Legal issues of Arctic energy development, September 24-25

Energy Law Conference Program

University of Tromsø

I attended presentations at U Tromsø, Norway’s Arctic University. The energy law conference this week provided discussion onHigh North oil and gas developments and challenges from a juridical perspective.
Else Berit Eikeland, Member of Arctic Council, Senior Arctic Official, Norwegian Ministry of Foreign Affairs, keynoted on sustainable development in the Arctic and circumpolar cooperation at the Arctic Council.

She emphasized that opening new areas of petroleum development in Norway is a democratic process and that peace and stability, even in these demanding times of embargoes on Russia is the focus of Norwegian representation at the Arctic Council.

The Law of the Sea is the legal framework for this area and in her presentation, she refers to Det Norske Veritas (DNV), the Norwegian shipping concern, using an image created by DNV, for which she credits the firm in her discussion about areas of increased marine traffic in the Arctic.

Ms. Eikeland also refers to climate change as the “most important [issue] to the Arctic Council”. Here, she utilizes and image produced by US tax-payer funded National Snow and Ice Data Center, which she does not credit.

Canadians are fond of telling Ms. Eikeland that living next to the United States is like “sleeping with an elephant”, a description she finds apt to describe Norway’s relationship to neighboring Russia.

But she points out that Norway and Russia are working hard to establish science relationships in fisheries (15 years) with successful stock management as a result.

Also, there is close dialogue in energy arenas and on and oil spill regulation for maritime shipping and offshore oil and gas development. Russia is a key to understanding development for Norway, and there is ongoing work on bilateral agreements with Arctic Council. Russia is “much more important to Norway than [is] Sweden and Finland – [because of the access to the Arctic Ocean, and the people located across the northern Norwegian area]”.

Nothing is binding in the Arctic Council (8 Arctic member states, 6 permanent observers and “a lot of outside specialists”), e.g., there is “no East/West division in the Arctic Council [and] interest is much more defined by geography, coastal states and economic interests in the North”. She describes the group as the “most successful multilateral political institution” [but what is the impact of decisions that are non-binding, ed.].

Tromsø as Arctic capital of the world.

Günther Handl, Tulane University School of Law and Kristoffer Svendsen, KGJ Centre, University of Tromsø, spoke of managing the risk of offshore oil and gas activities, identifying the key issues regarding compensation of transboundary pollution damage.
This was an interesting talk about international legal instruments that govern or address oil spills. When there is environmental damage, there is a cost to restoring and replacing natural resources; there is diminuation of value of those resources prior to bringing them back through reinstatement and restoration of environment; whenever such restoration is not feasible, it introduces components for proper compensation for all loses.

“Problem lies in the fact that for all ESS [ecosystem services] – we don’t have a market, or market-based mechanism –  and cannot calculate in monetary terms – and [some argue that] nature restores itself and no need for compensation”. But [in fact] in domestic law, we do have a number of statues that provide compensation for ecosystem services. There are environmental liability directives in Europe. In America there is […]. And in China, there are regulatory programs under development.

So there needs to be proper methods for [determining] eco-system losses – of non-use values. Habitant equivalency analysis. Address impacts on systems and create an equivalent on another area. Service to service approach, creating important domestically. BP aggressively undermining claims on Macondo [oil spill] – conversely federal governments will argue aggressively for compensation.

Nengye Liu, Marie Curie Fellow, School of Law, University of Dundee, discussed the European Union in the context of enhanced governance of offshore oil/gas operations in changing Arctic conditions.

To envision EU as an Arctic player (observer of Arctic policy) – The EU competent to act. There is no specific Arctic mandate. Does the EU really need an Arctic Mandate? Of course not. EU should initiate a “common reporting standard for accident and activities” and outline what measures will take place if companies fail to report. Offshore oil and gas: require common standards to facilitate business.

How to enhance EU enforcement – EU has no teeth. Article 10 – what is their task to ensure safety in oil and gas. “To assist… only on request… assess [but not enforce]”.

As a matter of course, Norway should export standards as a product – working with EU oil and gas –promote Arctic legally binding regional agreements

Nigel Bankes, U Tromsø and U Calgary came up to the podium to compared  unitization provisions of Norway and Russia on agreements in the Barents Sea and those of other framework unionization agreements.

First step was the unity of deposit clause in delimination agreement between UK and Norway; Second step is the framework agreement on TB – transboundary reservoirs — Unitization are party agreements versus dispute resolution at the level of the state.

Tina Hunter, U Queensland, gave an insightful talk on harmonisation of oil spill prevention and response in the Barents Sea, questioning if this is at all possible.

There are soft laws or legal regimes, but they should be binding and not simply guidelines.

Standards and best practices (Norway, UK, Canada, Norway) are now migrating to the safety case regime: proving to the regulator that the facility is as safe as possible (safe as reasonably possible), and based on nuclear reactor models. Those who create the risk should be best able to mitigate risk.

Deepwater Horizon/Montara – well integrity. No inspections – with the presumption that the operator is doing what it should do. Well integrity and well inspection is at the heart of protecting the Arctic. Read for example, Anthony Hopkins‘ Dangerous decisions. (In the rest of the world) there is well blow out Prevention versus  ONLY oil spill response at present in the Arctic.

Thinking about regulation within its context – instead of simply extending North Sea to the Barents area. Barents 2020 (DNV) uses baseline from north sea development – a whole range of responses for well control – where are your nearest responders. How long does it take to mobilize your human responses, etc.

Catherine Banet, U Oslo, Scandinavian Institute of Maritime Law, Petroleum and Energy Department, talking about third-party access regimes to LNG terminals in the Arctic region and asking whether it is possible to put Arctic LNG terminals into competition. Export terimals and import terminals. Three cases for considering third party access. She refers to the Snøvit, which is currently up and running, and to the Yamal project, which is in the process of development, and the Alaska project, which likely will take some time because of economics.

Nevertheless, each a has different regulatory situation despite their present state of development and success.
Finally, there was Maria Madalena das Neves, KGJ Centre, U Tromsø, who considered the protection of energy investments in two Arctic territories, Svalbard and Greenland — in Greenland – increased energy demand requires increased grids and electricity – and there is a desire to develop a more integrated grid system across the continent as well as substituting diesel for more environmental friendly alternatives. They are looking for experts from outside to help opening the market. There is some criticism that they are rushing in [to Arctic oil and gas developments] to quickly.