Environmental Audit Committee - Minutes of EvidenceHC 333

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Oral Evidence

Taken before the Environmental Audit Committee

on Wednesday 23 January 2013

Members present:

Joan Walley (Chair)

Peter Aldous

Neil Carmichael

Martin Caton

Zac Goldsmith

Mark Lazarowicz

Caroline Lucas

Dr Matthew Offord

Mr Mark Spencer

Dr Alan Whitehead

Simon Wright


Examination of Witnesses

Witnesses: Ruth Davis, Chief Policy Adviser, Greenpeace, Rod Downie, Polar Policy and Programme Manager, WWF, and Liz Gallagher, Senior Policy Adviser, E3G, gave evidence.

Q1 Chair: At this stage, I would like to welcome you to our session this afternoon. I think that you are very much aware that we had our inquiry and we produced our report. The Government responded to it. We had hoped that Shell would be able to come along to a further session to give us some feedback on some of the responses to our report. I am sure you are aware that for legal reasons they are not able to do that. However, we did feel that it was really important as a Committee that we should hear some kind of response to the response that we have had from Government. We realise that you have quite a lot to say on this. We are also aware that there has been an advert in today’s Daily Telegraph where I think this Environmental Audit Select Committee is mentioned. Simply, we thought we would start by just asking you to set out whether or not there are any areas that you are particularly worried about that appear in the Government’s response to our report and we will take it from there. In fact, if you could just introduce yourselves first, and then we will hear what you have to say to us.

Ruth Davis: Thanks. I am Ruth Davis. I am the political adviser to Greenpeace’s Arctic campaign.

Rod Downie: I am Rod Downie. I am the Polar Programme Manager at WWF UK.

Liz Gallagher: I am Liz Gallagher. I am the Senior Policy Adviser at E3G.

Chair: Great. Over to you, then, Ruth.

Ruth Davis: Thank you for giving us an opportunity to respond. We are really grateful for that. We are all going to just lay out our core concerns in a couple of minutes first, if that is okay, and then expect obviously to have some questions.

I am going to try to find nice things to say about the Government’s response to start off with, which may come as a bit of a surprise to members of the Committee. I think the work of the Committee has forced the conversation to happen in Government, which is much more integrated and much more open than we were aware of previously. I would not want the Committee to be discouraged about its work or experiences being that the discussions that we have been having with the Government are starting to touch on issues that previously I think either they were not necessarily aware of or were only being held in one part of Government rather than discussed across all of them.

Having said that, obviously we are concerned that very many of the specific recommendations in the Committee’s report are not going to be taken forward unless the Government changes its mind significantly. The areas that we particularly want to draw attention to are a concern that they specifically do not address the growing body of evidence that suggests that it would not be possible to respond to an oil spill in lots of Arctic conditions. What the Government decides to do about that evidence is another thing, but I think it is really important that they at least get to grips with whether or not they believe it would be possible to clean up a spill. There is nothing in their response at the moment that suggests they have got to grips with that evidence, so we would like to push them on that.

We specifically think that the analysis that they have done around whether or not Arctic drilling is compatible with a 2-degree temperature rise is the result of some quite artful cherry-picking of figures from the IEA’s World Energy Outlook. We would like to return to that point if possible, because obviously that is quite critical when you are thinking about policy integration across Government as to whether what they are proposing at the moment is compatible with their own climate change goals. We do not believe that it is.

We think there are some very specific steps that the Government could take to take forward its apparent aspiration to promote protected areas in the Arctic Ocean and specifically a protected area in the high seas. While we very much welcome the Government’s continued support for an implementing agreement under UNCLOS, we are disappointed that there are no concrete steps proposed to take further action in that area. We were very disappointed not just by the content, but also, to a certain extent, the tone of what was expressed about Arctic fishing. We felt that of all the areas in the Government’s response perhaps that was the one that verged on complacency.

Overall, I think our sense was that there are warm words that have not been backed up in any cases with specific actions and that the Government is in something of a diplomatic bind. It clearly very much values its relationship with Arctic states. That is just as it should be, but in attempting to retain those relationships it appears that it is going through a kind of regular act of self-censorship, which means that it is not really in a position to be able to argue for what it claims are its stated goals in Arctic policy. It needs to find a way forward that enables it both to retain those relationships and respect for the sovereignty of Arctic states, but also to pursue some policy goals with a little bit more vigour and aggression than it is currently proposing. Thank you.

Chair: Thank you. Do either of your colleagues wish to add to that at this stage?

Rod Downie: I am very happy to, thanks, Joan. Yes, WWF was also very disappointed by the UK Government’s response. We agree it demonstrates a certain level of complacency and it lacks any real sense of urgency at a time when the Arctic is undergoing such rapid change. Joan, I think you previously alluded to the fact that WWF took David Cameron up to the Arctic back in 2006 to demonstrate first-hand the effects of a warming climate, and of course he was famously photographed hugging a husky and a number of promises came out of that trip. We felt that the Committee had really provided the Government with a golden opportunity to demonstrate a true commitment to Arctic protection, but instead the Government Departments have failed to show this commitment. There seems to be a lack of willingness to influence any sort of transformational change in the Arctic, and the clear message that we have read in this is that they are seeking a business-as-usual scenario.

We are also very disappointed with the Government position that they can only focus on tackling climate change by reducing greenhouse gas emissions together with adaptation measures, but not limiting the production or extraction of Arctic oil and gas. We view this focusing solely on limiting emissions and not limiting production as somewhat akin to going into a fight against climate change but having one hand tied behind your back. It seems really absurd, and they do seem to be hiding behind the fact that there are no international mechanisms to agree limits on production.

We were also disappointed, but not wholly surprised, by the fact that the Government did not accept the recommendation to develop an Arctic strategy. We have spoken, probably for the last two years, to the Government about this. We realise that they find it politically unpalatable, but at least it is making its policies more accessible on the Arctic. We welcome their offer to publish a policy framework, and certainly we welcome contributing as part of the civil society engagement into that process. Thank you.

Chair: Thank you. Ms Gallagher?

Liz Gallagher: Thank you. I think we have been fairly underwhelmed by the Government’s response on the EAC’s recommendations. It has already been said that it is a fairly business-as-usual-type response and that will not really help deliver a secure future for the Arctic region or for the UK’s core national interests. What goes on inside the Arctic does not stay inside the Arctic. I think the Government’s main rebuttal-that it is a non-littoral state, it does not have sovereignty or jurisdiction, and does not necessarily recognise the fact that events in the Arctic will have implications upon the UK’s core national interest-is deeply unhelpful, especially as there are a wide-ranging bunch of countries that are non-littoral that are getting engaged and participating more and more in Arctic affairs.

I think one of the main concerns in the Government’s response is the assumptions that it makes on the future, and those climate assumptions are things that Ruth will articulate later, but also the economic assumptions about the viability and the feasibility of extracting Arctic oil. We see that the US Geological Survey has said that it costs around $100 to $300 a barrel to withdraw and extract oil. That is not at all recognised in those discussions.

I think the second piece is around the geopolitical assumptions within the Government’s response about what does the increasing militarisation of the Arctic look like. Some of the state-owned companies in the Arctic, in particular in Russia, are not necessarily acknowledged. I think that is something that this Committee could help to explore about what the assumptions are that the Government is making on the future of the Arctic.

Q2 Chair: Thank you for that start. I think it was very useful that you introduced your comments by saying that the Committee’s report had in some way perhaps got more traction with Government than perhaps we might be aware of. I just wonder whether or not, before we get on to the areas where there are hurdles to be overcome, it might just be useful to-looking at it from at least a positive point of view-see where you would single out specific things that the Government have responded to that you feel has taken us a step further on.

Ruth Davis: Shall I start with that and then others can join in? I am not sure that that has necessarily produced concrete and explicit steps, and if it had done, we would perhaps have seen those in the Government’s response. The area where I am particularly interested in the exploration that is currently going on inside Government is to try to understand the relationship between their international energy policy and their climate policy in particular and to try to explore what that means for the way in which they potentially promote British interests overseas. Now, I do not think that conversation has gone far enough and, as I say, I think the material that was made public in the Government’s response was rather casual and superficial, but I am aware of the fact that within the FCO and within DECC this is now a real conversation. This touches very much on what Rod was saying about the need at some point to get to grips with the extraction and production side of the climate equation. We know that if we burn all the fossil fuels that there are out there, we have a major problem. In fact, if we burn more than two-thirds of them, we have a major problem. If we burn more than a third of them, we have a major problem. At some point we are going to have to work out whether or not it is acceptable to invest in all of the infrastructure that is involved in the extraction of very expensive sources of oil like Arctic oil, given that that tends to commit us to a future in which companies have a very strong vested interest in extracting that oil and in which Governments like ours who then tie themselves to the interests of those companies themselves have a very strong interest in extracting that oil. It is that particular equation that I think we really need to start to get to grips with in terms of UK climate policy, but it is also a really important international issue in climate policy.

Q3 Chair: Just concentrating on that for a moment, if this Committee were to follow up our recommendations and the Government response and there was to be, if you like, further scrutiny from this Committee of how that is taken forward, who would be the participants at the table that you think, from within Government, should be addressing that, just very briefly?

Ruth Davis: The obvious participants would be those people who are dealing with climate policy both domestically and internationally in the Department for Energy and Climate Change, but particularly the international climate change team; those people who are dealing with international energy policy who sit in a number of places within Government, both within DECC and within the FCO; and those who are dealing with considering the support that the Government gives actively to UK business interests, and that obviously involves BIS as well as DECC. I personally would argue that this requires some kind of strategic overview from those who are thinking in a way that Liz was talking about-about the overall core interests of British energy and foreign policy. Arguably, that sits either in the Cabinet Office or No. 10, but to have those people having a conversation together about these scenarios and really exploring them would be quite a radical and important step forward.

Q4 Chair: Okay, that is very helpful. Just before I bring my colleagues in, can I just ask one more question? I think that one of the difficulties that we had when we were preparing our report was the fact that we were dealing with a fast-changing situation. The rate of melt of the sheet ice in the Arctic was something that seemed to us to be accelerating, really. None of you have really mentioned the speed of melt and the urgency or otherwise of the situation and how that was reflected in our report to Government. I just wondered if you had any comments about that in respect of the Government’s response to us. It is really about whether or not the current policy mechanisms are fit for purpose in terms of the timeline that needs to be followed.

Rod Downie: Yes. As I think I said, Chair, one of the key things that was missing for me was that sense of urgency from the Government’s response. It came through in the EAC report-in your report-but not from the response.

Liz Gallagher: Just quickly, I think the Government’s assumptions were that Arctic events would happen in a linear fashion, and I think it did not take into account the non-linear, complex dynamics inside the Arctic that make it such a challenging environment to operate in.

Ruth Davis: Could I add one thing to that, Chair, which is that you explored very carefully some of those non-linear issues that Liz is talking about? I think the analysis at the front of the Government’s response assumed that the melt was happening rather more slowly than many of the scientists that we have been speaking to think it is happening. It may be worth going back to people like Professor Maslowski, who certainly has views that that is going to happen rather faster than is being suggested.

Can I also give you one specific example where I think, no, it is not fit for purpose? If you look at the need very quickly to start identifying and designating a range of protected areas in the Arctic, recognising that the urgency of doing so is increased by the vulnerability of the ecosystem, the position of the Government is, "Well, we are supporting and implementing agreement under UNCLOS." That process is going-forgive me for the terrible pun-at a glacial pace. The fact that there is no proposition that is really around trying to speed that up through bilateral relationships, which is perfectly possible, suggests to me that, no, the policy framework is not fit for purpose and there is no combined sense of urgency to try to improve that.

Chair: Okay, thank you. I have lots of Committee members wanting to come in. I will start with Martin Caton.

Q5 Martin Caton: This is really for Rod, because you said, Rod, that you were very disappointed that they did not take up our recommendation on developing an Arctic strategy. In our early discussions following the response, that was one of the few positive things-the fact that they talked about a policy agenda and keeping people up to date. We saw that as-and I completely agree with everything you have said-basically a negative response to our report, but we hoped that it was a door at least ajar, where a proper strategy and addressing some of these other issues could come out of the work they did on that policy. Why are you so disappointed? Do you know more than we do?

Rod Downie: We are encouraged that they have committed to developing this policy framework. We are very encouraged by that, but it is this recognition that an Arctic strategy is not a requirement for the UK we feel is wrong.

Q6 Neil Carmichael: I think Rod is aware of this fact, but I have been to the Antarctic, and of course I am currently sponsoring the Antarctic Bill. There are a couple of things that arise from that. First of all, we have a treaty structure for the Antarctic that is leading to more co-operation between interested nations. Of course, we have the same sort of problems in terms of other nations suddenly becoming interested, so that is something that I think Ruth alluded to a little bit. The first question I have is, are there any lessons we can learn from that process and apply them to the Arctic?

Secondly, the Antarctic Bill as it stands starts talking about operator responsibility, insurance and all the rest. "Polluter pays" is very much part of the concept there. Is there something else that we can be doing along similar lines for the Arctic?

The third question is largely about recognising there is clearly a different system of governance between the Antarctic and the Arctic, but what parallels do you think we can draw from when we think about the way in which we deal with the bilateral relationships or otherwise that you have already mentioned?

Rod Downie: As you stated, Neil, it is a very different political situation. It is a very different scenario between the Arctic and the Antarctic, but I think what we can learn from the Antarctic Treaty and its environmental protocol is the capacity for that political will to come together. For example, under the Antarctic Treaty, under its environmental protocol, there is a complete and indefinite ban on commercial mineral resource activities. It demonstrates that there is a potential political will for countries to come together. As I say, it is a very different scenario in the Arctic, but at least there are precedents; there are precursors. That is a broad response.

Ruth Davis: I agree with what Rod says. Liz might have something to add about the overall developing nations around collective liability, but I think that is an interesting area you are talking about, the application of the "polluter pays" principle. I am not going to pretend to have more expertise than I do about global liability regimes, but I think it might be something that the Committee could consider exploring, because there is a complex set of overlapping liabilities and places where costs could fall in the Arctic. To go through the potential, obviously some of the costs will immediately fall on the oil company themselves, who will have to contribute to the clean-up of any spills should that happen as a result of an industrial accident. Some of those costs fall in the very long term on ecosystems and communities who have no means of being able to recoup them locally or nationally. Some of those costs potentially in the Arctic fall in areas that are outside of national jurisdiction and where it is impossible, really, at this moment, to foresee where costs would be recouped because there is not a liability regime that effectively applies to those. There is also a more deep-seated question as to what are the costs, potentially, that are attached to the impact of a major spill on the balance sheet and viability of a large oil company. I think one of the things that would be worth exploring here is what were the impacts of the BP spill, for example, on both the tax take for the UK Government, but also on share prices and the long-term value of a company like BP.

Q7 Chair: Can I just interrupt there and ask, if you were asking that question, how would you start to, if you like, subdivide the different parts of the answers that you would require?

Ruth Davis: What at the moment are precedents in terms of global liability regimes? That is something that you would need to put to lawyers. Where would you expect the different kinds of cost to fall at a physical and social level, so which communities would be impacted, which ecosystems across and what kind of time and space? Where do the ultimate costs lie-in terms of the impact on the financial viability of a company, and therefore the issue about where the long-term economic implications lie-of making a bad investment choice in something that, for example, Total have said is so risky that they are not prepared to put their investors’ money in it? I think I would divide it up like that.

Chair: Okay. Was it on this point, Zac? On this point, okay.

Q8 Zac Goldsmith: I was going to ask about this Total point before we move on. I was a few minutes late, so I hope you have not already covered it. I want to hear more about that. What is it that they are saying, and what are the implications?

Ruth Davis: What they are saying is that in their view the risks of a spill make it unacceptable for them, in reputation and financial terms, to drill in the Arctic. Interestingly, since they made that announcement the first bank has also come out saying that as a result of its view of the environmental risks, but also the risk to investors’ interests, they also are going to put a ban on lending to companies pursuing Arctic oil projects.

Zac Goldsmith: Who is that?

Ruth Davis: They are a German bank. Forgive me; I am going to have to look it up. It is WestLB.

Q9 Zac Goldsmith: Can I just ask you, were any of the fears that Total expressed unique to Total and their operation, or could their fears equally-or should they-apply to other operators?

Ruth Davis: I do not think they were unique to Total. With any oil company, obviously they are looking across the spread of investment decisions they have made and where their opportunities are for different kinds of extraction with different kinds of risk. To that extent, each one has a unique portfolio, but the risks that they were identifying were certainly ones that would be equally subject to Shell, I think.

Q10 Zac Goldsmith: We have Shell coming in at some point. Do you think it would be useful to get Total in to talk to them?

Ruth Davis: I think that would be extremely useful. Sorry, Liz, carry on.

Liz Gallagher: I was just going to say, Total have said it in the context of oil. They have also pulled out of or are postponing the Shtokman gas exploration as well, so there is an emerging theme here in which oil companies are looking again at what their investments are in the Arctic and trying to make decisions based on cost-risk analysis.

Q11 Mark Lazarowicz: My question is more related to the first section of Neil’s questions that drew attention to the fact there was an international regime in Antarctica based, obviously, upon the treaties. One of the ways in which the Government has responded to our report was to suggest that, in some areas, although treaty mechanisms were not obviously on the agenda, there were other initiatives that could be taking place on a global level, which meant that, therefore, a UK response would not be the best way of tackling the problem. For example, the Government suggested that rather than a UK moratorium, I think the phrase was that they were in favour of progressing global initiatives to ensure a wider moratorium on drilling and the exploration of the Arctic. Is there any sign that you would get that kind of global action or global agreement in that kind of area or any movement towards a moratorium at a wider level?

Ruth Davis: We have had a look at the range of interventions and precedents. I do not know if you did a bit of work looking at precedents, Rod. I have some examples. Do you want to go first?

Rod Downie: I can give a local-scale precedent. This was the Norwegian Government, and it related to the Lofoten Islands off the coast of Norway. It is an island archipelago and biologically very rich. It is one of the world’s largest cod and herring stocks, with very large seabird colonies. In 2003, the Norwegian Government designated the Lofoten Islands as a temporary no-go zone for oil and gas. This was after successful campaigning by a number of NGOs. In 2011, the ban was extended by the Norwegian Administration at least until the general election, which is actually this year. The decision shows that the Government put the value of nature and sustainable fisheries way ahead of oil and gas development around the Lofoten Islands.

Q12 Mark Lazarowicz: But unless there are any other examples elsewhere in the Arctic, it also shows there is one Government taking that approach in one relatively small area. Are there prospects of a wider moratorium among all the various nations involved?

Rod Downie: There is no sign of that at the moment, no. I think there is a tendency towards economic development in the area.

Ruth Davis: I would like to add to that, if possible. There is an interesting and increasing number of players who are articulating very great doubts about pursuing drilling in the Arctic. For example, I do not know if the Committee is aware that the Norwegian Foreign Minister has said that he believes that drilling in ice-covered areas is completely unacceptable. From a Norwegian Government position, they clearly have standards that, if they were applied globally, would not have allowed Shell to pursue drilling in an area that, during quite large parts of this summer, was clearly not necessarily ice-covered, but certainly ice-infested. Similarly, we have the position from Total. I do not know, again, whether you will be aware of the fact that the debate in the States is now very, very live and is, as a result of Shell’s various mishaps during the course of the year, probably moving closer towards a direction where they will just say they do not think that it is probably safe in Alaska. John Podesta and Carol Browner have both expressed a view that it is pretty much unacceptable.

The point that I was making about that is that we are in a very lumpy but rapidly developing playing field in the area of Arctic drilling. The question is, does the Government itself in the UK have a role in adding its voice to that and trying to promote the idea of common standards and saying, "It would be infinitely better if, instead of a hotchpotch of national regulations, we really did have a sustained conversation about what the higher standards were", or is it prepared to watch a range of very different, and on different time scales, regulatory approaches? Certainly, in our view, it would be better if there was a more sustained conversation. The obvious place for that to happen is in the Arctic Council, but we cannot necessarily see that happening without there being some additional diplomatic pressure and engagement from those countries who have a legitimate interest, including the UK.

Q13 Mark Lazarowicz: In that sense, you probably to some extent-I will not say endorse-see the logic of the Government’s position in terms of preferring a global approach rather than individual-country moratoriums?

Ruth Davis: I certainly think that the ideal outcome in this situation would be an agreed global moratorium. However, I do think that it is all very well to sit there and say, "This is the outcome we would prefer, and until we have that outcome we are simply going to pursue what we perceive to be our business-as-usual interests," without exploring the possibility of whether you can use your own diplomatic capital and expertise to make that global moratorium more likely. Forgive me, but it reminds me slightly of Shell’s position of saying, "Our ideal solution to the problem of climate change is a global carbon price." I am sure everybody’s is, but the fact is that, in the meantime, they continue to invest in vast quantities of fossil fuel extraction. The global solution is the ideal one, but you have to think about the actual practical steps that are enabling you to get there. I think it is things like the position of the Norwegian Foreign Minister-he is being overt about his view that we should not be drilling in the ice-that are likely to move the prospects of a moratorium closer.

Q14 Dr Offord: One of the points that was made was about the various mishaps by Shell in the last few summers. Presumably, you are referring to the Kulluk incident. Particularly, what question do you think that that issue raises in regards to drilling for oil in the ice area?

Ruth Davis: Such are the mishaps that I had to make quite a long and written-down time list for myself of what they were. Nearly all of them have some implications for how we should be handling stuff. I think almost the first one that has implications for the evidence that Shell gave previously to the Committee is to talk again to them about their capacity to be able to clean up a spill in icy conditions, because my memory is that what they said at the time was that they did not anticipate having to do that because they did not anticipate encountering ice because they would be drilling in an ice-free period, yet a day after they began their exploratory drilling they were forced to suspend it because they encountered a vast amount of floating ice. I think I would just start with that question, "You have spent a summer in an area where you have regularly encountered extremely severe conditions and floating ice. Do you think it is possible to clean up a spill in that situation?" It would be useful to clear that point up.

They are now left in a position where it seems doubtful at least that they are going to be able to deploy two rigs at the same time because the Kulluk is certainly damaged and is going to go through now quite a lengthy process of inspection. The next question is whether or not they are going to accept the fact that without being able to have two ice-worthy drill rigs they will not meet the conditions that are currently in their own spill response plan. Will they simply accept that that means that they are not going to be drilling next year, or are they going to try to take some other approach, for example, to attempt to adapt the conditions in that spill response plan?

The third question I think I would put to them is that they made much of the fact that they were testing a containment dome for potential spills, should that eventuality come about. We know that the testing that they did in Puget Sound earlier this year was something of a disaster. There were a series of leaked e-mails from the Interior Department that emerged in December that described what happened to their testing as the dome being breached like a whale and then followed by saying it was subsequently crushed like a beer can. Given the relatively temperate circumstances in which that was being tested, it does not suggest to me that the containment device that they had was in any way fit for purpose.

I think I would go through a series of questions: they encountered the ice and they did not anticipate it, so can they clean up in the icy conditions? Will they accept the fact that potential damage to the Kulluk means that they possibly cannot go forward with a further drilling programme until they have made sure that they are meeting the conditions in their own spill response plan? Then, a question about how do they expect to test much more effectively a containment mechanism that would work. But I also suspect that, given the very public series of mishaps that has gone forward, it is quite possible that they will not necessarily have renewed licences to operate in the next two or three years, because I think the United States Government are becoming increasingly wary about the operation.

Dr Offord: Rod, do you have anything to add to that?

Rod Downie: Yes. We did some work looking at what we call the response gap, so the percentage of time when, due to climatic conditions, it is simply impossible to respond to an oil spill. We did this around the Beaufort Sea area where Shell are actively engaged. The percentage of time where an oil spill response was not possible was 66% of the time for near offshore and 82% for the far offshore. That is during the month of June, so in the summer. A spill response in the Beaufort Sea would not be possible for more than 50% of the time between June and September, so effectively the entire period, then clearly after October any sort of response would be completely impossible.

Dr Offord: Liz, anything to add?

Liz Gallagher: No.

Dr Offord: Okay, thank you.

Q15 Chair: Right, okay. I do not think we have really covered the moratorium that we propose. I just wonder if it is worth exploring your response to that and, given what you were saying about the need to perhaps work with other countries, whether or not you are aware of which other countries might want to perhaps work alongside the UK. If we could get that taken on board by the Government, how would we go about, if you like, getting credence for that kind of an approach?

Ruth Davis: I think I would start from the position of having conversations about what the individual Arctic states consider to be the highest possible standards. I am sorry to endlessly repeat the point, but I think to talk to the Norwegian Government specifically about the fact that they do not think that it is safe to drill in ice-covered waters is a reasonable starting point. There are certainly countries outside of the Arctic states who have begun to explore their own national positions around this. I will, if I may, send in a written note to the Committee because I do not want to read out the whole of the content of it, but there is an Austrian Parliament resolution that is currently being debated that proposes that Austria should support a moratorium in all international forums, but also proposes a series of measures that the Austrian Government could then take to ensure that its own interests were not effectively colluding in Arctic drilling. For example, it has proposed the idea that it would not issue any export credit to Austrian companies for taking forward activity in the Arctic. Now, that resolution has not passed yet, and it will probably be adapted during its movements through the Austrian Parliament, but none the less it is evidence of the fact that there is an interest in this issue outside of just the UK, so I think exploration with them. Clearly, the French Government will be in an interesting position because of the stance that Total have taken and because they have a long history of proactive engagement in polar issues. I do not want to dictate a diplomatic strategy to the Foreign Office-far be it from me-but with a certain amount of research I think you could identify countries who are out there who potentially have common interests and have expertise to add to the debate.

Q16 Chair: You have not really touched on, in a way, what the UK Government could do in terms of British companies to promote better practice among them. Is that an area where you see there is a great deal of work to be done?

Ruth Davis: The performance of Shell during the course of the last year does tend to suggest that. I think there is an interesting question again. This would be something really worth the Committee exploring if you had the time capacity to do that, to look at precedents where Governments have been prepared to work with, or indeed regulate, companies that are based in their own national territories, but operate outside of their national territories-to look at precedents where that has happened previously and then to consider how it might be applicable in the context of UK interests. That debate, I know, went on when the first round of discussions happened about the EU offshore oil regs, which are going through at the moment. There was a certain amount of legal ambivalence as to the capacity of the European Union to apply rules that would operate on companies outside of EU waters. But it was ambivalence-it was not an absolute no-and I think this is an area that would be worth exploring. Certainly we would be happy to invest some time in exploring what the legal potential was to do that. At the moment, it would seem to me at least that Total have a different view, for example, about what are acceptable minimum standards to apply to Arctic drilling from Shell, so perhaps, as Zac has suggested, even just an exploration of what individual companies believe to be the highest possible standards would be a worthwhile exercise.

Chair: Yes, that might be an interesting avenue to explore. Did you want to come in?

Liz Gallagher: I just wanted to come in on the previous question about the diplomatic ties. I guess there are two large groups of countries that could be worthwhile investigating and forging greater links with. All of those stand to lose from Arctic industrialisation, be that through trade routes, be that through Arctic melt or be that through a range of different issues. There are some that have not necessarily given much attention or thought to Arctic affairs-for example, India, perhaps-who have not necessarily had a discussion nationally about what the impacts of the Arctic industrialisation are going to be on its economy and its national interests. Then there are those that are incredibly vocal about it and looking at a range of different issues-for example, the Alliance of Small Island States, the most vulnerable countries, and those types of groups of nations. I think there are quite a lot of countries that potentially could shift and engage on this issue, some much more vocal than others, but not all of them have had the national debate.

Q17 Chair: Would you see that being done through bilateral discussions, or what would be the mechanism whereby you think that that could be prompted?

Liz Gallagher: I think some through bilateral discussions and some through some of the sectoral discussions that are happening through the IMO. Yes, there is a range of different governance regimes that those discussions could begin and initiate in.

Q18 Zac Goldsmith: Just on that point, not to disparage the influence that those bodies could have, but clearly it is those countries with direct jurisdiction in the Arctic that are going to be calling the shots. Other countries are likely perhaps to apply pressure, but they are not going to clinch any kind of deal. Among the countries that are most directly involved in the Arctic with the most direct jurisdiction-and it is probably asking you to repeat yourself-which are the countries that you would say are most likely to look favourably upon expanding the moratorium idea? Who would be the most obvious allies there?

Liz Gallagher: In the littoral states, the Arctic nations?

Zac Goldsmith: Yes.

Liz Gallagher: I would have said Norway.

Zac Goldsmith: Other than Norway, is there any?

Liz Gallagher: I think there is a possibility, as Ruth was saying, in the US. I think there is a change of rhetoric at the moment, which I think is helpful. Yes, I would say those are the two most promising.

Q19 Zac Goldsmith: Is there anything in Russia at all that you see?

Liz Gallagher: Possibly not. I am no Russia expert, and it is quite a dark hole in terms of my knowledge, but I would probably say no.

Q20 Zac Goldsmith: Can I just push you? On the issue of liability, one of the recommendations obviously is to have unlimited liability-proven ability to pay in the event of an accident and so on. That is not something that is ruled out by the British Government, but they do say that this is not something they are going to push, because they do not think it is appropriate to be dictating those terms to those countries with Arctic jurisdiction. Are there any other countries directly impacted that are pushing for the same?

Liz Gallagher: I do not know about that. Ruth, do you?

Ruth Davis: No, not as far as I am aware, because obviously the further you push on liability the greater the costs are that you potentially apply to companies operating in your space. The Greenlandic Government, however, did require a very substantial bond, which it was intending to apply to companies operating off its coast. The relevance of that bond was that at the time-I think you probably remember-the company operating there was Cairn Energy, who, unlike Shell, do not have a vast balance sheet. If there were an accident involving a company like Cairn, the only way that you could really possibly recoup your costs would be if you had a really substantial bond. That, again, is worth exploring, but I think also to go back to perhaps looking and even exploring with the United States Administration where they got to in their discussions after Macondo as to how you apply a much more effective liability regime than the ones that are currently in operation.

Q21 Zac Goldsmith: Sorry, yes, on this point, what is the public position of the oil companies that are looking at the Arctic on this issue?

Ruth Davis: In terms of liability?

Zac Goldsmith: Yes, so if we ask Shell when they come in, whenever-

Ruth Davis: Yes. I seem to remember that you pressed them quite hard on that question the last time that they were here and the answer they gave was that-I am going to paraphrase, but I think this is accurate-they did not have an estimate of how much it would cost for them to clean up a spill because they did not anticipate that a spill would happen. We were somewhat at a kind of impasse, and, again, one of the reasons why I think it would really be worth bringing them back is because experts have confidently suggested that in the very difficult conditions of the Arctic a spill is extremely likely, and we also know that in the conditions that they were operating in it is very unlikely that they will be able to clean up most of that oil.

Q22 Zac Goldsmith: But given that Shell is going to refute that and they are going to claim that it is all much less risky than we are implying, will they also at the same time be rejecting any notion that they would have to take on the full liability?

Ruth Davis: I do not think so, because I think their anticipation is that this is not going to happen and therefore they do not really have to confess-no, I am going to put it slightly differently from that.

Chair: That could offend somebody.

Ruth Davis: No, exactly. That is the trouble, and I am trying not to put words in their mouth. I am trying to quote the evidence that they have given previously, rather than second-guess their perspectives. My understanding is that they have never, and have no intention at the moment, of putting a figure on what that cost might be. I would speculate that it is possible that the reason that they wouldn’t like to do that is because it has clear investment implications attached to it. But also the context in which we are talking is one in which those large oil companies do not third-party insure. They assume that they would pick up the cost, so far as it was possible for them to be held legally accountable for the cost. The issue that I was raising with Joan earlier in suggesting that it would be worthwhile exploring what the nature of those costs were is that there are many costs that it might be quite difficult to make them legally liable for in the context of existing liability regimes, particularly if you are talking about an unrecovered amount of oil in international waters, where it is not clear what the legal regime would be that would hold them to account, even if they were to accept the total bill for any legal liability.

Q23 Chair: Just following on from that, we have invited Shell to come back, and they will be coming back when they are in a position to be able to do that without breaching any legal procedures. Given that the Kulluk incident was something that happened in the process of us receiving the evidence, I just wonder if you could perhaps drill down a little bit on some of the questions that we should be asking Shell relating to the concerns that your members have about how much of the risk assessment and so on was done to deal with the situation arising that led to the difficulties that were experienced there.

Ruth Davis: I do not want to go over the same old ground if I can avoid it. I think the drilling down has to be about the extent to which they genuinely understood-

Chair: Sorry, when I said "drilling down" I meant just generally, not literally drilling.

Ruth Davis: Yes. I think it has to get down to the detail of the extent to which they genuinely understood the nature of the hostile conditions that they were going to be operating in and what precautions it was possible for them to take in the context of those very hostile conditions. What happened with the Kulluk happened in very stormy weather. It did not appear that they were in control of that operation. I think it would be worth asking them, "What was the nature of the risk assessment, and how far did you stretch the envelope in terms of thinking about how you could manage that operation in very extreme conditions in the Arctic?" Because one of the things that we do know about the way in which assessments have been done previously is that they have not necessarily always tried to deal with the likelihood of something going wrong in the most extreme conditions. I think previously when the Committee-I think it was actually an examination of the risks of offshore oil drilling in the UK. The thing that was identified was that very often companies were not in a position or chose not to identify the likely outcome of a relatively infrequent but very high-risk event. It is there that I think it would be worth trying to get more detail from Shell about the specifics.

Q24 Chair: Is there a worst-case scenario here?

Ruth Davis: It is a worst-case scenario, and often what you see in planning is that there is not really planning for a worst-case scenario. I would certainly say that the reason for that is because in many of these worst-case scenarios there is almost nothing you can do to prepare for them, so they are almost a self-collapsing risk assessment because the answer to the question is, "We do not know how to manage this risk." But definitely asking about what they anticipate the conditions are likely to be in the situation that they are operating is the starting question.

Q25 Caroline Lucas: I am really sorry that I couldn’t be here at the beginning, and you have probably already rehearsed it, but can you just tell me if you have already talked about the issue of the compatibility of greater oil exploration and so forth and the overall climate emission reduction targets? Has that all been done and dusted?

Rod Downie: We have drawn attention to it.

Chair: We have covered that, but if you want to just add to it-

Caroline Lucas: I only wanted to know-and again I apologise; it has just been such a busy day-in terms of what the Government said in response to our question that we do not think that they have looked at this strategically in terms of whether or not this focus on drilling is compatible with the 2 degrees. They seem to be saying, "Well, the IEA says it is all fine." But if you have rehearsed it all just-

Ruth Davis: We rehearsed the principle, not the detail. With the Committee’s permission, we do have quite a detailed breakdown of our view as to why we think that that was not necessarily the most rigorous analysis. I would welcome an opportunity to be able to send that to you as a written note. Would that be useful?

Chair: That would be very helpful.

Ruth Davis: Thanks very much. I am very happy to give you more detail now if that is appropriate, but I can send that through.

Q26 Peter Aldous: I just wonder if you have any feedback as to what other companies’ reactions have been to Shell’s experiences.

Ruth Davis: Statoil has said that they are going to suspend their proposals to drill in Alaska until they see what the outcome of the Shell adventure is. As we know, Total have said that they are not prepared to go there. The situation in the Russian Arctic is a little different, where the majority of companies are still interested in pursuing opportunities there, but I think quite a lot of them-you might be able to add to this, Liz-are some way away from being realised. They are at the very early stages. Yes, the perception seems to be that many of the companies are prepared to wait and see how the adventure plays out.

Rod Downie: If I could just add to that as well, I think even since the start of the inquiry we have seen increasing interest from much smaller UK-based companies as well. They include Tullow Oil, who have a 40% stake in an exploration block off the Greenland coast, and also Faroe Petroleum based in Aberdeen and Valiant Petroleum have both been granted licences off Iceland. This has all happened during the course of this inquiry, so there is an increasing UK-based interest in this as well. Of course, you spoke to Cairn Energy last year as well.

Ruth Davis: Cairn are intending to go back in 2014, as we understand it.

Liz Gallagher: Just to come back on the Russia front, there has been no dent in their enthusiasm for exploration, but it is fair to say that it is a slightly different situation in terms that they are incredibly heavily subsidised, so there is less risk involved in them pushing forward.

Q27 Chair: Do you think that is an issue that should be explored, a level playing field?

Liz Gallagher: I think it would be something that would be very interesting to look at, what different subsidies and tax exemptions there are across Arctic offshore, in particular oil and gas.

Q28 Chair: Is that something that was picked up through the WTO in terms of trade agreements?

Liz Gallagher: I do not think it is, no.

Ruth Davis: Not as far as I am aware. There is a G20 subsidies phase-out commitment that has slightly died a death since it was originally passed, but actually the G20 is in St Petersburg this year, I understand.

Liz Gallagher: It is. It is Russia hosting.

Ruth Davis: Yes. That was an agreement to phase out inefficient and wasteful fossil fuel subsidies, so I think that would be a question that it would be interesting to pose to Russian experts and colleagues.

Q29 Chair: Okay, I just have one final question; I do not know about the rest of my colleagues. Given the fact that you took out the full-page advertisement today in the national press and given that one of the things that we are looking to see is how Government in the next 12 months is going to respond to some of our recommendations, and this is obviously on the agenda of many different nations, and also of the Arctic Council and so on, I just wonder what your expectation is of the advertisement that you took out. I just wonder how much you would be wanting to look at the link between, if you like, the general public and what they are saying about this and the extent to which they are informed about the issues that are involved, and to what extent traction with the general public in terms of engagement then contributes, if you like, to them pressing MPs-not just in the UK, but their elected representatives-so that there is actually a greater momentum to have this as an agenda item and this is dealt with with the urgency that certainly I think our report felt it needed to be dealt with.

Ruth Davis: It is a very good question. Certainly, the international Greenpeace campaign is founded on the idea that it is only really massive people pressure that is going to make a difference to Governments’ perception about the urgency around the Arctic issue. At this stage, I have not looked at the latest numbers, but you will be aware that there are between 2.5 million and 3 million people, I think, already mobilised as Arctic defenders globally, and they do come from all parts of the world. It has been one of the most successful and resonant campaigns we have ever run, not least because I think the majority of people can see the demonstrable insanity of pursuing oil as the ice retreats.

Q30 Chair: You say "successful". How do you measure success?

Ruth Davis: I was talking specifically about our capacity to engage and mobilise people. We have found that because 2.5 million or 3 million people are engaged that is successful in those terms. Success, obviously, for the campaign is much more about affecting real-world outcomes. The interesting question for us is how we manage to turn that kind of huge public enthusiasm for a more progressive approach to the Arctic into something that really puts pressure on politicians. Now, some of that is obviously through making many more people aware of the nature of the issues, and you will have seen the advertisement today, which is partly obviously about raising public awareness, but is also obviously about raising awareness in the wider investment community, not just in the public mind.

At the moment, there is an online petition running globally that engages with those 2.5 million to 3 million people who are signed up as Arctic defenders in the global Arctic campaign directed at President Obama. That is specifically asking him to consider revoking licences for drilling in the Arctic, and we will see where that goes. I am very interested in the potential in the UK for us to work with the set of Arctic defenders that we have who have signed up to the Save the Arctic petition here and think about what is the most effective way for them to direct their pressure in order to raise this up the Government’s agenda. There are many of them, and they are very, very willing to act. I am interested to explore with members of the Committee-we can ask those people to directly require the Government to support a moratorium. It may be more effective for those people to be mobilised to talk specifically to their MPs, who in turn may be interested. It may be that we want to do both, but this is certainly where the campaign is going. We recognise that that public mobilisation is essential in order to be able to get the Government to take this issue with a little bit more urgency than it has so far.

Q31 Dr Whitehead: Just a small point in terms of shipping in the Arctic: one of the things that struck me about the response from Government is that on the one hand they are saying, "We ought to be concerned about environmental issues as far as shipping is concerned," and on the other, they are saying, "We stand ready to make use of any opportunities that may come our way." That is linked with a discussion that I don’t quite follow, I must say, about the impossibility of banning heavy fuel oil in the Arctic if ships are seen to be carrying crude oil. For example, you cannot apparently ban heavy fuel oil use, or it would seem to be not appropriate to ban heavy oil use, in the Arctic if there is a ship in the vicinity not using that oil but carrying it. How do you respond to that?

Ruth Davis: I did not follow that either, but I am also not going to pretend to be an expert on the regulation of Arctic shipping. This is not an area that I know enough about, I am afraid, so, like you, I looked at it and thought, "I can’t quite understand what the implications of that are." I do not know whether either Rod or Liz has a greater level of expertise, but we can explore that with others who know more about this issue if that is helpful.

Q32 Zac Goldsmith: It is a broad question. I agree your campaign has been brilliant in terms of catching people’s imagination, but if you succeed domestically here-or let us step back a bit; if the British Government responded to our submission 100% positively, if they were completely on side with the things you are asking for-what impact would that have in the big scheme of things? How much influence do we really have in real terms with the key players in the Arctic? How much do we matter?

Ruth Davis: The practical places where that could be carried through would be in the European Union, where the potential exists at least to regulate activity in some Arctic waters-not a massive amount, but in some Arctic waters-and where the European Union is in the process at the moment of developing its own Arctic policy, which-I think if the UK had a more progressive position, I would hope they would be able to advocate for a more progressive position in the European Union-in turn includes, obviously, some Arctic states, but also where there is a very strong link to Norway. I think the EU does have the capacity to be able to influence decision making inside the Arctic Council in a useful and helpful way.

Some of the issues that we have explored previously about the extent to which the UK might be prepared to try to promote best practice in the operation of its own companies is another area where, potentially, there is the opportunity for influence, but I think more broadly we should not see what is happening in the United Kingdom in isolation from what is a global campaign. I was talking about this resolution in Austria. All over the place in different countries in the world, an initiative is beginning to think about how countries outside of the Arctic might begin to influence the long-term future of the Arctic in order to make sure that that is more sustainable. The potential exists, therefore, for the United Kingdom to build a set of alliances globally that could obviously give it more traction than if it was simply operating as a lone wolf. This is not just about a Greenpeace campaign in the United Kingdom; it is a Greenpeace campaign in Hungary, in Argentina, in south-east Asia-that is the great blessing of it.

Liz Gallagher: Can I also just comment on that one? I think the Government also engages in a security context with the countries of the high north-so, the Nordics as well-so that is another avenue to deliver. Obviously, at the moment, the way the UK Government acts inside the Arctic Council means that it is not willing to expend political capital on issues. It is quite happy just to sit back and watch what goes on inside the Arctic Council. I think if it were to get a bit more muscle and expend some of that political capital, it could potentially engage with the other observers as well and build up more of a coalition to influence what happens inside the Arctic Council.

Chair: Right; okay. In the absence of any more questions from fellow Committee members, what I would like to do is to draw the afternoon session to a close and thank all three of you for coming along. As you are aware, we will be getting Shell at the appropriate time to come back before the Committee, and I can assure you that we will look in detail at the transcript of the session that we have had and see how we can take this forward. Thank you very much indeed.

Ruth Davis: Thank you very much.

Rod Downie: Thank you.

Liz Gallagher: Thank you.

Prepared 26th July 2013