed, giving way to the need -- the expectation, even -- for far-reaching stakeholder engagement that is transparent and legitimate.

The expectations associated with a license to operate are even greater in ecologically sensitive regions. As in any ecosystem, particularly one as unspoiled as the Arctic, there exists intrinsic value that cannot always be captured in dollars and cents.

It is time for industry to adopt a new approach to exploration, with long-term engagement playing a major role. If industry is to properly identify and address the varied and interrelated issues of Arctic exploration, it needs to be transparent and upfront in addressing stakeholder concerns, establish deep relationships and partner with NGOs, local communities and governments spanning the gamut of issues.

In the early stages of stakeholder engagement, it would go a long way to acknowledge and argue that conventional exploration is not the solution to energy independence, but more accurately a part of a broader solution. Industry should expect that stakeholder concerns will exceed regulatory requirements. What was once considered going the extra mile will now become the expectation.

The unchartered Arctic is an opportunity for influential companies to demonstrate leadership by driving the initiative for effective policy and proactive engagement. There is no clear, easy solution to address the challenges involved in Arctic exploration, but the greater the long-term preparedness and mindset, the greater the ability to drive the discussion for responsibility and progress.

Given the ever-shifting political, economic, energy and environmental climates, while some may see Arctic exploration as only a matter of time, industry should also be prepared for the possibility that it may not occur at all. One thing is certain: the Arctic and exploration debate will not fade anytime soon.