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Energy Security Initiaat BROOKINGS

March 2014

Policy Brief 14-01

Offshore Oil and GasGovernance in the

Arctic

A Leadership Role for the U.S.

Charles Ebinger

John P. Banks

Alisa Schackmann


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OFFSHORE OI L AND GAS GOVERNANCE I N THE ARCTI C : A LEADERSHI P ROLE FOR THE U . S .

E N E R G Y S E C U R I T Y I N I T I A T I V E

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ABOUTTHEBROOKINGSENERGYSECURITYINITIATIVE

he Energy Security Initiative (ESI) is a cross-program effort by the Brookings Institution designed tooster multidisciplinary research and dialogue on all aspects o energy security. ESI recognizes thatpublic and private choices related to energy production and use will shape the global, economic, environ-mental, and strategic landscape in proound ways and that achieving a more secure uture will thereorerequire a determined effort to understand the likely consequences o these choices and their implications

or sound policymaking. Te ESI Policy Brie Series is intended to showcase serious and ocused scholar-ship on topical issues in one or more o these broad research areas, with an emphasis on targeted policyrecommendations.

C E S I:Colleen LowryProject Coordinator(202) [email protected]
http://localhost/var/www/apps/conversion/tmp/scratch_7/[email protected]://localhost/var/www/apps/conversion/tmp/scratch_7/[email protected]


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Alisa SchackmannAlisa Schackmann is the senior research assistantin the Energy Security Initiative at Brookings.With a background covering international ener-gy policy and climate change negotiations rom

abroad, her research ocuses on the impact o U.S.policies on global energy markets and security.She has a Masters degree rom the Lyndon B.Johnson School o Public Affairs at the Universityo exas at Austin and a B.A. rom the Universityo Southern Caliornia.

Charles EbingerCharles Ebinger is a senior ellow and director othe Energy Security Initiative at Brookings. Hehas more than 35 years o experience specializ-ing in international and domestic energy markets

(oil, gas, coal, and nuclear) and the geopolitics oenergy, and has served as an energy policy advisorto over 50 governments. He has served as an ad-

junct proessor in energy economics at the JohnsHopkins School o Advanced International Stud-ies and Georgetown Universitys Walsh School oForeign Service.

John P. BanksJohn P. Banks is a nonresident senior ellow at

the Energy Security Initiative at Brookings. Hehas worked with governments, companies andregulators or over 25 years in establishing andstrengthening policies, institutions, and regulato-ry rameworks to promote sustainable energy sec-tors. Mr. Banks also serves as an adjunct proessorat the School o Advanced International Studies atJohns Hopkins University. He has worked in over20 countries.

ABOUTTHEAUTHORS


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I congratulate you and your collaborators on the report and on the

Energy Security Initiative. Te active interest and involvement of

Brookings in Arctic affairs is, and will be, of enormous importance

for the future development of the region.

H.E. laur Ragnar Grmsson, President o Iceland


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Te authors are grateul to the wide array o stakeholders, including academ-ics, government officials, regulators, industry executives, and representatives oNGOs and think tanks, who participated in this research or being so orth-coming with their experience and insights. Te authors wish to thank CameronKhodabakhsh, Simon Huang, Jane Olin-Ammentorp, Catherine rainor, Sara

Meyerhoff, Chloe Lula, and Ester Strommen or their research assistance. Teauthors are also grateul to Betsy Baker, David Hayes, and William Antholis ortheir careul review. Finally, the authors would like to recognize the help o Col-leen Lowry, Marcia Underwood, and the Brookings Foreign Policy communica-tions team in the production process.

ACKNOWLEDGEMENTS

Brookings recognizes that the value it provides to any sup-porter is in its absolute commitment to quality, independenceand impact. Activities supported by its donors reflect thiscommitment, and the analysis and recommendations o theInstitutions scholars are not determined by any donation.


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List of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

Summary for Policymakers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x

1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. A New Energy Frontier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

3. U.S. Arctic Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

4. Current Global Governance Framework. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

5. Challenges in the Governance Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

6. Conclusions and Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Annex A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

TABLEOFCONTENTS


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AANDC Aboriginal Affairs and Northern Development Canada

AMAP Arctic Monitoring and Assessment Programme (Arctic Council)

ANWR U.S. Arctic National Wildlife Refuge

AOR Arctic Ocean Review

API American Petroleum Institute

BAT Best Available Techniques

BEP Best Environmental Practice

BOEM U.S. Bureau of Ocean Energy Management

BP British Petroleum

BSEE U.S. Bureau of Safety and Environmental Enforcement

CAFF Conservation of Arctic Flora & Fauna (Arctic Council)

CEN European Committee for Standardization

COGOA Canada Oil and Gas Operations Act

COS Center for Offshore Safety

DOD U.S. Department of Defense

DOE U.S. Department of Energy

DOI U.S. Department of the Interior

DOS U.S. Department of State

EEZ Exclusive Economic Zone

EIA Environmental Impact Assessment

L ISTOF ACRONYMS


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EPA U.S. Environmental Protection Agency

EPPR Emergency, Prevention, Preparedness, and Response (Arctic Council)

ERRA Energy Regulators Regional Association

ESI Energy Security Initiative at Brookings

EU European Union

HSE Health, Safety, and Environment

ICC Inuit Circumpolar Council

IMO International Maritime Organization

IPIECA International Petroleum Industry Environmental Conservation Association

IRF International Regulators Forum

ISO International Organization for Standards

JAMP Joint Assessment Monitoring Programme (OSPAR)

JIP Arctic Oil Spill Response Technology Joint Industry Program

KOGAS Korean Gas Company

LNG Liquefed Natural Gas

MARPOL International Convention for the Prevention of Pollution from Ships

MMS U.S. Minerals Management Service

MODU Mobile Offshore Drilling Units

MOU Memorandum of Understanding

MPE Ministry of Petroleum and Energy (Norway)

MWCC Marine Well Containment Company

NEB National Energy Board (Canada)

NGL Natural Gas Liquids

NGO Non-Governmental Organization

NOAA U.S. National Oceanic and Atmospheric Administration

NPD Norwegian Petroleum Directorate

NSPD National Security Presidential Directive


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OCS Outer Continental Shelf

OESC Ocean Energy Safety Advisory Committee

OESI Ocean Energy Safety Institute

OGP International Oil and Gas Producers Association

OIC Offshore Industry Committee (OSPAR)

OSPAR Convention for the Protection of the Marine Environment of the North-East

Atlantic

PAME Protection of Arctic Marine Environment (Arctic Council)

PSA Petroleum Safety Authority (Norway)

QSR Quality Status Report (OSPAR)

RUNARC Russia-USA-Norway Arctic Offshore Oil and Gas Regime Project

SCPAR Standing Committee of Parliamentarians of the Arctic Region

SEMP Safety and Environmental Management Program

SWRP Subsea Well Response Project

TAPS Trans-Alaska Pipeline System

UAS Unmanned Aircraft Systems

UNCLOS United Nations Convention on the Law of the Sea

UNEP United Nations Environment Programme

USD United States Dollar

USG United States Government

USGS United States Geological Survey
http://www.ospar.org/html_documents/ospar/html/OSPAR_Convention_e_updated_text_2007.pdfhttp://www.ospar.org/html_documents/ospar/html/OSPAR_Convention_e_updated_text_2007.pdfhttp://www.ospar.org/html_documents/ospar/html/OSPAR_Convention_e_updated_text_2007.pdfhttp://www.ospar.org/html_documents/ospar/html/OSPAR_Convention_e_updated_text_2007.pdf


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to other global regions with large hydrocarbonresources. Tese actors have spurred the Arc-tic coastal states to support offshore oil and gasdevelopment, and the region is experiencing oth-er growing commercial interest and activity.

Nevertheless, the Arctic poses a unique operatingenvironment characterized by remoteness, thelack o ancillary supporting inrastructure, thepresence o sea ice, extended periods o darknessand cold, and hurricane-strength storms. In addi-tion, a diverse natural ecosystem and the presenceo indigenous communities call or the higheststandard o environmental protection and re-sponsible development. Tese actors, along withregulatory uncertainties, add considerable risk

and thus cost to exploiting offshore oil and gas.Although this reality recently has tempered theenthusiasm o some oil and gas companies andeven cast some development plans in doubt, thereis broad agreement that there will be increasedoffshore hydrocarbon activity in the uture. Tekey question is whether the U.S. will be preparedto meet the challenges posed by this activity.

Since 2009, the U.S. government has gradually or-mulated a policy approach to the Arctic. Tis ap-proach is outlined in the National Strategy for the

Arctic Region, published in 2013, with an empha-sis on international cooperation, the importance

he Arctic is changing and increasingly draw-ing the worlds interest. Perhaps the promiseo this vast region was best summarized by or-mer Secretary o State George Shultz, when hesaid that the opening o the Arctic is the greatest

event in human history since the coming o theice age. In the Secretarys view the exploitation othe Arctic will open a whole new ocean or hu-man activity and knowledge, with the regions

vast energy, mineral and marine resources uel-ing technological innovations no less revolution-ary than the impact o the discovery o the Pa-cific on the Old World.1 Te importance o thisregion in terms o climate change, world fisheries,new transportation corridors, and prospects orgrowing economic activity as the sea ice melts in

response to rising CO2emissions, mandates thatall nations will have an interest in this region oryears to come.

Among these economic activities, the potentialor vast reserves o offshore oil and gas consti-tutes arguably the most attractive, yet challengingprospect in the region. By the mid to late 2000s,interest in offshore hydrocarbons had surged ow-ing to receding sea ice, making more o the re-gion accessible, rising global energy demand,U.S. government estimates o large undiscoveredoil and gas reserves throughout the Arctic, and amore politically stable investment climate relative

SUMMARY FORPOLICYMAKERS

1Secretary George P. Shultz, Remarks beore the Hoover Institution Arctic Symposium, Stanord University, Palo Alto, Caliornia, November16, 2012.


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ture to deal with it. As a ormer U.S. Departmento State official stated, Te U.S. government needsto understand the need or speed in molding itsArctic policy. Tis requires a shif rom viewingthe Arctic primarily as a security threat in a strict-ly military and geopolitical sense, to ocusing on asafety threatin the Arctic in the context o climatechange, sustainability o indigenous communities,and protection o the environment.

Te existing governance framework for offshore

oil and gas activities in the Arctic region needs to

be strengthened, especially in the area of oil spill

prevention, containment, and response. Givenlarge distances, severe climate conditions, the pris-tine nature o the region, and the potential or oilpollution to affect more than one national jurisdic-tion, a critical part o strengthening governance isoil spill prevention, containment, and response.Tere is growing awareness and criticism that thecurrent, multilayered regulatory ramework is tooragmented and is not tailored to the unique con-ditions o the Arctic marine environment. Tereare concerns that national laws and regulations inplace vary in their overall systemic approach andability to be enorced, and that they are not su-

ficiently Arctic-specific or Arctic-tested to addressoperations taking place in ice-covered regions.Furthermore, the standards should be supportedby equipment and inrastructure in place, as wellas resource sharing arrangements, that allow time-ly and appropriate preparedness and response inthe event o an accident.

Te most effective governance strengthening ap-

proach is to build on the existing regulatory frame-

work. A new, Arctic-wide, legally binding instru-

ment addressing offshore oil, gas, and accompanyinginstitutional structures is not easible in the near-term. First, it is a top-down approach that, since it in-

volves so many sovereign and other interests, couldbe unwieldy and take many years to enact (similar tothe experience with the International Maritime Or-ganizations Polar Code). Second, such a high-level,

o the Arctic Council, and responsible develop-ment o hydrocarbon resources. More recently, inanticipation o the U.S. assuming chairmanshipo the Arctic Council in 2015, the White Housereleased its Implementation Plan for the NationalStrategy for the Arctic Regionin January 2014. ourther advance its earlier-outlined themes, thePlan singles out two key objectives: promotingoil pollution preparedness, prevention, and re-sponse and developing a robust agenda or theU.S. chairmanship o the Arctic Council.

At the same time, the Deepwater Horizon oil spillin the Gul o Mexico in April 2010, together withthe technical setbacks conronted by Shell in its at-tempt to drill in the Chukchi and Beauort Seas offthe coast o Alaska in the summer o 2012, has hada transormative impact on Arctic policy develop-ment. Tese events raised questions about drillingin rontier areas such as the Arctic and promptedwidespread calls rom the government, industryand expert bipartisan groups or U.S. leadershipin offshore oil and gas governance. Specifically,there is an increasing ocus on oil spill prevention,control and response, and on the development oArctic-specific standards to accommodate drilling

in ice-laden areas.

Within the context o all these actors and evolv-ing policy, we identified two critical questions:1) How can the U.S. elevate the region as a pri-ority national interest? 2) How can the U.S. leadin strengthening offshore oil and gas governancein the Arctic? Te objective o this policy brie isto recommend how the U.S. government can an-swer these questions in preparation or assumingchairmanship o the Arctic Council in 2015.

CONCLUSIONS

Tere is consensus that the U.S. government

should elevate the Arctic as a priority national

interest. Te changing Arctic is outpacing the gov-ernments current policy and institutional struc-


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(including types o resources, extent o inra-structure, ecosystems, and indigenous popu-lations) and builds on existing exchanges andlower-level dialogues. It also provides con-crete localized governance mechanisms thatcan be adopted or modified or wider applica-tion and offers a more streamlined path (sinceit would not initially involve multiple sovereignactors) to reach meaningul short-term solutions.Tis method is best characterized by the Barents2020 process between Russia and Norway.3

Tere is considerable room for better commu-

nication, coordination, and information shar-

ing amongst a wide array of institutions, con-

ventions, and treaties relevant to Arctic oil and

gas. Networks, exchanges and other peer-to-peermechanisms on a multilateral and bilateral basis,as well as industry collaborative efforts, have beenin place or many years throughout the Arctic,and they work. Moreover, there are precedentsin other regions and sectors that provide work-able models or how to implement networks thatenhance the regulation o offshore activity inthe Arctic (or example, in fisheries and law en-orcement). One clear benefit o the networking

approach is that it helps fill gaps in knowledgeby sharing lessons and experience. Tere is alsowidespread consensus on the value o and needor expanding this concept. Te networking ap-proach also allows more entrees or the privatesector into the processa pressing need that weheard in a number o our research discussions.

Te private sector should be better integrated into

efforts to strengthen Arctic governance. Since hy-drocarbon development in the Arctic will be un-

dertaken by companies, they need to be involvedin the process o establishing standards. Tis doesnot mean that oil and gas operators dictate their

consensus-driven processwith sovereign in-terests at stake and widely differing conditionsthroughout the Arcticcould result in weak, wa-tered-down regulations in a regulatory race to thebottom. Tird, the prospect o developing a newlegal architecture has been addressed already bythe Ilulissat Declaration in which five Arctic statesexplicitly recognize the adequacy o the existing le-gal ramework. Fourth, attempting to craf a newlegal ramework could overwhelm other more use-ul and effective efforts in the short-term.2

Te Arctic Council should be strengthened to

play a stronger role in enhancing offshore oil and

gas governance, but its current mandate and le-

gal character should not be changed. Te ArcticCouncil works and any governance-strengthen-ing approach should build on it. It has been aninvaluable institution in raising awareness o theimportance o the Arctic, especially in elevatingthe voice o indigenous peoples throughout theregion, and it should continue to play a key rolein enhancing oil and gas governance. We do notsupport changing the Arctic Councils undamen-tal mandate, including proposals or making it alegal entity with treaty powers. Rather, the Arctic

Council should remain a policy-shaping, scientificact-finding body and not become a policymakingentity. Nevertheless, the Council should be im-bued with enhanced internal structural and pro-cess changes that prioritize and elevate oil and gasissues allowing or a more structured and effectiveconvening o all relevant actors to strengthen theoffshore oil and gas governance regime.

Localized, regional, or bilateral governance ap-

proaches have significant merit: they have been

used extensively to yield timely, meaningful, andpractical results. Tis approach takes into con-sideration similar neighborhood conditions

2 Te effort to make progress toward the adoption o an Arctic Ocean ramework agreement could soak up a lot time and energy and mightwell detract rom the capacity o policy makers to address more specific needs or governance at Oran R. Young, I an Arctic Ocean treatyis not the solution, what is the alternative?, Polar Record 47 (243), 2011, pp. 327-334.

3See Chapter 4 or detailed discussion o the Barents 2020 initiative.


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Tis policy approach supports important ob-jectives o the U.S. National Arctic Strategy tostrengthen international cooperation and pro-mote Arctic oil pollution preparedness, preven-tion and response. It also addresses U.S. ob-ligations to meet the Arctic Councils KirunaDeclaration to develop effective ways to imple-ment theArctic Oil Pollution Agreementnamely,to encourage uture national, bi-national, andmultinational contingency plans, training andexercises, and to develop effective response mea-sures.5 Moreover, it supports recommendationsrom the Deepwater Horizon Commission, theOffshore Energy Saety Advisory Commission,and the Department o Interior to develop Arc-tic-specific regulations. In short, we believe thatour recommendations provide an opportunityor the U.S. to increase domestic awareness o thestrategic importance o the region and improvegovernance o Arctic offshore oil and gas activi-ties, while meeting stated objectives and commit-ments o U.S. policy in the region.

Our specific recommendations are as ollows:

1. Establish oil spill prevention, control, and

response as the overarching theme orU.S. chairmanship o the Arctic Councilin 2015-2017.

2. Create the diplomatic post o Arctic Am-bassador.

3. Establish a Regional Bureau or Polar A-airs in the U.S. Department o State.

4. Accelerate the ongoing development oAlaska-specific offshore oil and gas stan-dards and discuss their applicability inbilateral and multilateral orums or the

broader Arctic region.5. Strengthen bilateral regulatory arrange-ments or the Chukchi Sea with Russia,and the Beauort Sea with Canada.

final orm. Rather they should have a seat at thetable o a collaborative process rom the earlystages o any effort. Tere are a number o indus-try entities undertaking such efforts, as well as e-orts among consortia o companies researchingoil spill response technology or providing mutualaid in response capabilities. Collaboration is thekey to leverage the expertise and resourcesbothfinancial and in equipment and inrastructurewhile taking advantage o lessons learned andsharing best practices.

It is critical to involve indigenous groups in deci-

sions concerning offshore oil and gas activities,

including the development and implementation

of governance instruments. Tere is broad accep-tance o the critical importance o dialogue andpublic consultation with local communities. Tis

view is shared by governments and the oil indus-try. Tere is also growing awareness that indig-enous input into the development o standards isnecessary to leverage traditional knowledge. Tiscan have an impact on a range o regulatory issuessuch as area and seasonal drilling and seismictesting, and their interaction with marine mam-mal activity.

RECOMMENDATIONS

Te U.S. government must decide i it is an Arcticnation or not and what our vital interests in the re-gion are.4 Based on our analysis and conclusions,we believe that it is in the U.S. national interest tolead in strengthening the Arctic offshore oil andgas governance regime. Te cornerstone o U.S.leadership should be enhancing oil spill preven-tion, control and response through the develop-

ment o Arctic-specific standards and resourcesharing arrangements to ensure adequate stan-dards, procedures, financial resources, equipment,and inrastructure are in place and available.

4Comment rom a ormer senior U.S. government official, private interview.5Troughout this brie, we use Arctic Oil Pollution Agreement to reer to theAgreement on Cooperation on Marine Oil Pollution Preparedness

and Response in the Arctic.


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Tis policy brie is designed to inorm the legis-lative and executive branches o the U.S. govern-ment o the current state o offshore oil and gasgovernance in the Arctic, the need to strengthenthis governance, possible avenues or doing so,and the leadership opportunities available in itschairmanship o the Arctic Council. Te brie isintended to highlight that the responsibilities andchallenges the U.S. will assume in this role can-not be met with current policies. Rather, properleadership will require a sustained commitmento financial and institutional resources to moveorward efforts to improve the prevention, con-tainment, and response to accidents in the Arctic.

Congress has the responsibility to understand theimportance o establishing strong offshore gover-nance in this region as a national security priority.Even i offshore oil and gas activities in the regiontake decades to come online at commercial scale,tourism, fishing, and transportation will continueto drive economic development in the Arctic.Hydrocarbon activity is sure to ollow this pathonce paved. When it does, it is critical that properoil spill prevention, response, and managementregimes are in place to avoid environmental dev-

astation. In preparing or its chairmanship o theArctic Council, the U.S. government must notonly recognize the opportunity it has to spear-head these efforts but also to embrace them,pushing orward on initiatives such as those rec-ommended in this policy brie.

6. Support the industry-led establishmento an Arctic-specific resource sharingorganization or oil spill response andsaety.

7. Support and prioritize the strengtheningo the Arctic Council through enhancedthematic coordination o offshore oil andgas issues.

8. Support the establishment o a circumpo-lar Arctic Regulators Association or Oiland Gas.

U.S. LEADERSHIPANDSTRENGTHENINGARCTICOFFSHOREOILANDGASGOVERNANCE

Climate change is contributing to unprecedentedchanges in the Arctic. As the ice melts urther andhydrocarbon exploration and development moveinto more ice-inested waters, new regulatory ap-proaches will be needed, including the adoption oArctic-specific standards and the implementationo systems, inrastructure, and resource sharingarrangements to strengthen oil spill prevention,containment, and response. Despite much debateover how this is best accomplished, there is broad

consensus that the prospect o much o the Arc-tic opening up or commercial development on ascale scarcely recognized a ew decades ago posesmajor challenges. Environmental challenges onthe local, regional, and international levels andassociated risks, especially to indigenous com-munities, must be managed through strengthen-ing the existing offshore governance regime.


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1. INTRODUCTION

Over the last several years, the Energy Secu-rity Initiative (ESI) at Brookings has beenexamining major issues in the Arctic through aseries o events eaturing diverse regional lead-ers rom indigenous groups, Arctic ambassadors,and oreign ministers o the Arctic Ocean litto-ral states, the Prime Minister o Greenland, thePresident o Iceland, and key U.S. officials romthe Department o State, Department o the In-terior, Navy, Coast Guard, NOAA, the EPA, andleading academic specialists. In addition, ESIsstaff has participated in several high-level work-ing group meetings o the Arctic Program at the

Hoover Institution, chaired by ormer Secretaryo State George Shultz and Retired Rear AdmiralGary Roughead.6

As a result o these activities and additional re-search, several acts became increasingly clear.First, climate change is opening new regions othe Arctic or commercial development. Second,not only is there a strong prospect or extensiveoil and gas discoveries, but there is also grow-ing commercial interest and activity in the re-

gions hydrocarbon resources, with all the littoralstates having enacted policies to enable their de-

velopment. Tird, the Arctic environment poses

unique challenges to offshore oil and gas develop-ment. Fourth, and perhaps most importantly, de-

spite some recent positive policy developments,there is near unanimous consensus that the U.S.government is not sufficiently prepared to addressthese changing dynamics.

Moreover, the Deepwater Horizon oil spill inApril 2010, along with the setbacks experiencedby Shell in the Chukchi Sea in 2012, have had amajor impact on this evolving policy environ-ment, specifically on drilling in ragile rontierareas. Opponents o developing offshore Arctic

hydrocarbons are skeptical that the risks associ-ated with oil and gas development in the Arcticcan be reduced to an acceptable level. Tey stressthat the existing governance regime in the Arcticis inadequate; the very limited resources availableto respond to a loss o well control combined withpristine and highly diverse ecosystems wouldmake a Deepwater Horizon-type incident havear more dire consequences in the Arctic thanit did in the Gul o Mexico. Furthermore, crit-ics argue that existing standards are not Arctic-

tested or operations in ice-covered waters, andthat there is no equipment and inrastructure inthe region to respond to an oil spill. In contrast,

6Te Hoover Institution will release a major book length manuscript in 2014 dealing with a number o critical Arctic issues, includinggovernance o shipping and other international maritime trade issues affecting the oil and gas industry.


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leadership in the Arctic on both offshore oil andgas governance and international coordination.

Realizing this opportunity, Brookings embarkedon a research effort to recommend how the U.S.government can prioritize Arctic policy and, spe-cifically, play a global leadership role in strength-ening offshore oil and gas governance.

METHODOLOGY

Owing to the volume o work already conductedon the subject, Brookings relied on a two-track ap-proach: a detailed review o the existing literatureincluding reports by governments, academic insti-tutions, NGOs, and the private sector; and detailedinterviews with over 80 Arctic specialists romCanada, Finland, Iceland, Norway, Sweden, Rus-sia, the United States, and European Union officialsin Brussels. Te participants in these research in-terviews included five Senior Arctic Officials (thehighest ranking government official dealing withthe Arctic in each country), top level oil industryofficials responsible or the Arctic rom three ma-

jor companies, NGOs, non-oil and gas companies,and representatives o indigenous communities.

We also had discussions at the Arctic Circle Con-erence in Reykjavik in September 2013 with aca-demic experts, the government o Greenland (in-cluding the current and ormer Prime Minister),the Prime Minister o the Faroe Islands, and Rus-sian specialists. Finally, we were able to draw uponthe knowledge and insights o Icelands Presidentlaur Ragnar Grmsson rom a Brookings orumheld in Washington in April 2013 in concert withthe Embassy o Canada and rom his address at theArctic Circle conerence in Iceland. All the views

expressed in the course o our interviews and dis-cussions were given in confidence with no directattribution provided unless previously agreed, ormade in a public setting.

During the ormulation o the report, we drew ex-tensively upon the inormation and insights provid-

supporters o Arctic drilling avor appropriatelyregulated access to resources to support econom-ic development, generate revenues or local andnational governments, and create jobs.

Te increasing ocus on the Arctic and DeepwaterHorizon has also spurred a wider global debate.For example, the Arctic Ocean littoral states takethe view that since most o the Arctic Ocean allswithin their respective Exclusive Economic Zones(EEZs), international law allows each states lawsand regulations to govern oil and gas resource de-

velopment within their domains. However, thisview is not shared by some non-Arctic states suchas India, China, South Korea, and Japan. Tesestates and others argue that all nations shouldhave a seat at the table on issues relating to theregions uture owing to the Arctics vast energy,mineral and fish resources, its importance to theglobal ecosystem and climate, and the emergenceo new commercial maritime routes. In addition,some o these nations assert their right to theresources in the High Arctic, a geographicallysmall area outside the EEZs o the littoral states.Non-Arctic states also note that traditional inter-national law has not kept up with pending chal-

lenges posed by the regions commercial develop-ment, with specific concerns over the inadequacyo a suitable legal liability regime in case o dam-aging accidents.

Deepwater Horizon and Shells experiences in theChukchi have demonstrated the potential dangerso drilling in the Arctic. Te environmental dam-age and inadequacy o inrastructure exhibitedby these incidents have led to calls rom govern-ment, industry and expert bipartisan groups or

U.S. leadership in offshore oil and gas governance.In addition, one o the key lines o effort in theObama administrations National Strategy for the

Arctic Region is to strengthen international coop-eration in the Arctic. Te U.S. chairmanship o theArctic Council, to begin in June 2015, will serve asan opportunity or the U.S. government to assume


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broad national policy objectives related to thedevelopment o resources, and national regula-tors, as part o a government, develop and imple-ment a regulatory approach and specific rules andstandards to ensure government policy objectivesare met. Te oil and gas companies and relatedtrade groups bring technical expertise and oper-ating experience to inorm the development oworkable standards. Tere are also a wide arrayo other institutions that do not play a direct gov-ernance role, but provide important scientific andother inputs, including standards organizations,NGOs, academia, and local communities. For ex-ample, the Arctic Council, while not responsibledirectly or governance, is critical in supportingresearch, examining science-related issues, andexamining and developing best practices.

Te authors o this policy brie do not take a posi-tion on drilling in Arctic waters. Tey acknowl-edge that since activity is already taking place andwill likely continue, it is prudent to take steps nowto ensure that offshore hydrocarbon developmentis carried out in the most responsible mannerpossible, in particular with respect to oil spill pre-

vention, control and response.

Tis policy brie is organized as ollows:

Chapter 2: A New Energy Frontier Provides an overview explaining the po-tential and growing commercial interestin offshore oil and gas in the Arctic, high-lighting key opportunities and activities.

Chapter 3: U.S. Arctic Policy As-sesses the evolution o U.S. Arctic policy,

ed by the interviewees. In the final analysis, however,the recommendations reflect the views o the ESIteam alone and not the views o any individual in-terviewed. We have attempted to create recommen-dations reflecting what we believe are issues worthyo serious consideration by the U.S. government.

ASSUMPTIONSANDDEFINITIONS

Tis assessment ocuses on offshore oil and gasactivity, broadly encompassing the supportinginrastructure and steps involved in drilling andproduction. We do not address shipping in thisanalysis since this is covered extensively in otheranalyses and is largely regulated under separatelegal instruments. Te respective national taxand financial regimes surrounding offshore oiland gas activities are also not addressed. Finally,there is a growing realization that the insuranceand liability regime governing a major oil pollu-tion incident in the Arctic is inadequate and stepsshould be taken now to establish a ramework inadvance o commercial oil and gas activity in theregion. For example, the AOR report states thatinternational law does not currently address li-ability or damage rom drilling activities in the

way the CLC and Fund conventions have or oilspills rom vessels.7 However, we do not assessthis critical aspect o offshore oil and gas gover-nance given several recent analyses on this sub-

ject, including rom the Hoover Institution.8

We use the term governance in this report to re-er to a multi-aceted ramework in which variousstakeholders play a distinct and critical role in over-seeing and regulating offshore oil and gas activities,both in direct and indirect ways. Governments set

7PAME, Te Arctic Ocean Review Project, Final Report, (Phase II 2011-2013). (AOR May 2013) Protection o the Arctic MarineEnvironment (PAME) Secretariat, Akureyri, May 2013, p. 58. CLC is the International Convention on Civil Liability or Oil PollutionDamage, and the Fund is the International Convention on the Establishment o an International Fund or Compensation o Oil PollutionDamage.

8For an excellent analysis o the issue and options see Mark E. Rosen and Patricio Asura-Heim, Addressing the Gaps in Arctic Governance.Arctic Security Initiative, Hoover Institution, 2013.


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and opportunities or strengthening theexisting offshore oil and gas governanceregime.

Chapter 6: Conclusions and Recom-

mendations Recommends steps or theU.S. government to elevate the Arctic as apolicy priority and specifically to assumea leadership role in strengthening thecurrent offshore oil and gas governanceregime as it prepares or the chairman-ship o the Arctic Council in 2015.

examines the impact o the DeepwaterHorizon oil spill in the Gul o Mexico,and describes the challenges conrontingU.S. Arctic policy.

Chapter 4: Current Global GovernanceFramework Provides an overview othe existing global governance rame-work or offshore oil and gas activities.

Chapter 5: Challenges in the Gover-

nance Framework Analyzes challenges


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2. A NEWENERGYFRONTIER

his chapter describes the offshore oil and gaspotential and project activity throughout theregion. Tis is not an exhaustive inventory, butrather is intended to highlight key data and select-ed developments. Exhibit Aprovides a map o theArctic indicating the location o major resources.

RISINGINTERESTINARCTICOILANDGAS

Several actors converged in the mid to late 2000sto spur interest in Arctic offshore hydrocarbonresources. First, as a result o climate change andthe retreat o Arctic sea ice, the waters o the re-gion are increasingly open or longer periods othe year or oil and gas exploration as well as thetransit o supporting maritime vessels. Estimatesindicate that the polar ice cap is now 40 percent

smaller than in 1979, and summer sea ice acrossthe Arctic covers hal o the area it did in 2000.9

Second, in 2008 the U.S. Geological Survey(USGS) issued a revised hydrocarbon assess-ment o the Arctic indicating 13 percent o theworlds undiscovered oil resources (90 billionbarrels) and 30 percent o the worlds undiscoverednatural gas resources (1,669 trillion cubic eet) liein the region; o this, 84 percent are offshore.10

Tird, strong projected global growth in oil de-mand and soaring prices peaking at $147 perbarrel in July 2008 accelerated interest in newrontier areas. Finally, interest in the Arctic wasbolstered by the act that, despite major techni-cal risks and high costs, most o the region isgoverned by politically stable states that adhereto the rule o law and the sanctity o contracts.Te Arctic thus poses ar less political risk thanother parts o the world where the growing powero national oil companies either limits access topromising drilling acreage or risks demands orcontract revisions once oil and gas is discovered.

REGIONALPROSPECTSANDCOMMERCIALACTIVITY

United StatesTe U.S. Arctic is estimated to hold large reserveso oil and gas. Te USGS believes there may be23 billion barrels o technically recoverable oiland 108 trillion cubic eet o natural gas offshorealone on the Outer Continental Shel (OCS) in theBeauort and Chukchi Seas.11 Elsewhere in Alas-ka, there are indications, while controversial, thatsizeable oil and gas resources still exist on the cen-tral North Slope. Furthermore, though estimates

9Te 40 percent figure is rom U.S. Coast Guard Arctic Strategy, May 2013. For data on changes in sea ice coverage, see J.P. Clement, J. L.Bengtson, and B. P. Kelly,Managing for the future in a rapidly changing Arctic: A report to the President. Interagency Working Group onCoordination o Domestic Energy Development and Permitting in Alaska, Washington, D.C., 2013, p. 11. While sea ice returned in 2013, thelong-term trends over the last 30 years are clear.

10For more inormation, see: K.J. Bird et al, Circum-Arctic Resource Appraisal: Estimates o Undiscovered oil and Gas North o the ArcticCircle: U.S. Geological Survey Fact Sheet FS-2008-3049, U.S. Geological Survey, 2008, p. 4, ( http://pubs.usgs.gov/s/2008/3049/s2008-3049.pd).

11Marc Humphries, Robert Pirog, and Gene Whitney, U.S. Offshore Oil and Gas Resources: Prospects and Processes, Congressional ResearchService, 26 April 2010. States have jurisdiction or activities up to three miles rom the coast, and ederal jurisdiction extends rom that pointto 200 miles and is reerred to as the OCS.
http://pubs.usgs.gov/fs/2008/3049/fs2008-3049.pdfhttp://pubs.usgs.gov/fs/2008/3049/fs2008-3049.pdfhttp://pubs.usgs.gov/fs/2008/3049/fs2008-3049.pdfhttp://pubs.usgs.gov/fs/2008/3049/fs2008-3049.pdf


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12Clement et al,Managing for the future, p. 16.13Sharon Warren, Energy Outlook: U.S. Arctic Outer Continental Shel, Department o the Interior, Bureau o Ocean Energy Management,

July 2013.

have been reduced recently, prospects o oil in theNational Petroleum Reserve and perhaps in theArctic National Wildlie Reuge (ANWR) exist

as well. Tere might also be oil and gas in shaleormations which could potentially be developedwith hydraulic racturing when market condi-tions allow.12

Tere has been some exploration and productionactivity in the Alaskan OCS: a total o 86 explor-atory wells have been drilled since 1975the vast

majority in the period 1975-1995with 31 in theBeauort Sea and 6 in the Chukchi Sea.13 In recentyears the U.S. government has sought to offermore acreage in the Alaskan OCS commensurate


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on stranded assets. o avoid this situation, manyhope that new oil production in the Chukchi andBeauort Seas could use this existing transporta-tion network, reducing the time and cost o get-ting oil to market. It should be noted, however,that transporting oil rom the Chukchi Sea toAPS will require a major pipeline project in-

volving subsea trenching and crossing hundredso miles o sensitive terrain, an effort that mostscenarios indicate is more than a decade away.Moreover, the success o the unconventional oiland gas revolution in the lower 48 states has hada sobering effect on how soon energy resourcesin high-cost areas such as the Arctic will be de-

veloped.

European High North

Over the next decade, investments in excess o30 billion euros will commence in the EuropeanHigh North and adjoining regions o Russia, withthe largest projects associated with the offshore oiland gas industry.19 Tese investments could be a-cilitated by a seismic shif in global transportationroutes i Russias Northern Sea Route, the North-west Passage through the Canadian archipelago,and new previously unimagined transpolar sea

lanes become the new reality o internationalcommerce. Tese new corridors could reduce thedistance between Europe and Asia by as much as5,200 miles and will lead to the development onew international marine servicing hubs or in-dustry in places as diverse as Iceland, the Faroe Is-lands, and remote regions o Russia, Canada, andAlaska. In addition, with this increased maritimetraffic new ports will be developed which in turn

with the Obama administrations stated all o theabove energy strategy to help promote econom-ic development and enhance energy security.14

Nearly 1 million acres are leased in the Beauortand 2.75 million acres in the Chukchi, and the2012-2017 Five Year Outer Continental Shelf Oil

and Gas Leasing Programcalls or two additionallease sales, one in the Chukchi in 2016 and one inthe Beauort in 2017.15

In 2012, Shell commenced initial preparations oroil exploration in the Beauort and Chukchi Seas,but owing to ice encroachment and delayed cer-tification o an oil spill containment vessel, wasunable to drill. Although Shell had intended tocontinue exploratory drilling in the Chukchi Seain the summer o 2014, they have since canceledthese plans owing to a January 2014 ruling by aU.S. ederal court challenging the legitimacy othe lease sale to Shell in 2008.16 ConocoPhillipsand Statoil also hold leases in the Chukchi butboth companies have announced that they aretemporarily shelving exploration plans.17

Te importance o oil to the state o Alaska isdemonstrated by the act that oil comprises 98

percent o all natural resource revenues collectedby the state and that about 50 percent o all jobsare directly or indirectly related to oil produc-tion or ancillary activities on the North Slope.18

Yet oil production has been in decline since 1988.I production continues to all, by the end o thedecade the valuable rans-Alaska Pipeline System(APS) could cease operation, with serious conse-quences or the Alaskan economy and billions lost

14See Interior Finalizes Plan to Make All Highest-Resource Areas in the U.S. Offshore Available or Oil & Gas Leasing, U.S. Department o

Interior Press Release, 28 June 2012, (http://www.doi.gov/news/pressreleases/Interior-Finalizes-Plan-to-Make-All-Highest-Resource-Areas-in-the-US-Offshore-Available-or-Oil-and-Gas-Leasing.cm).

15See Five Year Outer Continental Shel (OCS) Oil and Gas Leasing Program, Bureau o Ocean Energy Management, (http://www.boem.gov/5-year/2012-2017/).

16Phil aylor, Shell Scraps 2014 exploration, cites 9th Circuits lease decision, Greenwire, 30 January 2014.17Clifford Krauss, ConocoPhillips Suspends Its Arctic Drilling Plans, New York imes,10 April 2013.18Managing for the future, p. 16.19Lapland Chamber o Commerce, European High North Business Yearbook 2013, Arctic Business Forum, April 2013, (http://ic.com/files/

Yearbook_13.pd). See also: imo Koivurova and Kamrul Hossain, Background Paper Offshore Hydrocarbon: Current Policy Context in theMarine Arctic, Arctic ransorm, Arctic Center, pp. 5-12, 4 September 2008, (http://arctic-transorm.org/download/OffHydBP.pd).


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tal, Shell, and several other companies.24 In thelicensing round to be held in 2014, the governmentwill offer 34 blocks in the Barents, moving into ar-eas urther north and east.25 Te Barents has onlyone field developedSnhvitwhich came on-line in 2007 and provides gas or LNG exports.Another oil field, Goliat, owned by ENI, has esti-mated resources o 190 million barrels o oil andis expected to start production in late 2014.26 TeSkrugard-Havis field near Goliat is in the plan-ning phase, with just the pipeline linking the fieldto a terminal north o Honningsvag, requiring aninvestment o 800 million euros.27

Several promising areas o the offshore Norwe-gian shel have not been approved or petroleumactivities by the Norwegian Parliament. Teseinclude all o the northern Barents Sea towardthe Svalbard archipelago, the eastern part o thesouthern Barents Sea, the Northeastern Norwe-gian Sea, the Arctic Ocean north o Svalbard, andthe area around Jan Mayen. With very limitedseismic study activity done at this point, thereare no plans or exploration licensing in these ar-eas. However, the government has initiated twoopening processesin which it ormally assess-

es the risks and prospects o a particular areaorJan Mayen and the south eastern Barents Sea.28Te boundary in the Eastern Barents with Russiahas now been settled, and the Russians have com-menced seismic activity studies in their portion.

will lead to the opening o new intermodal rail,pipeline, and road links rom the Arctic Oceansouth into the interior o Europe and Russias vastFar Eastern regions.20

Norway

Norway is Europes largest oil producer andamong the worlds largest natural gas exporters.Petroleum activities in Norway are divided intomature areas and rontier areas. Mature areas in-clude the North Sea, where most oil productionhas taken place, and most o the Norwegian Sea.Frontier areasdefined as regions with littleknowledge o the geology, significant technicalchallenges, and lack o inrastructureincludedeepwater and northern areas o the NorwegianSea, and most o the Barents Sea.21

Te Barents Sea holds significant promise: a re-cent USGS survey estimated the mean undis-covered, recoverable petroleum resources in theBarents Sea Shel to include 11 billion barrels ooil, 380 trillion cubic eet o natural gas, and twobillion barrels o natural gas liquids (NGLs).22

Te Norwegian government estimates that theBarents holds 30 percent and 43 percent respec-

tively o the countrys undiscovered oil and gasresources.23 For this reason there is increasinginterest in this region as evidenced by a June2013 licensing round in which the governmentoffered 86 blocks, 72 o which were in the Bar-ents. Awards went to Statoil, ENI, Conoco, o-

20Lapland Chamber o Commerce, pp. 14-32.21Facts 2013: Te Norwegian Petroleum Sector, Norwegian Petroleum Directorate, Norwegian Ministry o Petroleum and Energy, March 2013.22Assessment o Undiscovered Petroleum Resources o the Barents Sea Shel. World Petroleum Resources Assessment Fact Sheet, U.S.

Geological Survey, accessed 26 July 2013, (http://pubs.usgs.gov/s/2009/3037/pd/FS09-3037.pd).23Facts 2013, p. 28.24Reuters Editorial Staff, Update 1-Norway grants 24 oil licenses in Arctic-ocused round, Reuters, 12 June 2013, (http://www.reuters.com/

article/2013/06/12/norway-oillicensing-idUSL5N0EC2AD20130612).25Atle Staalesen, Drilling urther north, arther east, Barents Observer, 18 February 2014. http://barentsobserver.com/en/energy/2014/02/

drilling-urther-north-arther-east-18-02#.UwV7at83IbE.email.26 Facts 2013, p. 114.27Lapland Chamber o Commerce, pp. 1922.28 Facts 2013, p. 33.
http://pubs.usgs.gov/fs/2009/3037/pdf/FS09-3037.pdfhttp://www.reuters.com/article/2013/06/12/norway-oillicensing-idUSL5N0EC2AD20130612http://www.reuters.com/article/2013/06/12/norway-oillicensing-idUSL5N0EC2AD20130612http://barentsobserver.com/en/energy/2014/02/drilling-further-north-farther-east-18-02#.UwV7at83IbE.emailhttp://barentsobserver.com/en/energy/2014/02/drilling-further-north-farther-east-18-02#.UwV7at83IbE.emailhttp://barentsobserver.com/en/energy/2014/02/drilling-further-north-farther-east-18-02#.UwV7at83IbE.emailhttp://barentsobserver.com/en/energy/2014/02/drilling-further-north-farther-east-18-02#.UwV7at83IbE.emailhttp://www.reuters.com/article/2013/06/12/norway-oillicensing-idUSL5N0EC2AD20130612http://www.reuters.com/article/2013/06/12/norway-oillicensing-idUSL5N0EC2AD20130612http://pubs.usgs.gov/fs/2009/3037/pdf/FS09-3037.pdf


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sessing other arrangements to increase its oil andgas links with Russia.33

In perhaps the most significant development, Exx-onMobil signed a Strategic Cooperation Agree-ment with Rosnef in August 2011 which was sub-sequently expanded in February 2013. While littlenoted at the time, the original agreement includedexploration rights or hydrocarbon resources inthree blocks in the Kara Sea covering more than125,000 square kilometers, an area equal in size tothe total leased acreage in the U.S. Gul o Mexi-co. Under the extended agreement, ExxonMobilreceived access to an additional 600,000 squarekilometers across seven new blocs in the Chuk-chi, Laptev, and Kara Seas, all regions consideredamong the worlds most promising and least ex-plored offshore areas. Te agreement also offeredRussia participation in some o some o Exxon-Mobils acreage in Alaska. As part o the February2013 agreement with Rosnef, ExxonMobil agreedto study a prospective LNG project in Russias FarEast and to collaborate with Rosnef in establishingan Arctic Research Center.34

Despite these promising developments, the emer-

gence o low-cost unconventional shale gas in theU.S. has undermined the economics o developingsome o these large projects, including the giantShtokman natural gas field. Statoil was originallycooperating with Gazprom and otal in the Shtok-man project, which was designed to send LNG tothe U.S., but did not renew its contact in June 2012due to rising costs and an unavorable market.35

Russia

In February 2013, Russia released its first Arcticstrategy through the year 2020, emphasizing theimportance o the Arctic region or national se-curity, economic growth, and improvement o

jobs and quality o lie.29 In particular, the strat-egy ocuses on regional inrastructure and thedevelopment o oil and gas deposits in the continen-tal shel. Russia has the greatest potential or Arcticoffshore oil and gas with 52 percent o all assessedoil, natural gas, and natural gas liquids in the re-gion.30 By 2020, Russia intends to study and developthe offshore fields in the Barents, Pechora, and KaraSeas as well as in the Yamal and Gydan Peninsulas.Te government is also establishing a state programor mineral exploration and development in theArctic shel to tap known resources o chrome, zinc,manganese, titanium, aluminum, tin, and uranium.

Offshore hydrocarbon production has alreadycommenced: the Kirinskoye gas field in the Sea oOkhotsk began production October 2013, and thePrirazlomonoye oil field in the Pechora Sea start-ed production in December 2013.31 Other proj-ects are also moving orward. Moscow is seekingpartners or Rosnef and Gazprom to develop off-

shore oil and gas, and there has been considerableinterest. In the wake o a settlement o Norwaysdisputed maritime boundary with Russia, Rosnefsigned a $2.5 billion agreement in May 2012 withNorways Statoil to explore a field in the BarentsSea.32 Te China National Petroleum Corporationsigned a deal in March o 2013 to explore threeoffshore oil fields with Rosnef, and China is as-

29rude Pettersen, Russia launches program on Arctic development to 2020, Barents Observer, 20 February 2013.30Arctic Oil and Gas, Ernst and Young, 2013, (www.ey.com/oilandgas), p. 13.31Kirinskoye Gas and Condensate Field, Sea o Okhotsk, Russia, Offshore echnology.com, ( http://www.offshore-technology.com/projects/

kirinskoye-gas-condensate-field-russia/); Offshore Magazine, Gazprom starts oil production rom Prirazlomnoye in Pechora Sea, 23December 2013, http://www.offshore-mag.com/articles/2013/12/gazprom-starts-oil-production-rom-prirazlomnoye-in-pechora-sea.html.

32Rosnef and Statoil in Arctic exploration deal, BBC News, 6 May 2012.33Rakteem Katakay and Will Kennedy, Russia lets China into Arctic Rush as Energy Giants Embrace, Bloomberg, 25 March 2013.34See ExxonMobil, Arctic Leadership, (www.exxonmobil.com/Corporate/files/news_pub_poc_arctic.pd), and also based on interviews with

Exxon Arctic officials.35When development o Shtokman was first conceived, it was projected that within a decade the US would be importing 40 percent o its

natural gas needs. Te project was located perectly geographically to serve that market. Tis led to a financial boon in the Murmansk regiono Russia as billions o euros poured in preparation or the construction o the ancillary acilities required or the project.
http://www.offshore-technology.com/projects/kirinskoye-gas-condensate-field-russia/http://www.offshore-technology.com/projects/kirinskoye-gas-condensate-field-russia/http://www.offshore-mag.com/articles/2013/12/gazprom-starts-oil-production-from-prirazlomnoye-in-pechora-sea.htmlhttp://www.exxonmobil.com/Corporate/files/news_pub_poc_arctic.pdfhttp://www.exxonmobil.com/Corporate/files/news_pub_poc_arctic.pdfhttp://www.offshore-mag.com/articles/2013/12/gazprom-starts-oil-production-from-prirazlomnoye-in-pechora-sea.htmlhttp://www.offshore-technology.com/projects/kirinskoye-gas-condensate-field-russia/http://www.offshore-technology.com/projects/kirinskoye-gas-condensate-field-russia/


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o stakeholders, and this approach continues: Ab-original Affairs and Northern Development Can-ada are currently holding several public meetingsregarding uture offshore oil development in theArctic.40

At the end o 2012, there were a total o 152 ac-tive licenses in the Mackenzie Delta-Beauort Sea,Eastern Arctic offshore, and the Arctic islands, owhich most are significant discovery licensesin the Mackenzie Delta-Beauort Sea (there areonly two production licenses.)41 Arctic explora-tion now is turning to the next phase o deepwa-ter activity, while much o the past activities havebeen offshore or in much shallower depths. Forexample, in September 2013, Imperial Oil, Exx-onMobil, and BP filed a joint agreement to beginexploratory drilling in the Beauort Sea, with theAjurak and Pokak blocks expected to see drillingin depths o 1,500 meters. Tese are the arthestnorth yet to be drilled in the Canadian Arctic.42

O the 92 wells previously drilled in the Beau-ort Sea, all have been in less than 68 meters owater.43 In October 2013, the Canadian govern-ment approved a license application rom Cono-coPhillips to begin drilling exploratory wells in

the Northwest erritories.

44

Tis was the first suchapplication that approved drilling in this regionusing hydraulic racturing techniques. Statoil and

Canada

Canada possesses significant technically recover-able oil, gas, and NGL resources in the Arctic, withoffshore potential in the Mackenzie Delta-Beau-ort Sea, Eastern Arctic offshore, and the Arcticislands. Government policy in recent years hassupported developing these resources. In its 2010Arctic Foreign Policy statement, Canada identi-fied securing international recognition o the Ca-nadian continental shel as one o its priorities.36

In December 2013, the government submitteda partial claim or rights in the Atlantic seabedand indicated its intention to file an Arctic claimat a later date extending to the North Pole.37 Tegovernment also has taken steps to strengthen itsoffshore oil and gas regulatory regime. In 2011the National Energy Boardwhich regulatesoil and gas exploration activities in the Arcticcompleted an Arctic Offshore Drilling Review togather inormation on the risks involved in drill-ing in Arctic waters and develop approaches tominimize harmul impacts to the environment.38

One o the major outcomes o this review wasthe re-affirmation o the Same Season Relie WellPolicythat operators must demonstrate the ca-pability to drill a relie well to kill an out o con-

trol well during the same drilling season.

39

Teocus o the NEBs Review was extensive publicoutreach to gather comments rom a wide range

36Government o Canada, Canada and the Arctic, Foreign Affairs and International rade Canada, accessed 30 July 2013, ( http://www.international.gc.ca/arctic-arctique/index.aspx?lang=eng). Under UNCLOS, a country can claim control over waters beyond its 200 mileExclusive Economic Zone i it can provide evidence that its continental shel extends beyond this limit. Tis was the first time the CanadianGovernment stated its intention to claim the continental shel all the way to the North Pole.

37Stephen Chase, Arctic claim will include North Pole, Baird pledges as Canada delays ull seabed bid. Te Globe and Mail, 9 December 2013,(http://www.theglobeandmail.com/news/politics/ottawa-delays-ull-bid-or-claim-to-north-pole/article15824139/).

38Backgrounder National Energy Board Report on the Arctic Offshore Drilling Review, National Energy Board, last modified 1 November2011, (http://www.neb-one.gc.ca/cl-nsi/rthnb/pplctnsbrthnb/rctcffshrdrllngrvw/nlrprt2011/bckgrndr-eng.html).

39Backgrounder.40David Murphy, Canada holds Nunavut consultations on offshore oil and gas drilling. Nunatisaq Online, 3 February 2014, ( http://www.

nunatsiaqonline.ca/stories/article/65674canada_holds_nunavut_consultations_on_offshore_oil_and_gas_drilling/). Te AANDC isresponsible or policy development, royalties and leasing in Canadas Arctic Region.

41Northern Oil and Gas Annual Report 2012, Aboriginal Affairs and Northern Development Canada, p. 13.42Jeffrey Jones, Imperial Oil leads push to drill deep in Canadian Arctic, Globe and Mail, 29 September 2013, (http://www.theglobeandmail.

com/report-on-business/industry-news/energy-and-resources/major-oil-companies-apply-to-drill-deep-in-canadian-arctic/article14596797/).

43Jones, Imperial Oil, 2013.44Chester Dawson, Canada Approves ConocoPhillips est Oil Drilling in Arctic North, Wall Street Journal, 30 October 2013, http://online.

wsj.com/news/articles/SB10001424052702304073204579168212023494666 .
http://www.international.gc.ca/arctic-arctique/index.aspx?lang=enghttp://www.international.gc.ca/arctic-arctique/index.aspx?lang=enghttp://www.theglobeandmail.com/news/politics/ottawa-delays-full-bid-for-claim-to-north-pole/article15824139/http://www.neb-one.gc.ca/clf-nsi/rthnb/pplctnsbfrthnb/rctcffshrdrllngrvw/fnlrprt2011/bckgrndr-eng.htmlhttp://www.nunatsiaqonline.ca/stories/article/65674canada_holds_nunavut_consultations_on_offshore_oil_and_gas_drilling/http://www.nunatsiaqonline.ca/stories/article/65674canada_holds_nunavut_consultations_on_offshore_oil_and_gas_drilling/http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/major-oil-companies-apply-to-drill-deep-in-canadian-arctic/article14596797/http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/major-oil-companies-apply-to-drill-deep-in-canadian-arctic/article14596797/http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/major-oil-companies-apply-to-drill-deep-in-canadian-arctic/article14596797/http://online.wsj.com/news/articles/SB10001424052702304073204579168212023494666http://online.wsj.com/news/articles/SB10001424052702304073204579168212023494666http://online.wsj.com/news/articles/SB10001424052702304073204579168212023494666http://online.wsj.com/news/articles/SB10001424052702304073204579168212023494666http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/major-oil-companies-apply-to-drill-deep-in-canadian-arctic/article14596797/http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/major-oil-companies-apply-to-drill-deep-in-canadian-arctic/article14596797/http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/major-oil-companies-apply-to-drill-deep-in-canadian-arctic/article14596797/http://www.nunatsiaqonline.ca/stories/article/65674canada_holds_nunavut_consultations_on_offshore_oil_and_gas_drilling/http://www.nunatsiaqonline.ca/stories/article/65674canada_holds_nunavut_consultations_on_offshore_oil_and_gas_drilling/http://www.neb-one.gc.ca/clf-nsi/rthnb/pplctnsbfrthnb/rctcffshrdrllngrvw/fnlrprt2011/bckgrndr-eng.htmlhttp://www.theglobeandmail.com/news/politics/ottawa-delays-full-bid-for-claim-to-north-pole/article15824139/http://www.international.gc.ca/arctic-arctique/index.aspx?lang=enghttp://www.international.gc.ca/arctic-arctique/index.aspx?lang=eng


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extraction.48 Nevertheless, even while acknowledg-ing the potential or oil and gas to spur economicdevelopment, the Premier o Greenland also issueda moratorium on newexploration licenses.49

Cairn Energy was the first oil company operatingin Greenland and made its first oil discovery inthe summer o 2010.50 Additional licenses subse-quently have been granted. In December 2013,Statoil, alongside partners ConocoPhillips andNunaoil, received a license to drill in a block justoff northeastern Greenland and in January 2014,BP acquired a license to develop the Amaroq con-cession, consisting o 2,630 square kilometers.51

Afer Cairn Energy invested $1 billion in drillingoperations, Greenland has 14 exploratory wells aso 2013, up rom only six in 2000.52

Nevertheless, harsh environmental conditionscontinue to make Greenland a very challengingoperating environment and commercial discov-eries remain elusive. Cairn will not resume itsGreenland projects in 2014 as its costly effortshave proven to be ruitless.53 Statoil is also mull-ing over ending its drilling operations off WesternGreenland.54

As these overviews demonstrate, the substantialamount o estimated reserves, activities under-way, and plans on the drawing board indicate a

Husky Energy also made two discoveries in theFlemish Pass Basin off the Labrador coast o New-oundland in November 2013. ExxonMobil isconstructing the Hebron oil platorm in the sameregion, with installation slated to begin in 2016and oil production by 2017.45

Tere is also considerable commercial interest inthe Canadian Arctics gas potential, particularlyas consumers in Asia look or more gas to helpmeet rising demand. In December 2012, the Ko-rean Gas Company (KOGAS) purchased a 20 per-cent stake in the offshore Umak field, and also hasplans to build an LNG terminal along the North-west erritories.46 Te Canadian government hasalso proposed building the Mackenzie Valleypipeline, which would run rom the CanadianArctic to British Columbia, effectively reducingshipping costs or LNG to Asia.47

Greenland

With a population o only 56,000 people, Green-lands large, estimated oil and gas reserves present asignificant opportunity to support economic devel-opment and increasing autonomy rom Denmark.Te sel-ruling government in Nuuk supports

natural resources development with the Bureau oMinistry and Petroleum issuing 120 energy andmineral licenses to multinational companies in-

volving iron ore, uranium, emeralds, and nickel

45Ashley Fitzpatrick, Bay du Nord biggest find outside Norway: Statoil, Te elegram, 26 September 2013, ( http://www.thetelegram.com/News/Local/2013-09-26/article-3406745/Bay-du%E2%80%88Nord-biggest-find-outside-Norway%3A-Statoil/1).

46Nathan Vanderklippe, South Koreans eye Arctic LNG shipments, Te Globe and Mail, 23 August 2012, ( http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/south-koreans-eye-arctic-lng-shipments/article597537/).

47Brent Jang, Gas exports rom B.C. seen as key to reviving pipeline, Te Globe and Mail, 3 February 2014, ( http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/gas-exports-rom-bc-said-key-to-reviving-pipeline/article16657138/). TeCanadian government also issued licenses to Imperial and ExxonMobil to begin exporting LNG along British Columbia, though an LNGterminal has yet to be built.

48Greenland Bureau o Minerals and Petroleum, Report to Inatsisartut, the Parliament o Greenland, concerning mineral resources activitiesin Greenland, 2012, p. 13.

49erry Macalister, Greenland halts new oil drilling licenses, Te Guardian, Wednesday 27 March 2013, (http://www.theguardian.com/world/2013/mar/27/greenland-halts-oil-drilling-licences).

50 Arctic Oil and Gas.51erry Macalister, BP wins first Greenland drilling concession despite chequered record, Te Guardian, 3 January 2014, ( http://www.

theguardian.com/business/2014/jan/03/bp-wins-first-greenland-drilling-deepwater-horizon).52Coco Smits, Governance of oil, gas and mining activities in Arctic Greenland, Wageningenur, 14 August 2012, pp. 42, 43.53Gareth Mackie, Greenland on back burner as Cairn plans Arican push, Te Scotsman, 22 January 2014, ( http://www.scotsman.com/

business/energy/greenland-on-back-burner-as-cairn-plans-arican-push-1-3277106).
http://www.thetelegram.com/News/Local/2013-09-26/article-3406745/Bay-du%E2%80%88Nord-biggest-find-outside-Norway%3A-Statoil/1http://www.thetelegram.com/News/Local/2013-09-26/article-3406745/Bay-du%E2%80%88Nord-biggest-find-outside-Norway%3A-Statoil/1http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/south-koreans-eye-arctic-lng-shipments/article597537/http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/south-koreans-eye-arctic-lng-shipments/article597537/http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/gas-exports-from-bc-said-key-to-reviving-pipeline/article16657138/http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/gas-exports-from-bc-said-key-to-reviving-pipeline/article16657138/http://www.theguardian.com/world/2013/mar/27/greenland-halts-oil-drilling-licenceshttp://www.theguardian.com/world/2013/mar/27/greenland-halts-oil-drilling-licenceshttp://www.theguardian.com/business/2014/jan/03/bp-wins-first-greenland-drilling-deepwater-horizonhttp://www.theguardian.com/business/2014/jan/03/bp-wins-first-greenland-drilling-deepwater-horizonhttp://www.scotsman.com/business/energy/greenland-on-back-burner-as-cairn-plans-african-push-1-3277106http://www.scotsman.com/business/energy/greenland-on-back-burner-as-cairn-plans-african-push-1-3277106http://www.scotsman.com/business/energy/greenland-on-back-burner-as-cairn-plans-african-push-1-3277106http://www.scotsman.com/business/energy/greenland-on-back-burner-as-cairn-plans-african-push-1-3277106http://www.theguardian.com/business/2014/jan/03/bp-wins-first-greenland-drilling-deepwater-horizonhttp://www.theguardian.com/business/2014/jan/03/bp-wins-first-greenland-drilling-deepwater-horizonhttp://www.theguardian.com/world/2013/mar/27/greenland-halts-oil-drilling-licenceshttp://www.theguardian.com/world/2013/mar/27/greenland-halts-oil-drilling-licenceshttp://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/gas-exports-from-bc-said-key-to-reviving-pipeline/article16657138/http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/gas-exports-from-bc-said-key-to-reviving-pipeline/article16657138/http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/south-koreans-eye-arctic-lng-shipments/article597537/http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/south-koreans-eye-arctic-lng-shipments/article597537/http://www.thetelegram.com/News/Local/2013-09-26/article-3406745/Bay-du%E2%80%88Nord-biggest-find-outside-Norway%3A-Statoil/1http://www.thetelegram.com/News/Local/2013-09-26/article-3406745/Bay-du%E2%80%88Nord-biggest-find-outside-Norway%3A-Statoil/1


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ket conditions or oil and gas and other industrialdevelopment elsewhere in the global economy willhave an impact on uture projects, the Arctic willwithin the next 10-20 years undergo a transorma-

tion that will have implications eltaround the globe.Skeptics o Arcticresource development may arguethat such developments are manydecades away, but economic orcesrom various arenas in the globaleconomy will inexorably link to de-

velopment o this region. Te ques-tion is not whether the Arctic will be

developed and drawn into the mainstream o inter-national commerce, but rather when this will oc-cur and whether the U.S. will be prepared to meetthe challenge.

large offshore opportunity and significant com-mercial interest in the Arctic. Yet there are seriousobstacles. Regulatory uncertainties, high costs, andenvironmental conditions add considerable risk toexploiting offshore oil and gas in thisunique environment. Tese chal-lenges are recognized by the oil andgas companies, illustrated by Shellsdecision to suspend drilling in theChukchi Sea in 2014 and publicstatements rom other companies.For example, Statoils explorationchie recently stated, We dont envi-sion production rom several o these areas beore2030 at the earliest, more likely 2040, probably notuntil 2050.55Nevertheless, although the exact tim-ing o investments is unknown and changing mar-

The question is

not if there will be

large scale Arctic

development, but

when and how

quickly it will occur.

54Brian Swint and Mikael Holter, Statoil Considers Leaving West Greenland to Keep Lid on Spending, Bloomberg, 21 January 2014, ( http://www.businessweek.com/news/2014-01-21/statoil-considers-leaving-west-greenland-to-keep-lid-on-spending).

55Joshua Franklin, Large-scale Arctic oil and gas drilling decades away Statoil, Reuters, 29 November 2013. See also, Guy Chazan, otalwarns against oil drilling in the Arctic, Financial imes, 25 September 2012.
http://www.businessweek.com/news/2014-01-21/statoil-considers-leaving-west-greenland-to-keep-lid-on-spendinghttp://www.businessweek.com/news/2014-01-21/statoil-considers-leaving-west-greenland-to-keep-lid-on-spendinghttp://www.businessweek.com/news/2014-01-21/statoil-considers-leaving-west-greenland-to-keep-lid-on-spendinghttp://www.businessweek.com/news/2014-01-21/statoil-considers-leaving-west-greenland-to-keep-lid-on-spending


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3. U.S. ARCTICPOLICY

opportunities but also to provide stewardship inthis ragile environment.57

In January 2014, the White House issued an Im-plementation Plan for the National Strategy for

the Arctic Region providing more detail on howto achieve the strategys major objectives.58 TeImplementation Plan identifies two related areasto advance U.S. policy in the region regardinghydrocarbon development: promote Arctic oilpollution preparedness, prevention, and responseinternationally, and work through the ArcticCouncil to advance U.S. interests in the Arctic

Region. With regard to the latter, the plan specifi-cally calls or developing a robust agenda or theU.S. chairmanship o the Arctic Council. Terelease o the Implementation Plan was ollowedby Secretary o State John Kerrys announcementon February 14, 2014, that the U.S. Departmento State will designate a Special Representative orthe Arctic Region, a high-level official o staturewho will play a critical role in advancing Ameri-can interests in the Arctic Region, particularly aswe prepare efforts or the United States to Chair

the Arctic Council in 2015.59

his chapter provides a brie overview o U.S.Arctic policy, describes the impact o theDeepwater Horizon oil spill, and assesses themain challenges conronting U.S. Arctic policy.

EVOLUTIONOFU.S. ARCTICSTRATEGY

In January 2009, the Bush Administration issuedNational Security Presidential Directive (NSPD)-66 establishing the policy o the United States to-wards the Arctic, including the need to work withother Arctic nations to ensure that hydrocarbonand other development in the Arctic region is car-

ried out in accordance with accepted best practic-es and internationally recognized standards.56 OnMay 10, 2013, President Obama released a newNational Strategy for the Arctic Regionwhich, orthe first time, articulated the strong linkages be-tween events in the Arctic and enduring U.S. inter-ests. An important contribution o the Strategyisthe strong case it makes that changes in the Arcticare affecting U.S. national security. Te Presidentalso defined strengthening international coop-eration as one o the principal lines o effort in

the strategy not only to support new commercial

56National Security Presidential Directive (NSPD)-66 also titled Homeland Security Presidential Directive (HSPD) -25 or NSPD-66/HSPD-25,January 2009, (http://www.as.org/irp/offdocs/nspd/nspd-66.htm).

57Te White House, National Strategy for the Arctic Region, May 2013, (www.whitehouse.gov/sites/deault/files/docs/nat_arctic_strategy.pd).58Te White House, Implementation Plan for Te National Strategy for the Arctic Region, January 2014, (http://www.whitehouse.gov/sites/

deault/files/docs/implementation_plan_or_the_national_strategy_or_the_arctic_region_-_fi....pd).59Secretary Kerry Announces Department Will Establish a Special Representative or the Arctic Region, Press Statement, U.S Department o

State, Washington, DC, 14 February 2014, (http://www.state.gov/secretary/remarks/2014/02/221678.htm ).
http://www.fas.org/irp/offdocs/nspd/nspd-66.htmhttp://www.whitehouse.gov/sites/default/files/docs/nat_arctic_strategy.pdfhttp://www.whitehouse.gov/sites/default/files/docs/implementation_plan_for_the_national_strategy_for_the_arctic_region_-_fi....pdfhttp://www.whitehouse.gov/sites/default/files/docs/implementation_plan_for_the_national_strategy_for_the_arctic_region_-_fi....pdfhttp://www.state.gov/secretary/remarks/2014/02/221678.htmhttp://www.state.gov/secretary/remarks/2014/02/221678.htmhttp://www.whitehouse.gov/sites/default/files/docs/implementation_plan_for_the_national_strategy_for_the_arctic_region_-_fi....pdfhttp://www.whitehouse.gov/sites/default/files/docs/implementation_plan_for_the_national_strategy_for_the_arctic_region_-_fi....pdfhttp://www.whitehouse.gov/sites/default/files/docs/nat_arctic_strategy.pdfhttp://www.fas.org/irp/offdocs/nspd/nspd-66.htm


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as a dynamic region undergoing undamentalchange, and DODs relatively passive approachtoward the importance o the region. In particu-lar, the DOD strategy cautions against exaggera-tions o the extent and rapidity o changes in theregion: Significant uncertainty remains aboutthe rate and extent o the effects o climate changeincluding climate variability in the Arctic. Tereis also uncertainty about uture economic condi-tions and the pace at which human activity willincrease in the region. Te challenge is to balancethe risk o having inadequate capabilities or insu-ficient capacity when required to operate in theregion with the opportunity cost o making pre-mature and/or unnecessary investments in a timeo fiscal austerity.64

In sum, since 2009 the U.S. government graduallyhas ormulated a policy approach to the Arctic thatemphasizes international cooperation and, in par-ticular, the importance o the Arctic Council. More-over, as illustrated in the January 2014Implementa-tion Planissued by the White House, strengtheningoffshore oil and gas governanceby promoting oilpollution preparedness, prevention, and responseis singled out as an important objective.

IMPACTOFTHEDEEPWATERHORIZONOILSPILL

Te impact o the Deepwater Horizon oil spill inthe Gul o Mexico in April 2010 cannot be over-stated. ogether with the technical setbacks con-ronted by Shell in Alaska in the summer o 2012,the accident has had a transormative impact onU.S. energy and Arctic policy and on perceptionsabout the role o Alaska in the nations energy

uture. Prior to both events, Alaskan oil and gas,

Te Presidents National Strategy for the ArcticRegionwas strongly seconded by the May releaseo the Coast GuardsArctic Strategy60 and that othe Department o Deense (DOD) in Novem-ber 2013.61 Te Coast Guard Strategyopens withthe bold assertion that the U.S. is an Arctic na-tion ready to deal with partners in the region. Ithighlights the changes brought about by climatechange in terms o the opening o new sea routesand the act that the regions abundant resourceswill lead to increased industrial activity through-out the region. Importantly, the document high-lights the Coast Guards recognition o the needto cooperate internationally to improve Arcticgovernance. In short, the Coast Guards strategyis articulate, orward looking, and anticipatory inrecognizing that circumstances are evolving andthat it needs to plan or them.62

Te DOD Arctic Strategy is designed to advanceU.S. security interests, pursue responsible Arcticregion stewardship, and strengthen internationalcooperation. Te department also has the man-date in the Arctic to improve nautical charts o di-rect interest to the oil and gas industry, to enhanceatmospheric and oceanic models, to improve the

accuracy o estimates o ice extent and thickness,and to detect and monitor climate change indica-tors. DOD possesses a key role in meeting the U.S.obligations in aiding in search and rescue opera-tions and in responding to oil spills in ice-coveredwaters, specifically vis-a-vis theAgreement on Co-operation on Aeronautical and Marine Search and

Rescue (Search and Rescue Agreement) in theArctic and theArctic Oil Pollution Agreement.63

Nevertheless, there is a difference in tone between

the Coast Guard strategy, which sees the Arctic

60United States Coast Guard,Arctic Strategy, May 2013, (www.uscg.mil/seniorleadership/DOCS/CG_Arctic_Strategy.pd).61United States Department o Deense,Arctic Strategy, November 2013, (www.deense.gov/pubs/2013_Arctic_Strategy.pd ). NB: It is

anticipated that the U.S. Navy will release its own strategy in the first quarter o 2014 placing a strong emphasis on the links between climatechange and U.S. strategic interests in the Arctic.

62United States Coast Guard, May 2013.63Department o Deense, November 2013.64Ibid.
http://www.uscg.mil/seniorleadership/DOCS/CG_Arctic_Strategy.pdfhttp://www.defense.gov/pubs/2013_Arctic_Strategy.pdfhttp://www.defense.gov/pubs/2013_Arctic_Strategy.pdfhttp://www.uscg.mil/seniorleadership/DOCS/CG_Arctic_Strategy.pdf


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as the Arctic, is inadequate. Te same is true o thehuman and natural impacts o oil spills.66Specifi-cally, the Commission drew attention to several ba-sic acts. Given the unique challenges posed by re-

moteness, weather, ice, andother conditions, oil spillresponse methods romthe Gul o Mexico cannotsimply be transerred tothe Arctic.67 It discussedthe potential or oil spillsin the Arctic to flow acrossnational boundaries im-mediately internationaliz-ing any accident. Tus, theCommission made a clar-

ion call or strong international standards agreedto by all Arctic nations.68 Clearly the enactment osuch standards will require extensive cooperationand coordination among all Arctic nations as wellas strong institutional leadership.

Interagency Working Group on Coordination

of Domestic Energy Development and

Permitting in Alaska

o address undamental questions regarding

what U.S. Arctic policy should be, the uture oAlaska in the U.S. energy mix, and other issuesrelating to the relationship between the ederalgovernment and Alaska, President Obama on July12, 2011, issued Executive Order 13580 establish-ing the Alaska Interagency Working Group. TeExecutive Order was orthright in noting thatederal agencies have a number o independentauthorities and responsibilities related to energydevelopment and that these are ofen not as well-coordinated as they might be and, in some cases,

even work at cross purposes.69

especially rom the OCS, was predicted to play akey role in uture energy supply. Tese events, how-ever, undermined this assumption as critics askedhow the industry could insure that an accident inArctic conditions couldbe contained hundreds omiles rom any land-basedinrastructure i one couldnot be contained near theheart o the oil and gas in-dustry in exas and Loui-siana. Deepwater Horizonalso generated numerousefforts to assess lessonslearned and revise proce-dures or offshore drillingin general, and specifically or the Arctic.

National Commission Report on Deepwater

Horizon

Te Commission reviewing the Deepwater Hori-zon accident could not have been more searingin its indictment o the risks involved or the in-adequacy o the regulatory oversight o currentoffshore drilling procedures:

Deepwater energy exploration and pro-duction, particularly at the rontiers oexperience, involve risks or which nei-ther

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