The Frozen Frontier: Is Shell Ready For The Risks Of Arctic Drilling?

Guest blog authored by Jim Coburn, who directs Ceres’s corporate sustainability disclosure program:

Just two years after BP’s Deepwater Horizon rig exploded in the Gulf of Mexico, another oil industry giant is poised to begin drilling in an even more forbidding, unpredictable and remote environment: the Alaskan shoreline.Shell is moving forward with at least two Arctic wells this year, at a time when confidence in the oil and gas industry’s risk management practices is remarkably low.

In the wake of the Deepwater Horizon disaster, several reports have found that many oil and gas companies—not just BP—were poorly managing the risks of offshore drilling. As it prepares to move into the Arctic, has Shell set itself apart from its competitors, or is the company taking avoidable risks in an unforgiving environment?

A new report by Ceres shows that oil and gas companies—Shell included—are not doing enough to manage offshore drilling risks and disclose their efforts to investors. The report, Sustainable Extraction?, examines risk disclosure in SEC filings submitted in the first quarter of 2011 by 10 of the world’s largest oil and gas companies. It finds that out of 50 deepwater risk disclosure scores on key metrics including spill response procedures and drilling risk management, only four scores were good, and 29 (nearly 60 percent) were poor or no disclosure.

This striking lack of disclosure makes it nearly impossible for investors to understand how companies are managing the range of potential drilling risks.  And investors are already wary.

Lloyd’s, the world’s largest insurance market, cautions that “the Arctic is a frontier unlike any other” that will “remain a complex risk environment.” In its Arctic Opening report, Lloyd’s highlights geographic remoteness, ongoing changes to the environment as a result of climate change and extreme weather as key risk factors of offshore drilling in the Arctic.
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World’s Worst Power Outages

Northeastern U.S. and Canada, 1965

Photograph by Bob Gomel, Time Life Pictures/Getty Images

A full moon created an eerie skyline silhouette after New York City went dark during the blackout of November 1965. In a world that's increasingly dependent on constant power, massive electrical outages are a common concern and may strike systems across the globe.

Major power disturbances can be triggered by storms, heat waves, solar flares, and many other sources, but all have roots in the mechanical and human vulnerabilities of the power grids themselves. "Power delivery systems have a lot of parts, wires, transformers and other components all nicely tied together—which means there are a lot of things that can go wrong," explained Clark Gellings of the nonprofit Electric Power Research Institute. "Pieces break down and people make errors. A system is designed to tolerate a certain amount of disruption but past a certain point, it's simply gone too far and it falls apart."

The "great Northeast blackout," which began when a power surge near Ontario set off a chain of failures across New York State and beyond, covered 80,000 square miles. "Within four minutes the line of darkness had plunged across Massachusetts all the way to Boston," reported The New York Times on the day of the outage. "It was like a pattern of falling dominoes-darkness sped southward through Connecticut, northward into Vermont, New Hampshire, Maine and Canada."

—Brian Handwerk


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Dinosaur-Feather Doppelganger?

Photographs courtesy University of Bristol

The feather of an extinct Confuciusornis bird may have had colors similar to those in this modern feather from a zebra finch, according to the new study.

Feather color in Confuciusornis—an early beaked bird found in 120- to 130-million-year-old fossil beds in Liaoning Province, China—was inferred from microscopic melanosomes preserved in a fossil specimen.

Two types of melanosomes were found. Eumelanosomes (such as the finch eumelanosomes inset at left) are rodlike and associated with the colors black and grey in living birds. Phaeomelanosomes (inset right) are spherical and produce colors ranging from reddish brown to yellow. A lack of melanosomes makes white.

Using a scanning electron microscope, the researchers found that a fossil Confuciusornis feather contained both types of melanosomes and was likely multicolored in life.

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Eleven Nations With Large Fossil-Fuel Subsidies

  United States: Fossil Tax Breaks

Photograph by George Steinmetz, National Geographic

Drilling rigs are seen here lying in wait in Cheyenne, Wyoming, in 2001, but they've had little time to idle in recent years. The United States is amid an oil and natural gas boom, and its dependence on foreign energy imports is the lowest in 16 years.

(Related: "U.S. Oil Fields Stage "Great Revival," But No Easing Oil Prices")

Economists and historians will likely debate for years the reasons for this revival: How much was due to favorable free market conditions—and how much due to a helping hand from government?

Case in point: Texas, birthplace of the shale gas boom, bestowed more than $1 billion in state severance tax exemptions on the natural gas industry in 2010, according to a survey of fossil-fuel subsidies in OECD member countries.

Although most developed countries do not have the kind of direct and universal consumption subsidies seen in the big oil-exporting nations, tax breaks and other supports lessen the cost of production and consumption. In 2009, the G20 ("the group of 20" nations including the largest economies in the world), committed to phasing out these subsides. But no one had ever catalogued just how large this burden was. So OECD embarked on a first-of-its-kind inventory, and last fall produced its first reports. Although the OECD cautioned that the value and budget impact of subsidies varies widely from state to state (and did not even total the figures), the United States had the largest supports, totaling about $15 billion in 2010.

With G20 leaders meeting today in Los Cabos, Mexico, environmentalists around the world plan demonstrations and a "twitterstorm" to raise awareness of fossil fuel subsidies. But global economic woes are likely to dominate the summit agenda.

U.S. tax breaks, such as the expensing of exploration and development costs, make up about $5 billion of U.S. fossil fuel subsidies. President Barack Obama's proposed 2013 budget would eliminate many of these, yet the proposed cuts are likely to be met with resistance in Congress. Measures that favor home-grown fossil fuel are a tradition as old as the American Republic. Soon after Congress was established and George Washington was sworn in as the first president in 1789, lawmakers enacted a 10 percent tariff on imported coal to give the domestic industry a leg up over British producers; it was the first U.S. fossil-fuel subsidy, but far from the last.

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Four-Winged Dinosaurs Found in China, Experts Announce

Hillary Mayell
for National Geographic News


Paleontologists in China have discovered the fossil remains of a four- winged dinosaur with fully developed, modern feathers on both the forelimbs and hind limbs.

The new species, Microraptor gui, provides yet more evidence that birds evolved from dinosaurs, and could go a long way to answering a question scientists have puzzled over for close to 100 years: How did a group of ground-dwelling flightless dinosaurs evolve to a feathered animal capable of flying?

Xu Xing, a paleontologist at the Institute of Vertebrate Paleontology and Paleoanthropology in Beijing, China, and colleagues suggest in the January 23 issue of the journal Nature that the species is an early ancestor of birds that probably used its feathered limbs, along with a long, feather-fringed tail, to glide from tree to tree.

They argue that the animal represents an intermediate stage in the evolution of flight, from gliding much as flying squirrels do today to the active wing flapping of modern birds.

Xu's work has long been supported by the National Geographic Society's Committee for Research and Exploration.

The six specimens were excavated from the rich fossil beds of Liaoning Province in northeastern China. They are dated at between 128 to 124 million years old (Early Cretaceous).

"To have fully formed flight feathers on the hind legs is fascinating," said James Clark, Ronald Weintraub Associate Professor of Biology at George Washington University, Washington, D.C.

"There were some interesting speculations about 90 years ago that birds might have had four feathered limbs, but no one has suggested it in recent times, since all living birds use only their forelimbs," he said. "This find broadens the whole scope of thinking about the origins of flight."

The Bird-Dinosaur Connection

Much fossil evidence has been uncovered supporting the idea that birds evolved from a group of bipedal carnivorous dinosaurs called theropods. Within the theropod group, birds are most closely related to dromaeosaurids. Velociraptor, a star in the movie Jurassic Park, is probably the most famous of dromaeosaurs.

Earlier finds in Liaoning suggest that the earliest dromaeosaurs were small, feathered animals with forelimbs similar to those of Archaeopteryx, the oldest known bird at around 150 million years old, and feet with features comparable to modern tree-living birds. 

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Eleven Nations With Large Fossil-Fuel Subsidies

Uzbekistan: Tanked Energy

 
Photograph by Denis Sinyakov, AFP/Getty Images

A fuel tanker operated by the state gas company stops near Tashkent, in the mountains of Uzbekistan. The country is a major producer of natural gas, but only a small amount of the fuel makes it to foreign markets.

Almost 80 percent of the gas Uzbekistan produces is sold at cut-rate price on the domestic market, where it used for electricity and heat.  Uzbekistan is a world leader in fossil-fuel subsidies, spending $12 billion in 2010, almost one-third of its gross domestic product. That's a higher share compared to national economic output than for any other country.

Money is spent on subsidies instead of badly needed infrastructure upgrades that could aid in economic expansion. In addition to natural gas, Uzbekistan has large oil reserves, yet it pumps and refines a relatively small amount due to antiquated facilities. 

The country has been searching for new markets for its natural gas, and recently announced plans to export to China. But Uzbekistan is landlocked and currently lacks the pipelines and other infrastructure needed to expand exports.


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Feathered Dinosaur

Skeletal reconstruction shows the preserved bones found by the scientists.

The new tyrannosauroid is relatively small (about 1.5 metres 5 feet long) and rather primitive in many details of its skeleton. But its skull has the distinctively square-snouted profile of its much larger and more famous 70-to-65-million-year-old cousin, T. rex.

Eleven Nations With Large Fossil-Fuel Subsidies

Indonesia: Protests Quash Reform

Photograph by Binsar Bakkara, AP

Smoke from burning tires billows around an Indonesian man protesting the government's effort at fossil-fuel subsidy reform earlier this year. More than 80,000 Indonesians took to the streets in sometimes violent demonstrations that ultimately forced the government to back off its plan to raise fuel prices by 33 percent.

Gasoline prices here are among the cheapest in Asia, but the costs—$16 billion in 2010—have ballooned the nation's budget deficit. Indonesia once was a net exporter of oil, but now it is heavily dependent upon imports to meet demand, and high global oil prices have taken a toll.

Like Egypt, Indonesia sees some hope for reducing its subsidy costs by switching consumers from oil to cheaper natural gas. It already has significantly reduced its kerosene subsidies with a program to convert households to LPG as a cooking fuel, according to a report by the International Institute for Sustainable Development.

In a program that initially will be focused in the Java-Bali area, the government now has plans to convert large numbers of vehicles to run on compressed natural gas and liquid natural gas, and to develop the infrastructure—including filling stations—to support the switch. If successful, the program would be rolled out nationwide.


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Antarctica Was Once Home To Rainforest, Say Scientists

The study of sediment cores drilled from the ocean floor off Antarctica's east coast revealed fossil pollens (AFP/File, Antarctic Ocean Alliance) 

 

Scientists drilling off the coast of Antarctica made a startling discovery recently that could hold clues to the Earth's future -- especially if climate change keeps warming the planet.

According to a study published in the journal Nature, the frozen continent was home to a "near-tropical" rainforest 52 million years ago, when temperatures measured about 68 degrees Fahrenheit.

The sediment found in the Antarctic seabed may be more relevant during a summer when drought, record heat and violent storms are being connected to climate change trends.

"It shows that if we go through periods of higher CO2 in the atmosphere it's very likely that there will be dramatic changes on these very important areas of the globe where ice currently exists," study participant Kevin Welsh told AFP. The Australian scientist was on the 2010 expedition that brought up fossil-rich sediment from Wilkes Land on the east coast of Antarctica. "If we were to lose a lot of ice from Antarctica then we're going to see a dramatic change in sea level all around the planet," he said.

Even a small rise in sea levels could swamp major coastal cities from New York to Hong Kong.

University of Glasgow scientist James Bendle said in the London Evening Standard that the sediment samples "are the first detailed evidence we have of what was happening on the Antarctic during this vitally important time."

Noting that the drilling expedition worked through "freezing temperatures, huge ocean swells, calving glaciers, snow-covered mountains and icebergs," Bendle said, "It's amazing to imagine a time-traveler, arriving at the same coastline in the early Eocene, could paddle in pleasantly warm waters lapping at a lush forest."

The study found that sediment cores were studded with pollen from two different environments much warmer than present-day Antarctica. There was evidence of palms, ferns and other trees typical of warm, lowland rainforests like that of Madagascar. There were also samples from beech trees and conifers of the kind found in mountain forest regions.

Scientists involved in the study warned that Antarctica could become ice-free again. Already, rising levels of carbon dioxide, or greenhouse gases, and other environmental factors have led to reports of melting ice and regional warming.

Feathery Dino

The skull of the primitive tyrannosauroid the earliest of its kind yet found was discovered in the Yixian formation of western Liaoning, China, the source of many species of fossil birds and dinosaurs with feathers as well as protofeathers (primitive forms of feathers).

The sediments in which the new dinosaur was found are between 139 and 128 million years old.

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Eleven Nations With Large Fossil-Fuel Subsidies

United Arab Emirates: Emissions Driver

Photograph by Beth Wald, Aurora Photos/Alamy


Four-wheel-drive vehicles careen over sand dunes in the United Arab Emirates, a nation that burns some of the cheapest gasoline in the world.

The UAE is a major producer of both natural gas and oil, yet rising domestic demand has required the country to import natural gas and cut the volume of liquid fuel available for export. 

At nearly $2,500 per person, the country's 2010 subsidies, totaling $18.2 billion, were second only to Kuwait's on a per capita basis, according to the IEA.

Much of the natural gas used domestically is burned in power plants to generate electricity. Demand for power is rising due to population and economic growth. In addition to sapping oil reserves and possible export revenue, domestic demand for fossil fuel has turned the country into a large-scale polluter. In 2007, the UAE produced nearly five times the world average of carbon dioxide per capita.

The UAE has in the past considered phasing out fossil fuel subsidies, but the Federal National Council in May recommended the government further cut gasoline prices.

An irony for UAE is that foreigners, who make up 89 percent of the population, are the biggest beneficiaries of the nation's cheap fuel.

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Feathery Dino

Artist Portia Sloan worked with the Chinese scientists who discovered the new dinosaur to produce this drawing of what it might have looked like.

Scientist Xu Xing and colleagues found the tyrannosauroid, an early relative of T. rex, in Liaoning province in China. The species, named Dilong paradoxus, provides the first direct fossil evidence that tyrannosauroids had hairlike primitive feathers.

This research was supported in part by the National Geographic Society's Committee for Research and Exploration.    Read More

—Drawing by Portia Sloan

Eleven Nations With Large Fossil-Fuel Subsidies

Venezuela: Prices Subdued

   Photograph by Paulo Fridman, Corbis

Oil wells rise from the placid waters of Lake Maracaibo, the center of Venezuela's petroleum industry and heart of the world's largest proven oil reserves, by OPEC's reckoning.

Venezuela's government has long used its oil wealth to buy popular support. At 8 cents per gallon (2 cents per liter), the price of gasoline in the South American nation is by far the cheapest in the world, according to data collected by GIZ, the German Society for International Cooperation.

The costs of Venezuela's massive domestic subsidies, $20 billion in 2010, have hindered economic growth. Venezuela spends more money on fuel subsidies than on education, and consumes the highest rate of energy per capita in Latin America. President Hugo Chávez has called for slowing domestic fuel consumption, but with elections approaching, popular subsidies are unlikely to fall.

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