Environmental Modeling and Environmental Impact Assessments in the Hydrocarbon Industry

1. Environmental Modeling and Environmental Impact Assessments in the Hydrocarbon Industry Bill Arnold Jones Graduate School of Business Rice University

2. Definition: Environmental Impact Assessment International Association for Impact Assessment (IAIA): �the process of identifying, predicting, evaluating and mitigating the biophysical, social and other relevant effects of development proposals prior to major decisions being taken and commitments made.� Functions: Predict problems Find ways to avoid them Enhance positive effects EIA principles: Create terms of reference for a specific project Screen Scope: important issues and alternatives, information to collect, analysis Assess Decide and implement, with stakeholder engagement EIA provisions incorporated into national law and regulation in OECD and emerging countries

3. Specific guidelines Introduction and description, including time schedule Environmental setting Commercially important fish and invertebrates - on a species by species basis Marine birds and mammals on a species by species basis Description of threatened species Areas of particular ecological importance Baseline chemistry Existing resource use Alternatives that have been considered Physical characteristics of the proposed activity Energy requirements Use of chemicals Waste handling Air and water emissions Decommissioning plan Effects on the environment Mitigation Non-technical summary for use in public domain Areas of weakness in knowledge/future research Transboundary: UNECE Convention on Environmental Impact Assessment in a Transboundary Context

4. Environmental Impact Assessments in the Hydrocarbon Industry Guidelines Case studies: Sakhalin, Russia Camisea, Peru Mozambique Chukchi Sea, Alaska

5. Guidelines Greenland case: 2006: Guide to license holders Full life cycle: exploration development production transport decommissioning No commercial discoveries off SW Greenland despite six wells drilled Plan to open a more northern region � Disko Nuussuaq offshore Very sensitive ecosystems and species Icebergs and drifting ice � potential for large impacts (e.g. leaking tanker) Baseline studies by the government

6. Company responsibilities Individual companies must prepare EIA�s for: the entire region that might be impacted and trans-boundary issues and update as needed (going from exploration to development) Initial EIA relates primarily to exploratory drilling But include assessments of scenarios of possible activities related to later phases

7. Specific guidelines Impact analysis Risk and impacts of oil spills, including trajectory modeling Effects of emissions, noise (esp. underwater noise on marine mammals) Impact of helicopters on birds and mammals Impact on fishing and hunting Cumulative impacts in combination with other activities Risk of introducing invasive species Environmental mitigation and monitoring Routine and accidents Plan for acquiring supplementary data

8. Sakhalin II project - Russia

9. Sakhalin environmental challenges 89 Western Gray Whales 1100 Salmon river crossings

10. Camisea project - Peru Construction and operation of two pipelines, one for natural gas (714 km) and one for natural gas liquids (540 km). They run from the Camisea fields, 431 km east of Lima, to the coast of Peru south of Lima, where the NGL pipeline will end at a fractionation plant. The natural gas pipeline will turn north and run along the coastline to the Lima City gate. The natural gas pipeline was designed for the initial transportation of 285 million cubic feet per day. The NGL pipeline was designed for the initial transportation of 50,000 barrels per day. The elevation profile for the pipelines reaches its highest point at 4,800 meters above sea level. The route selection was designed to maximize the stability, safety and reliability of the system and minimize the social, cultural and environmental impacts. Bypasses the sites of historical and archaeological significance. Minimizes the number of water crossings as well as the quantity of vegetation clearing. Originally developed by Shell and Mobil, ultimately developed by Hunt Oil, Pluspetrol, SK Corporation, and Techint.

11. Camisea Challenges Peruvian Amazon home to extraordinary biological and cultural diversity 104,000 km of seismic lines 679 exploratory and production wells 48.6% of Peruvian Amazon has oil and gas concessions (7.1% in 2003) Overlap 17.1% of Peruvian Amazon protected area system and over half of all titled indigenous lands Potential for another boom Height of mountain passage Threat of colonization, logging Ecuador, in contrast, initiative to leave known reserves I the ground; seeks alternative sources of revenues from the international community. Source: IOPscience http://iopscience.org/1748-9326/5/1/014012/fulltext

12. Camisea actions taken Avoid building roads, which lead to colonization Baseline environmental studies Avoid contact between workers and indigenous populations; community consultation, services as appropriate

13. Camisea: Original EIA EIA conducted by an independent contractor, Environmental Resources Management (ERM) � began in 1996. Shell also engaged ProNatura, international NGO founded in Brazil to internalize socio-environmental concerns. Worked with Smithsonian�s Conservation Biology Institute to prepare a biodiversity assessment and monitoring plan Consultation with stakeholders with wide-ranging differences: Native communities in the Lower Urubamba Native communities federations Consulting with Government Consulting with national & international NGO�s

14. Community Reactions Community reactions Generally supportive but saw benefits as mostly short term None wanted the gas plant near their village, but only one objected to it being anywhere on their lands. Concern about health, education, and agriculture Impact of waste on water Use of hovercraft � impact on fish and the �pishtaco� myth Use of helicopters that may affect wildlife Increase in river traffic Roads okay to improve markets and communication between villages, but prevent settlers and loggers Concern that communication with women and elders not as effective as it could be Independence of ERM Peru appreciated Four week survey with community at their agricultural plots, chacras, where kids helped out during the school vacation; survey of 5 river communities to establish a baseline of river traffic (types of vessels, activity by time of day�), collect water samples Source: Environmental Impact Assessment of the Camisea Gas Project: The Importance of Local Participation, Diego Shoobridge and Sachin Kapila

15. Camisea project - Peru Agreements involving Transportadora de Gas del Peru (TGP) and several organizations: Piura National University Engineering National University San Antonio Abad Cusco National University Special Land Titling Project and Rural Cadastre (PETT) Land Titling in the Area of Influence of the Camisea Pipeline - Jungle Section Agreement with the Natural History Museum Documentation of the Flora and Fauna along the pipeline corridor, Camisea Agreement with the National Institution of Culture (INC) Agreement with the Ministry of Health in Cusco Agreement with the Center for the Development of Indigenous Amazon Peoples (CEDIA) Agreement with the Machiguenga Council for the Urubamba River (COMARU) Agreement with the Confederation of Amazonian Nationalities (CONAP) Source: www.camisea.pluspetrol.com.pe/project3.asp

16. Key Management Factors Management must internalize issues and create reinforcing rewrads systems. Must make early commitments at highest corporate managerial level Ensure staff conitnuity for corporate memory, commitment, trust Throughout set creative and modest targets that are attainable, enhacing credibility with stakeholders Provide a framework for collaborative learning among civil society, government, and private enterprise Source: Corporate Roles and Rewards in Promoting Sustainable Development: Lessons Learned from Camisea, Peter H. May, Project Director, Energy and Resources Group, UC-Berkeley, January 1999

17. Mozambique: Best Practice Process Offshore Mozambique adjacent to a national park & tourism destinations EIA process led to recommendation to postpone a third of the offshore concession area until more information was obtained. Additional studies commissioned. EIA scrutinized by stakeholder forum as part of the EIA and by independent international reviewers. Subsistence economy with rich biological diversity seeking sustainable development through law and regulation Seismic surveys and exploration drilling, well-testing: shallow & deep water Source: IAIA08 Conference Proceedings, The Art and Science of Impact Assessment 28th Annual Conference of the International Association for Impact Assessment www.iaia.org

18. Mozambique EIA Identified key information gaps; recommended /accepted deferral of shallow water drilling Undertook extensive effects monitoring (fish catches, noise, coral reefs, tourism, turtles, dugong (marine mammal)� during implementation of 3D deepwater seismic survey Recommendations on noise were spatial (buffer zones) and temporal mitigation (avoid peak migration and breeding seasons) Compensation paid to stakeholders affected by exploration activities (not well explained) and future social investment projects Participation of stakeholders throughout the process: information sharing, public meetings, 14 forums Independent peer reviewer appointed at request of stakeholders during scoping stage EIA is not an appropriate tool to address conflicting issues between future O&G production activities and perceived threats to tourism, artisanal fishing and conservation.. This requires a Strategic Environmental Assessment.

19. Shell Chukchi Sea Outer Continental Shelf, Alaska2010 Exploration Drilling Program July-October open drilling season Request for 5 sites, with intent to drill 3 wells more than 60 miles offshore, depending on ice and weather conditions Shell submitted Exploration Plan (EP) in support of which it provided EIA, regional oil discharge prevention and contingency plan, environmental monitoring information, site-specific geohazards survey data and assessment, mitigation measure, plan to reduce potential conflicts with subsistence activities, description of Cultural Awareness and health, safety, security, and environment awareness programs� National Environmental Policy Act (NEPA) requires Minerals Management Service (MMS) to prepare an Environmental Assessment (EA) at each stage: 5-year leasing program, individual lease sales, exploration, development & production

20. Shell Chukchi Sea Outer Continental ShelfIssues Covered Distribution and abundance of seabirds Acoustic modeling of underwater noise from the drill ship Bird strike avoidance on the drill ship Marine mammal surveys Modeled drill mud impacts Technology � no new or unused; best available and safest; drill ship retrofitted for operating in Arctic OCS waters Critical Operations and Curtailment Plan: move off drill location in event of potential hazards Potential for accidental oil spills: no spills >1000 bbl while 14,000 wells drilled; analyze in terms of how much would evaporate, disperse, or remain after certain periods of time

21. Shell Chukchi Sea Outer Continental ShelfLegislation and Government Agencies Involved Legislation: NEPA Outer Continental Shelf Lands Act Marine Mammal Protection Act Coastal Zone Management Act Clean Air Act Clean Water Act Oil Pollution Act Non-indigenous Aquatic Nuisance Prevention and Control Act as amended by the National Invasive Species Act Federal Government Agencies Council on Environmental Quality US Environmental Protection Agency Department of the Interior/Minerals Management Service; name changed to Bureau of Ocean Energy Management, Regulation, and Enforcement Fish and Wildlife Service National Oceanic and Atmospheric Administration (NOAA), National Marine Fisheries Service US Army Corps of Engineers US Coast Guard

22. Shell Chukchi Sea Outer Continental ShelfConditions Operating environment: ice gouging of the seafloor already identified despite 150� water depth; no other shallow hazards Decreasing perennial arctic ice pack: extent: much less in the summer, slightly less in winter; decline at faster rate Thickness: decreasing Distribution: changing Age: decreasing melt duration: increasing Three types of ice: Landfast � attached to shore, relatively immobile Satmukhi � grounded and rigid Pack ice � moves with wind and current

23. Chukchi Special Issues Conflict Avoidance Mechanisms to Protect Subsistence Whaling� No interference during identified periods and locations with subsistence hunting of whales, ice seals, walruses, polar bears Must consult with North Slope Borough and with directly affected communities Leases are outside the jurisdiction but supply vessels and aircraft are included Oil spill prevention and contingency plans Fuel transfers: barge must be surrounded by oil spill containment during transfer Lighting of lease structures to avoid bird strikes by spectacled & Stellar eiders (minimize radiation of lighting that causes disorientation and attraction) Hire 9 full-time local subsistence advisors Flight restrictions within 300 meters, or below 500 meters, of marine mammals