Oil Industry

timhowardlaw

Crowded North Pole

A Russian Mir submarine descended through the Arctic Ocean depths in 2007 and planted a titanium Russian flag on the sea bed, one of the polar commanders declaring “The Arctic has always been Russian.”  Denmark now officially disagrees.  Denmark did not plant a flag on the sea bed.  Instead they pinned a claim on the polar map by using the UN Convention on the Law of the Sea (“UNCLOS”).  On December 15, 2014 the nation made its claim to 900,000 square kilometers north of Greenland.  Greenland is a self-governing part of Denmark.  Denmark adopted UNCLOS on December 16, 2004.  UNCLOS claims to territory must be made within ten years of adoption.

No happenstance:  ten year claim period per UNCLOS; well-known mineral riches at stake; Russia (and others) already moving; and Arctic sea ice melting at an accelerated rate.  Arctic open water and year-round shipping may be immanent.  Denmark knows how to drill for oil and gas, and knows how to do it in deep water and cold water.

How much conflict will issue?  Nation states now contend for claims to the Arctic, specifically the sea bed.  A total of 71 ocean going vessels traversed polar open waters in the summer of 2014, up from only 46 in 2012.  sea passages require internationally recognized rules, effectively curbing conflict.  Despite the polar rush, all involved countries know that much of the energy and mineral resources in the area are within the recognized 200-nautical mile economic zone of individual countries.

Like any natural resource race, unknown reservoirs and caches tempt.  Denmark, Russia and many others savor the prospect of an open water Arctic prize.  Russia acted unilaterally.  Denmark acted under UNCLOS.  Now the task is to join action for mutual advantage.

timhowardlaw

Bakken Crude Draws DOT Emergency Order

The eastbound crude petroleum carrying train collided with a derailed westbound grain train with thunderous results for Casselton, North Dakota.  Ruptured rail cars belched 400,000 gallons of crude which the shattered rail cars ignited to explosion lighting the late December night.  More than a month before that 2013 day, the rural landscape near Aliceville, Alabama similarly erupted when a train derailed and released an undetermined amount of crude from punctured tank cars.  The crude fouled wetlands near the site of the wreck, although thankfully no one was hurt.

The US Department of Transportation responded on February 25, 2014 with an Emergency Restriction/Prohibition applicable to shipments of Bakken crude.  Based on evidence that shows Bakken crude to have Reid Vapor Pressure readings as high a 9.7 psi, the DOT now requires Bakken to be tested frequently enough to ensure that the crude is classified properly according to DOT classes; and with respect to crude with Bakken characteristics, require it to be handled as hazardous material in Packing Group I or II.  The rule applies to those who provide the crude to the railroad carrier.  The consequences of violation?  Civil penalties of up to $175,000 for each violation or for each day of violation, in addition to criminal fines and imprisonment of up to ten years.

What about the trains?  The Department of Transportation issued no new rules or advisories regarding the integrity of tank cars or the safe operation of the rail system.  Trains are not supposed to derail and tank cars puncture.

Effective new rules?  The classification and hazardous material packing group may not fully account for the types of vapor emitted by Bakken crude.  The new rules of course address nothing concerning tank cars or railroad movements.  Perhaps the real issue is capital cost:  who will bear the cost of modifying and upgrading infrastructure and rolling stock as needed to improve protection.  More to come.

 

timhowardlaw

Piracy or Greenpeace?

The 30 person crew of the Greenpeace vessel Arctic Sunrise was taken ashore in Murmansk, Russia on Tuesday, Sept. 24, 2013 for questioning in connection with the attempted scaling on Sept. 18 of a Russian oil platform owned by OAO Gazprom in the Barents Sea.  The activists were protesting oil drilling in the Arctic, specifically in a new area that Russia was opening for development.  Russia was neither amused nor tolerant; the Investigative Committee, a Russian federal law enforcement body, will probe the incident but has already vowed to bring all those involved to justice.  The potential charge is piracy and the penalty is up to 15 years in a Russian prison.  The crew includes an American, four Russians and six Britons as far as now known.  The Investigative Committee specifically stated that punishment will be levied “regardless of their citizenship.”  The Kremlin’s human rights ombudsman characterized the option sought by the Investigative Committee as “gentle”, called the activists’ goals “noble” but accused them of endangering their lives and the health of others, presumably those on the drilling rig.  The spokesman for the Investigative Committee said that the Dutch-flagged Greenpeace vessel was “full of electronic devices of unknown origin and people calling themselves participants in an ecological rights group”, who tried to “all but storm” the platform.  He concluded that these actions raised doubts about their intentions.

Greenpeace rejected the characterization, called the activists peaceful and took the position that the charges had no basis in international law.  Some of the statement by the Investigative Committee took issue with the legal points, international as well as Russian federal law.

The oil platform?  Drilling now and expected to begin production later this year (2013).  The partners in the oil platform may include oil companies from various countries.  No statement from the governments of those countries or from the oil companies.  Greenpeace demanded the immediate release of the crew (no mention of the vessel) but made no further indication of plans to contest the matter.

Piracy action or Greenpeace activism?  Surprisingly muted response from Greenpeace and no statement at all from ecologically-minded countries, the UN or any NGO about what could be a stunning precedent.