Clinton Seeks U.S. Arctic Spill Policy as Drilling in Greenland Resumes

U.S. Secretary of State Hillary Clinton will push for an Arctic oil spill response taskforce this week as Cairn Energy Plc prepares for its busiest drilling season off the coast of Greenland.

Clinton will travel to Greenland’s capital for a meeting of the eight nations that lay claim to the Arctic amid growing concerns about the risks to the environment in light of last year’s Gulf of Mexico spill. Cairn, the first explorer to drill off Greenland in a decade, won approval for four wells this year to tap an estimated 17 billion barrels of oil.

“This will be a historic meeting,” said Julie Reside, a spokeswoman at the State Department. “For the coming two years, Secretary Clinton and the other ministers will set in motion negotiations on a new instrument to control potential oil spills in the Arctic.”

After six failed attempts by explorers to find oil over the past 30 years, Greenland received a record 17 applications in last year’s licensing round. Producers including Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) have been attracted by higher oil prices, dwindling resources and Arctic exploration made easier by global warming.

Climate Report

Interior Secretary Ken Salazar will join Clinton for the seventh meeting of the Arctic Council ministers in Nuuk on May 12. The member states are Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden and the U.S. A search-and-rescue treaty will be signed and ministers will also receive a report on how climate change is affecting the Arctic, Reside said.

Photographer: Joshua Roberts/Bloomberg

U.S. Secretary of State Hillary Clinton. Close

U.S. Secretary of State Hillary Clinton.

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Photographer: Joshua Roberts/Bloomberg

U.S. Secretary of State Hillary Clinton.

“The Arctic Council is in an odd transition place now: it has been decided that they need to make it a more formal institution and give it real authority,” said Buck Parker, a strategic adviser with Earthjustice, a non-profit law firm that focuses on environmental issues. “They have to make it look like they’re doing something, or other countries that particularly have an interest in how the Arctic is managed with respect to global warming are going to want some say.”

Cairn, based in Edinburgh, plans to invest a further $500 million to drill as many as four wells off the coast of Greenland this year, one more than in 2010. The company failed to make a commercial discovery there last year.

Investment

“By the end of this year we will have spent over $1 billion in Greenland,” Simon Thomson, Cairn’s legal and commercial director, said in an interview. The explorer is targeting prospects ranging in size from 1 billion barrels to “hundreds of millions of barrels,” Thomson said.

Cairn has just won approval from the Greenland government for its 2011 campaign. The Scottish explorer plans to drill as many as three wells in the Atammik and Lady Franklin blocks, and at least one in the Eqqua or Napariaq blocks farther north in Baffin Bay, according to a report published on the island’s minerals bureau website.

Water depths range from 288 meters (945 feet) at Napariaq to 1,530 meters at Eqqua, similar to where BP Plc was drilling when the Deepwater Horizon rig exploded, killing 11 workers and spewing almost 5 million barrels into the Gulf of Mexico.

“It took BP months to stop Macondo, with a fleet of 6,500 ships, with 50,000 people and a bill of about $40 billion,” said Ben Ayliffe, a senior oil campaigner at Greenpeace International. Cairn, valued at about $9.8 billion. “last year had 14 ships thousands of miles from anywhere, and they’re not the sort of company than can afford to take a $40 billion hit on an oil spill.”

Extreme Weather

Greenpeace argues that freezing temperatures, extreme weather conditions, lack of local infrastructure and remote locations would challenge a spill response. The spilt oil risks becoming trapped under sheets of thick ice.

“It could take years to stop a spill,” Ayliffe said by phone from London. “There are no proven technologies to keep ice out of the way of a project which would need to run over the Arctic winter.”

In a bid to stop Cairn, four protesters from the campaign group boarded the company’s Stena Don drilling rig in September and spent two days hanging from the platform’s underbelly, forcing drilling to be suspended. Last month, 11 campaigners tried to occupy the Leiv Eiriksson rig en route from Turkey to Greenland.

Independence, Wealth

The far north’s potential is spurring exploration from Russia to Alaska. The Arctic may hold 27 percent of the world’s undiscovered gas and 13 percent of the oil, the U.S. Geological Survey said in 2008. Areas off Greenland, including some shared with Canada, may hold 17 billion barrels of oil, 148 trillion cubic feet of gas and 9.3 billion barrels of gas liquids, the USGS said.

For Greenland’s 57,000 inhabitants, largely dependent on shrimp exports, petroleum may also bring wealth and allow greater independence from Denmark.

Denmark gives Greenland an annual subsidy of about $608 million, or $10,700 per person. The Arctic island was granted home rule in 1979 and increased local powers in 2009.

“A commercially viable oilfield discovery in the Greenland waters could contribute significantly toward a self-sustaining economy in Greenland,” Cairn wrote in a March report.

-- Editors: Stephen Cunningham, Alex Devine

To contact the reporters on this story: Marianne Stigset in Greenland at mstigset@bloomberg.net. Nicole Gaouette in Washington at ngaouette@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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