What Lies Beneath

Joern Skov Nielsen surely qualifies as one of the more obscure government ministers in the world. Head of Greenland's Bureau of Minerals and Petroleum, he operates out of an office in Nuuk, capital of Greenland, a semiautonomous region of Denmark with fewer than 60,000 people living on a landmass that covers more than 800,000 square miles. In summer, Nuuk resembles a small Midwestern suburb, its low-lying ranch-style buildings spread across a wide plain and painted in stark primary colors, with only the occasional chunky office building breaking the town's low skyline. In winter, much of the town shuts down, bathed in darkness and battered by fierce storms.

But obscure Greenland also sits in the crosshairs of the global warming industry. This summer more than 15 energy companies showed up at Nielsen's door. They arrived after Greenland called for a meeting to discuss potential exploration off its west coast, where melting ice has opened up new offshore areas -- and where exploratory wells would be sunk right in the Bay of Disko Bugt, which contains an ecologically sensitive United Nations World Heritage Site. “We received a large number of applications -- almost all of the [oil] majors,” says Skov Nielsen. “It's definitely helping that the area around Greenland is warming and the sea ice coverage is a lot less.”


And there's the rub. In recent years, the oil industry has been trying to get on the right side of global warming. Writing in the Financial Times earlier this year, Royal Dutch Shell Chief Executive Jeroen van der Veer sounded more like Rachel Carson than the head of a giant company that makes its money pulling fossil fuels out of the earth. “Many scientists agree that emissions from human activities are changing our climate,” van der Veer admitted. “The challenge is to develop technology that can fuel growth without environmental degradation.” In its 2005 Sustainability Report, his company vowed to limit its greenhouse gas emissions, ramp up its alternative energy programs like solar and wind power, and work closely with conservation organizations to ensure that Shell's projects support biodiversity.

ConocoPhillips, BP, and other oil giants have joined the effort. (The holdout is ExxonMobil, which still spends corporate cash promoting anti-global warming advocates.) In recent years, BP has promoted a sophisticated, multimillion-dollar advertising campaign entitled “Beyond Petroleum” in which it boasted that it would start “a journey that will take a world's expectations of energy beyond what anyone can see today.” The company even changed its name from British Petroleum to BP and adopted a new logo -- a cuddly green, yellow, and white sunburst. “We take the problem of climate change very seriously,” BP chief executive officer Lord John Browne told German reporters this year. BP, the first oil company to acknowledge the seriousness of global warming, also has drastically ramped up its alternative energy programs. In November 2005, it announced plans to spend $8 billion over a decade and claims that it has slashed its own emissions of greenhouse gases to 10 percent below its 1990 levels. In Britain, BP has even developed a scheme to help drivers find ways to reduce carbon emissions so that their driving habits become “carbon neutral.”

Yet even as the oil giants show off their green stripes, they have quietly pursued a strategy that works against the environmental tide: buying up rights to explore Arctic and sub-Arctic lands soon-to-be exposed as global warming melts the polar ice. Such territories likely hold vast new stocks of oil, gas, and minerals, and the oil companies and other energy and mining interests are investing heavily in the warmer globe. Last year, Shell purchased some $44 million worth of leases to explore for oil in the Beaufort Sea, a pristine ocean off the northern coast of Alaska, and plans to move in a rig to begin exploration. ConocoPhillips, too, saw the opportunity, buying 13 Beaufort Sea leases last year.

BP “obviously [has] made this part of their strategy, to look at how the climate change will benefit them,” says Lawson Brigham of the U.S. Arctic Research Commission in Alaska, a congressionally mandated organization. “ConocoPhillips' research and development department is looking at the ice melt and making long-term plans.” “Shell has put an office together here in Anchorage with a huge support staff in Houston,” agrees one Alaska oil consultant. “You see how quickly they are staffing up here and you see the level of their interest” in the Beaufort Sea. According to a 2001 study by the United Nations Environment Programme, by 2050 most of the Arctic may be impacted by oil, gas, mining, and other industrial development.

This race for riches, in regions of America, Canada, Russia, Norway, and Greenland above or near the Arctic Circle, could destroy the world's most pristine environments, all the while speeding up global warming by forestalling a transition away from oil and by adding carbon dioxide emissions as companies prospect and refine crude petroleum. But few governments seem to care. Instead, the United States and other nations have quietly promoted Arctic exploitation. “When we've been talking about climate change it's with concern, but we're talking about opportunity,” George Newton, former head of the Arctic Research Commission, told a panel at the World Economic Forum this year. In other words, forget about global warming. Welcome to the global warming industry.

***

The Chukchi, a frigid, 225,000-square-mile sea north of the Bering Strait and east of Siberia, makes even remote parts of Alaska look like Times Square. The few boats sailing its black, deep waters travel days without seeing anything except an occasional walrus or ringed seal; in winter, darkness covers much of the sea 24 hours a day. The Chukchi is navigable only during summer months, and even then ships sometimes have to zigzag, in thick fog, between jagged ice floes the size of houses. “In the Chukchi, you feel like you could be on the moon,” says Ken Boyd, former director of the oil and gas division of Alaska's Department of Natural Resources.

But even the Chukchi is becoming less remote. According to the 2004 Arctic Climate Impact Assessment, a comprehensive study of the region produced by hundreds of scientists, the Arctic is heating up twice as fast as the rest of the globe; half the Arctic ice cap has vanished over the past five decades. Warming is projected to cause the near total melting of perennial sea ice later this century. Another study, by NASA, found that Arctic ice was melting even faster than previously thought, and that the most melting occurred in the Chukchi and Beaufort seas.

But even while they wring their hands over global warming, many companies and governments realize the warming will drastically improve their chances for polar profit. Oil and gas companies could set up offshore drilling operations, shipping firms could consider new routes shorter than the Panama and Suez canals, and mining firms could drill into regions no longer covered in permanent ice. “There's enormous profit potential in this,” says one prominent polar expert, adding that the oil and gas companies have started snapping up scientists to run models on Arctic potential in a warmer climate.

The Prospect contacted BP and Shell and ConocoPhillips several times for this article. Shell responded and said no one was available for comment. A BP spokesperson, commenting on how warmer Arctic temperatures may allow for more oil and gas drilling and shipping, replied that it may become possible, that “no one knows because it hasn't been tried,” and that “the first issue to address is access -- should or could Arctic regions be opened to exploration? This is a matter for politicians to decide, not oil companies, so I'll leave it to them.”

But the oil companies aren't waiting: Indeed, they have begun amassing leases in regions that will open up as more ice melts. In Norway, Norwegian oil giant Statoil is pouring an estimated $9 billion into developing a massive project called Snohvit, which will pipe natural gas from the melting Barents Sea. This spring the Norwegian government disclosed that companies will be granted new exploration licenses for the Barents, attracting corporations ranging from Texas-based Hunt Oil to Japanese petroleum giant Mitsubishi. According to documents from the U.S. Interior Department's Minerals Management Service, 15 firms have shown a desire to drill in the American part of the Beaufort. In Canada, exploration giant Devon Energy Corp. has launched a massive exploration project in the Canadian part of the Beaufort Sea, spending about $50 million on one well alone. Other oil companies have bid about $400 million in exploration licenses for the Beaufort from the Canadian government.

To carry the gas, the petroleum industry has mapped out a potential pipeline through the Canadian north that would require one of the largest infrastructure investments in Canadian history. “You can't book a room in Inuvik,” says Robert Huebert, an Arctic expert at the University of Calgary, about the gateway town to the Beaufort Sea. “They're all being taken up by the energy companies.” Energy firms, Huebert says, are even buying up rights to the most obscure areas of Canada, like Melville Island, an uninhabited Arctic island so far north it has almost no vegetation.

A project in Russia dwarfs even this exploration race. Geologists believe a region called Shtokman, in the Russian part of the Barents Sea, may hold one of the biggest offshore gas reservoirs on earth. Early 2005, when Russian gas company Gazprom picked five finalists to develop the field, the world's petroleum giants, like ConocoPhillips and Chevron, went all out to woo the Russians. Some of the oil companies reportedly even ran advertisements on television channels owned by Gazprom, essentially putting money right into the pocket of the Russian company.

Big mining companies, which have also made commitments to fighting global warming, envision similar opportunities in warming polar regions. Mining giants already have built three major diamond mines in the Canadian north. And the Prospect obtained documents and speeches confirming that in 2004 Nunavut, one of Canada's northern territories, issued some 1,500 more permits for mining exploration -- together the Northwest Territories and Nunavut handed mining firms such as global giants DeBeers and BHP Billiton some 100,000 square miles of area to prospect. “Every square inch [of the north] is going to be opened to diamonds, sapphires, gold,” Michael Miltenberger, minister of natural resources in Canada's Northwest Territories, said last year in an interview. Even the Antarctic, historically protected by an international treaty banning mining, could be game down the road. Antarctica is believed to contain large deposits of coal, iron, and probably oil and gas, and at times when commodity prices skyrocket, countries have reconsidered the ban.

There is no doubt that there is a lot to be gained, or lost, beneath the frozen areas that global warming will uncover. The U.S. Geological Survey estimates that the Arctic contains roughly 25 percent of all the globe's untapped petroleum and gas reserves. Norway's Barents Sea alone has an estimated more than two billion untapped barrels of oil; Alaska's offshore regions could contain some 25 billion barrels, which at $60 a barrel, would make Alaska's oil worth $1.5 trillion; and Russia boasts the world's largest quantities of untapped natural gas. (The world consumes about 36 billion barrels of oil a year, according to 2003 figures.)

Meanwhile, ice melt could open to commercial shipping the Northwest Passage, in northern Canada, and the Northern Sea Route, across the length of Siberia. (According to a report by the Canadian military, the Northwest Passage could become open to summertime shipping within a decade.) Using the Northwest Passage could save companies transporting goods between Shanghai and Rotterdam nearly $600,000 per trip over a voyage through the Suez Canal, according to an analysis by Emmanuel Guy, a shipping researcher at the University of Quebec. It's not surprising, then, that companies cannot resist the poles.

***

Early on March 2, a typically frigid arctic morning, a man working near the BP oil operations on the North Slope of Alaska smelled a strong odor of petroleum. He rushed to tell his bosses, who soon found that a pipeline had been leaking for an estimated five days. Before workers closed the pipeline and started vacuuming and shoveling up spilled petroleum, some 200,000 gallons of crude oil had spread onto the North Slope ice, sinking into the fragile tundra beneath.

BP claims the spill was an isolated and quickly resolved event. But the Prospect found numerous examples of mismanagement by BP and other oil companies in cold weather zones, suggesting they may not be prepared to explore in even colder, icier, and more remote Arctic regions. Operating in the Arctic is not easy. Snow and ice rust and batter pipes, rigs, and other oil operations, increasing the chance of accidents and spills. And when spills do happen, they are more difficult to access than in temperate zones, making cleanup much harder.

In the case of the pipeline that sprung a leak in March, BP had not done a comprehensive check for corrosion in nearly a decade. According to Alaska oil expert Richard Fineberg, “Over the last decade BP has consistently argued for less stringent leak detection requirements.” Facing looser rules from the state and federal governments, BP abandoned regular checks and cut costs without regard to safety, according to an internal complaint filed by employees in 2004. The company has “a difficult time maintaining a full component of trained [spill] responders,” according to a 2001 company study. Two years before that, 77 BP workers in Alaska had sent a letter to company chairman Lord Browne warning that a major worker-related accident was all but inevitable. “When will the body count, capital destruction, and loss of production be enough to halt this dead-end course?” the workers asked.

Not only drilling but also cleanup is tougher in the Arctic. The Exxon Valdez spill took place in subarctic Alaskan waters. “With the Exxon Valdez [spill], you could utilize a port to launch a cleanup operation,” says Colonel Pierre LeBlanc of Canadian Diamond Consulting, an expert on the polar regions. By comparison, he says, explorers in the upper-Arctic could be a thousand miles from the nearest major port and in areas still laden with huge blocks of ice, making cleanup nearly impossible. (The U.S. Arctic Research Commission admits, “There is a substantial dearth of knowledge about oil spills in Arctic conditions.”) Arctic flora and fauna also take longer to recover from a spill since they grow more slowly than southern animals and plants. Even the oil companies probably realize they do not know how to handle Arctic spills. At a recent forum, Alaskan native leader Robert Thompson asked Shell representatives point-blank how they would handle a spill in the far northern waters. “They say they need to do more computer modeling to think about that,” Thompson says.

Environmental groups have documented how exploration in the Barents could destroy crucial spawning grounds for many species of fish, drilling offshore in the Alaskan Arctic could ruin some of the world's biggest wild salmon runs and threaten stocks of bowhead whales, and mining in Arctic Canada has already created abandoned sites full of trash, old equipment, rotting batteries, and other debris. Even native Inuit groups that historically have supported onshore exploration, in areas like the Arctic National Wildlife Refuge (ANWR), oppose drilling in the coldest, most remote Arctic seas, where any spill could be catastrophic and exploration could scare away whales, the lifeblood of Inuit culture. “They have no evidence this [offshore development] is safe,” says Karl Francis, a special assistant to the city council of Kaktovik, an Inuit village in northern Alaska that has backed drilling in ANWR. “We get no idea of what the impacts will be.” He says Shell representatives “studiously avoided talking to me.”

Greater exploration in the north not only raises the potential for spills, it actually adds to global warming. After all, drilling for oil and gas is a major source of methane, which the Environmental Protection Agency calls a “potent greenhouse gas.” A leading study estimated that the oil fields in northern Alaska emit some 24,000 tons of methane every year. It is a perfect circle. Oil and gas production facilities spit out powerful greenhouse gases. Those gases warm the earth, melting ice and making Arctic exploration easier.

***

It is possible to drill for oil without ruining the surrounding areas. But in the Arctic areas, at least, there's little incentive. For one thing, the Arctic lies so far from population centers, and flights to the north can cost thousands of dollars, so few environmental organizations have the money to spend much time monitoring oil and gas exploration in polar regions. “For environmental groups to operate in the Arctic is very expensive, so it's hard for them to document” problems, says LeBlanc. And though some native organizations complain about exploration, energy and mining companies have been able to work them into the system: Shell recently hired the Inuit former mayor of Alaska's North Slope Borough as its community affairs manager. “Someone from Shell seems to have concluded that they can just buy their way into the region, by hiring native people,” says Francis.

Worse, the region's governments are contributing to the problem, with the United States standing as the worst offender. Although the Clinton administration did not focus on the Arctic, it at least bought into the idea of climate change as a serious global problem. The Bush administration, by contrast, has simply tried to shut down any concerns. In 2004, scientists and representatives from all of the Arctic nations were completing the Arctic Climate Impact Assessment (ACIA), which found that polar regions were rapidly warming. The White House tried to muzzle the most alarming parts and stop the report from making recommendations on how to fight global warming. “The U.S. weakened the Arctic Climate Impact Assessment document,” says Sheila Watt-Cloutier, former chair of a leading Inuit organization who participated in negotiations about the assessment. “It was worse than pulling teeth … to ensure consensus that the ACIA wouldn't just be a scientific document but would have ideas on how to deal with greenhouse gases.” Even Russia, not known for playing nice in international organizations, was easier to deal with than the United States, she says.

One year later, the U.S. Arctic Research Commission published
its biennial goals and objectives. Although it listed ways to combat environmental destruction in the Arctic, another goal was figuring out, “Can we exploit these changes in the Arctic Ocean for our benefit?” The same year, the Interior Department's assistant director for science and technology policy, Indur Goklany, produced a paper suggesting that there might be upsides to global warming. “Strictly from the perspective of human well-being, the richest-but-warmest world … would probably be superior,” Goklany argued.

More than ignoring threats, the Bush administration, and the pro-drilling Alaska state government, actively promote the global warming industry. “The federal government is driving hard to develop oil and gas, and they don't want any local opposition,” says Francis, the Kaktovik policy-maker. “Now there's just a different approach from the oil companies -- a harder-edged approach, because they don't need to worry so much about government regulation.” To support exploration in farthest-north Alaska, the Department of Interior is offering oil and gas giants waivers on the royalty fees they are supposed to pay on their finds, even though ConocoPhillips and BP reported net profits of $5.18 billion and $7.3 billion, respectively, in the second quarter of 2006. According to several Alaska sources, leases have been offered without a substantial environmental impact study.

Meanwhile, the White House has placed oil and gas loyalists in key Arctic-oriented positions. This spring, the administration picked a new head of the U.S. Geological Survey (USGS), which is supposed to conduct unbiased scientific research, including studies of polar regions. For the job, the White House selected Mark Myers, who previously worked for a part of BP. In the history of USGS, Myers was the first director in five decades not to come from within the Geological Service or from a university. “Putting someone in with strictly an oil and gas background could be a move toward moving the agency towards oil and gas interests,” the previous USGS head, Charles Groat, told reporters in July.

Meanwhile, U.S. envoys to Oslo have aggressively pushed Norway to explore in its Arctic region, which would allow Norway to ship petroleum to America. When the new U.S. ambassador, Benson Whitney, arrived in Norway last January, he quickly hustled up to the north, where he said of the Barents Sea, “This region is of great significance to the United States.” Perhaps not coincidentally, the Bush administration chose remote northern Norway, rather than capitals like Oslo or Stockholm, as the site of its first “American Corner” in Scandinavia, a public diplomacy effort designed to promote positive local opinion toward the United States.


Other governments are not blameless. Denmark, Canada, and Russia have scrambled to demonstrate they should control resource-rich international Arctic waters. The Danes have funded an expedition to the North Pole to stake their demands, and Russia has sent a document to the United Nations generously outlining its claims. A consortium of Canadian research groups calculates that Ottawa offers oil and gas companies more than $1 billion in tax breaks annually. The Canadian government's own Department of Indian and Northern Affairs admits, in internal documents, that backers of the northern gas pipeline have not fully assessed its potential impact on the environment and local people. And Peggy Holroyd, an environmental policy analyst at Canada's Pembina Institute, a research organization, says Canadian Prime Minister Stephen Harper visited Yellowknife advocating for the potential pipeline, even though the government is supposed to wait for environmental hearings before deciding whether to back it.

Of course, government regulation would be a good start. But so would more honesty from oil, gas, and mining companies about how they plan to explore in the Arctic. It turns out, BP could lead a journey that will take the “world's expectations of energy beyond what anyone can see today” to polar regions of the globe no one has ever seen. But putting that in a promotional ad would be one truth too inconvenient to admit.

Joshua Kurlantzick is a Prospect senior correspondent.

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