U.K. Lawmakers Call for Moratorium on Arctic Oil & Gas Drilling

Oil and gas companies including Royal Dutch Shell Plc (RDSA) and Cairn Energy Plc (CNE) should be prevented from drilling in the Arctic until rigorous environmental regulations are in place, a panel of U.K. lawmakers said.

Oil spill response techniques haven’t been proven to work in Arctic conditions, the multiparty Environmental Audit Committee said today in an e-mailed report. It proposed a halt to drilling until stronger safeguards are in place in an effort to avoid leaks on the scale of BP Plc (BP/)’s Macondo disaster in the Gulf of Mexico in 2010.

“The infrastructure to mount a big clean-up operation is simply not in place,” Joan Walley, a member of the opposition Labour Party who chairs the committee, said in an e-mailed statement.

The receding Arctic sea ice, which this year shrank to a record low during the annual melt season, has spurred companies including Shell and Cairn to explore for oil and gas in the waters off Greenland, Alaska and Russia. The British lawmakers flagged the danger of spilled oil lingering “for decades,” and risks to whales caused by the sound of drilling.

“Only a small fraction of oil would be recovered in the event of a significant oil spill in the Arctic and it might take decades for wildlife to recover,” the lawmakers wrote. Citing evidence from the environmental group Greenpeace, which opposes Arctic drilling, they said oil was still being found in the Arctic 23 years after the 1989 Exxon Valdez oil spill in Alaska.

With the Arctic warming at twice the pace of the rest of the planet, sea ice in August shrank to a record with three weeks of the annual melt season left, according to the National Snow and Ice Data Center in Boulder, Colorado. By Sept. 17, it had receded to 3.41 million square kilometers (1.32 million square miles), 18 percent less than the prior record from 2007.

Environmental Damage

“The retreating ice-cap is enabling greater exploitation of the Arctic’s natural resources — fossil fuels, minerals, and fisheries, and opening up new major global shipping routes,” the lawmakers said. “Such development could result in significant environmental damage in a region already feeling the effects of climate change more than the rest of the planet.”

Shell said Sep. 17 that it has abandoned plans to drill this year into oil reservoirs in the Chukchi Sea off Alaska’s north coast after a containment dome designed to cap any potential oil spill was damaged. The company said it will still drill so-called top holes that don’t extend down into oil reserves.

Cairn drilled eight wells in two years through the end of 2011 in an unsuccessful attempt to find recoverable oil and gas reserves off Greenland. ConocoPhillips (COP), Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), GDF Suez SA, Dong Energy A/S, A.P. Moeller-Maersk A/S and Statoil ASA (STL) also hold licenses to explore off Greenland.

No Cost Estimates

Peter Velez, a global emergency response manager for Shell, and Cairn Exploration Director Richard Heaton testified to the lawmakers. Velez said Shell had no estimate for the cost of a worst case oil spill in the Arctic because “we are going to do whatever it takes to clean it up,” according to the report. Heaton said Cairn’s position was “similar,” the lawmakers wrote.

“We are surprised that neither has put a financial estimate on the cost to their business of dealing with a ‘worst case’ oil spill,” the lawmakers said. “There does need to be public transparency to provide assurance that cost will not be a bar on dealing with the consequences of any spills.”

Sub-Sea Blowout

The report cited earlier evidence to another parliamentary committee that used the BP oil slick in the Gulf of Mexico in 2010 as evidence that the industry isn’t prepared for a sub-sea well blowout.

The U.S. estimates more than 4 million barrels of oil spilled into the Gulf as BP took about three months to stop the leak. The company has set aside $38 billion for the spill, including lawsuits and fines. It has spent $14 billion on stopping the leak and cleaning it up.

BP, which also has interests in the Arctic, asked not to take part in today’s inquiry, citing legal proceedings related to the Gulf spill.

“Oil giants like Shell shouldn’t be drilling in the fragile and pristine Arctic,” Vicky Wyatt, head of Greenpeace’s Arctic campaign, said in an e-mailed statement. “By calling for a halt, these members of Parliament have hit the nail on the head. An oil spill in this unique place would be catastrophic.”

The lawmakers said a moratorium on drilling in the frozen north should stay in place until a pan-Arctic oil spill response standard is in place, along with regulations for a “preferably unlimited” financial liability regime for oil and gas operations. They said Arctic states should impose “the highest available environmental standards” for drilling and called for more research into spill-response methods in Arctic conditions.

“The oil companies should come clean and admit that dealing with an oil spill in the icy extremes of the Arctic would be exceptionally difficult,” Walley said.

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