Sustainable Assessment Report of Oil Drilling in the Arctic

1.0 Executive Summary

Equipped by a Large International Engineering Firm is a Sustainable Assessment Report (SAR) on the significances of oil exploration in the Arctic region. The report will emphasise the significant impacts that oil exploration in the Arctic has environmentally, economically and socially. As outlined by the report, appropriate measures are required in the Arctic for the exploration of crude oil. Legislations and policies are instrumental for safeguarding both the Arctic indigenous civilians and the environment. These policies convey specific processes required for tasks such as the disposal of the waste muds and cuttings and the extraction of the oil. The report will discourse the simulations predicted for the future usage of crude oil and how it will gradually evolve into an excluded method for fuel, electricity and production generation and therefore create a huge demand for the utilisation of efficient, biodegradable resources.  

Table of Contents

1.0 Executive Summary

2.0 Environmental Aspects

3.0 Social Aspects

4.0 Economic Aspects

5.0 Conclusion

6.0 References

7.0 Appendix

2.0 Environmental Aspects

Environmental issues have beleaguered oil exploration in the Arctic throughout the years which has led to the strengthening of the Arctic National Wildlife Refuge (ANWR) treaty. The treaty was sanctioned by the Secretary of the Interior, Fred A. Seaton, under the authorisation of then U.S. President, Dwight D. Eisenhower. This was established in 1960 in which it attained close to nine million acres. Due to the ever increasing demands of non-renewable resources, the treaty is continuously being revised and currently, 19.2 million acres are now under federal protection. The 1002 Area, as shown in figure 1, is the area that was investigated for petroleum. It is estimated that billions of barrels units can be attained from this location.  

Figure 1: ANWR including 1002 Area

The assessment below will feature implications of the potential environmental impacts and further on, the development of mitigative and compensatory measures for environmental aspects only.   

In the Arctic, it must be identified that any major operations have more of an impact on the environmental ecosystems than most other locations in the world due to its ease. The largest consequences of both on-land and the marine atmospheres are physical turbulences and oil spills respectively.

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The Arctic Monitoring and Assessment Programme (AMAP) is one of six data collection groups that accumulates information which can be used for specific decision making which can potentially establish policies. This evaluation validates their assertions that the absorption of petroleum hydrocarbons are at a minimal in the Arctic. It must be said that petroleum hydrocarbons are generally formed from the natural, non-renewable resources within the environment.

There are many contributors to this concentration and several of these are:

• Human activity – This entails oil spills
• Industrial activity
• Shipping distribution
• Fishing

Taking oil spillages out of consideration, this assessment can conclude that oil, currently, does not pose a significant impact to the petroleum hydrocarbon concentration on the whole. Accumulation of concentrations can eventually create an immense dilemma in which the major consequence will be deterioration of human health in the future years. This will occur through contamination of the inhabitant’s sustenance and water supply. This environmental effect emphasises the requirement of further policies and mandatory petroleum hydrocarbon concentration inspections to ensure the nearby communities and employees safety. 

Another major deterrent of oil extraction in the Arctic is the probable oil spills and pollution from the disposal of the waste muds and cuttings which have a significant effect on the flora and fauna ecosystem. The 1989 Exxon Valdez spill in the Gulf of Mexico serves as a stark reminder of the effects on the environment that oil spillages can produce. This example indicates that these spills can still be evident for several decades. Many animals including birds, mammals and marine life will be affected if oil was to be released into their environment. The wildlife is especially vulnerable if oil is released during the reproducing season. This can lead to malnourishment, disfiguration and in more severe cases, death.  

To minimise the impacts on the environment concerns expressed above, mitigation plans need to be placed in effect. These plans can only really be placed into effect by governments through legislations and procedure guidelines. Several mitigative concepts are recommended by the Large International Engineering Firm and are presented below: 

• Rigorous controls need to be put into effect concerning particular operations in sensitive locations where susceptible flora and fauna can be exposed to severe environmental damage. An assessment/examination can be completed to identify the environmental risks in a risk matrix in those operations and if it reaches a high risk, the operations hazards will need to be downgraded through the Hierarchy of Controls. This comprises of: elimination, substitution, isolation, engineering controls, administrative, PPE.
• Continual documentation of vulnerable flora and fauna needs to be carried out within the operation areas. This documentation should include: the population of each individual species, the petroleum hydrocarbon concentration and the spawning season of the wildlife.
• During spawning seasons of wildlife, it is recommended that the operations adopt the newfound marine regulations of the Great Barrier Reef. This means that no operations should take place for a few weeks during this spawning season, so it will improve the livelihood of wildlife offspring’s.

3.0 Social Aspects

Oil in the Arctic is contentious due to the impacts that it has on neighbouring communities and the surrounding environment. Oil exploration in the Arctic has been subjected to many different social impact concerns since its emergence and some of these impact on: Regional and National governments, neighbouring communities – two of these are the Thule and Inuit Peoples and various drilling corporations which includes employees and administrators. It must be said that the above can be socially impacted on in two ways: positively and negatively. Some social impacts might include:

• Improvements to infrastructures in the Arctic area
• More employment opportunities for the Arctic region as well as nations who want to exploit the natural resource that lies in the Arctic
• Inuit and Thule cultures being compromised due to the operations that might occur in the region.

The assessment below will feature implications of the potential social impacts and further on, the development of mitigative and compensatory measures for social aspects only.   

Following the discoveries of major petroleum hydrocarbon deposits in the Arctic’s atmosphere, an investigation into the social, economic and environmental issues led to the establishment of the Arctic Monitoring and Assessment Program (AMAP). The Arctic Environmental Protection Strategy (AEPS) was implemented in the early nineties and it was signed off by 8 Arctic countries. The AMAPS role is to provide scientific recommendations to the AEPS on mitigative approaches to conserve the ANWR. The AMAP concluded at the end of their assessment that further research is required to fully grasp the many positive and negative impacts that factors in human health as well as the net result of employment opportunities that the oil exploration operations hold.

Subsequently, local/native communities and environmental non-governmental organisations (ENGOs) have voiced trepidations of the ever-growing development of the Arctic oil drilling operations. It has been noted in this assessment that the community is apprehensive of the cleaning technologies that is required in hazardous incidences which generally involves oil spills or leakages. It must be noted that according to AMAP’s assessment, no oil spill occurrence has ever been successfully cleaned. This information only adds to the growing social concerns. Many ENGO’s believe that government legislations and further safety procedures will not sufficiently protect the ANWR. As this is a major social impact, the local communities as well as ENGO’s are heavily endorsing additional compensation for the utilisation of their local environment.

All through the years, regional and national governments have introduced legislations and safety guidelines to improve the quality of social impact evaluations which will effectively provide further security for the local societies. This includes the Thule and Inuit peoples. These implemented regulations were produced after consultation with the local community and government, the national governments, environmentalist organisations as well as industrial corporation heads. The evaluation is designed to complete a comparison between the positive and negative social impacts to assist in achieving a valid conclusion. As discussed previously, positive impacts can include amplified employment prospects whilst negative impacts can contain fractured community beliefs and cultural loss. Although the positive outcomes can dominate the negatives, it is very important that all aspects are recognised before undertaken advancements can be established.    

To minimise the impacts on the social concerns expressed above, a mitigation plan need to be placed in effect. A mitigative concept is recommended by the Large International Engineering Firm and is presented below: 

• A social impact assessment would be an important implementation to utilise for potential impending advancements in the oil drilling operations. This evaluation can concentrate on the positive and negative outcomes of these developments and can also be employed as a prevention measure to avoid community dislocation. It must be said that this assessment, while it should consider the indigenous community of the Arctic, it cannot be the sole focus point of this study as it also needs to include the wide-ranging effects that may transpire. A functional and additionally, an accurate social assessment, significant management systems and effective communication with the local people and ENGO’s will ultimately constrict the pandemonium that will occur once drilling operations inaugurates.  

4.0 Economic Aspects

Lastly, the economic aspect is so influential for the Arctic economy as well as global economy as the benefits are extensive. These benefits include, but are not limited by the following shown below:

• Employment – both directly and indirectly through the oil exploration operations.
• Regional growth and groundwork
• Export remunerations
• Benefits for the local communities –Thule & Inuit peoples
• Royalties taxes & Governmental fees

A thorough economic investigation by Wharton Econometrics Forecasting Associates (WEFA) has led to a discovery that approximately 736,000 new employment opportunities will arise for the United States (US) resulting from the oil exploration developments in the 1002 Area in the Coastal Plains. The employment distribution can clearly be seen in figure 2 below however, it does not factor in the utilisation of the many contractors and subcontractors during the process.

For the oil industry to survive in this current economy, it is recognised that they need revenue to be able to afford the expenses that come with the operations as well as satisfying their many stakeholders. “From investigation, the projected size of undiscovered oil deposits beyond the Arctic is 90 billion barrels which take up approximately 5.9% of the world’s known oil reserve.” :( Desjardins, 2016)]. From the current forecasts of crude oil worth, one-barrel unit of oil costs $50.82 USD. From calculations, this can be estimated to be 760 billion AUD or 542 billion USD.

From the previous findings, such economic capacity entails adequate human resources. As little operations have commenced in the ANWR region, many assumptions can be made regarding the hypothetical average wage of each individual worker.  From the 2014 information of the Alberta’s gas and oil labour business, approximately 110,000 were employed within the organisation. “According to an official data of Alberta’s government, the average wage per hour in this industry is equal to $36.02. The difference is especially visible in comparison with other industries.” (Government of Alberta, 2014).

If this assessment was to use this hourly rate as a base rate for these oil exploration developments, as well as the estimated employment of all drilling organisations, it can be calculated that the approximate expenses for HR support can be $27 million per every hour. This is presumptuous that breakdowns of all types of employment associated with these operations is being completed at the same time. If we simulate that the average salary of all types of labour associated with the operations is approximately $80,000 (this is as the mid-range employee titled with Oil Rig Supervisor), then the yearly HR expenses can be estimated to be $6 billion. According to MMS information, from the period of 1953 – 2000, export revenues in the form of royalty taxes, bonuses and rentals was approximately $68.5 billion, $61.4 billion and $2.1 billion respectively. This information was from all oil drilling operations that the US correlated with during this time. From this data, the average export revenue per year if these developments were to be commenced, can be calculated to $8.8 billion. This is including the HR approximation as mentioned previously.

From these calculations, it renders it highly important to the economy that the area surrounding the community remains large enough to sustain its own resources as well as the operations when the developments potentially commences. An example of potential benefits for the Arctic region is recognised during the 1980 – 1994 period where $22.5 billion was spent on the remaining oil fields, 22% of these monies was spent inside the Arctic region for employee’s salaries, materials, engineering and design of infrastructure. This example proves that if these developments go ahead, the local community will show great signs of advancements.

The economic advantages of oil exploration in the Arctic will benefit all involved through the examples mentioned previously. The industry would benefit heavily in the short-term as oil demand around the globe is reducing due to its natural resource capacity, national governments would profit from the taxes that the industry pays on exports and the local community will benefit from the additional wealth that the operations accomplishes.

6.0 References

• http://library.arcticportal.org/1552/1/oil_and_gas_assessment.pdf
• https://brage.bibsys.no/xmlui/bitstream/handle/11250/2393148/Andreassen.pdf?sequence=5
• https://www.everycrsreport.com/reports/R41153.html
• https://www.britannica.com/place/Arctic-National-Wildlife-Refuge#ref1118080