Lloyd's warns of risks of Arctic oil rush.

A new report by Lloyd's of London confirms what environmentalists have long claimed- that there are huge risks associated with the rush for oil in the Arctic. A Chatham house report warns that there are 'multiple ways in which ecosystems could be disturbed' because of unbridled economic activity in the pristine region, that is already feeling the consequences of climate change. It predicts that it is "highly likely" that this will happen.

Although such concerns are not new, Lloyd's is the first major insurance market that has gone on record to highlight risks associated with commercial exploitation of the Arctic.  Lloyd's CEO Richard Ward says that companies should think carefully before rushing in to exploit Arctic resources "before research is carried out and the right safety measures put in place". His statement comes at a time when close to a hundred billion British Pounds worth of investment is estimated to flow into the Arctic oil industry over the next ten years, with Total, Cairn Energy and Shell some of the frontrunners in the race. In addition to oil, other minerals are to be excavated; the Guardian reports that Lakshmi Mittal is planning a new mine- with an estimated £14bn of iron ore- 300 miles inside the Arctic Circle.

Even as the Lloyd's report warns that a future oil spill is the "greatest risk in terms of environmental damage, potential cost and insurance", it warns that the understanding of the region is yet incomplete and that the Arctic consists of several ecosystems  "highly sensitive to damage" in the long term.  It raises the sceptre of pollutions from mines, nuclear waste, weapons testing and oil and urges "baseline knowledge about the natural environment and consistent environmental monitoring".  Unclear legal boundaries will add to the tardiness of a response to an environmental incident, Lloyd's says.

"Other than the direct release of pollutants into the Arctic environment, there are multiple ways in which ecosystems could be disturbed, such as the construction of pipelines and roads, noise pollution from offshore drilling, seismic survey activity or additional maritime traffic as well as through the break-up of sea ice," it says, adding that investment is needed to "close knowledge gaps, reduce uncertainties and manage risks" and to enable "safe economic activity. Additionally, migration patterns of caribou and whales in offshore areas may be affected.  Lloyd's says that "full-scale exercises based on worst-case scenarios of environmental disaster should be run by companies". 

In a separate development, the intergovernmental Arctic Council's taskforce is understood to be working on producing a mechanism that would- given the inadequate response to major oil spills elsewhere in the past- hasten clean up and compensation payments in the event of a calamity in the frigid north. This is supposed to be ready by 2013, and "may include an international liability and compensation instrument" missing so far, says the Guardian. 

Environmentalists have long pushed for measures to ban drilling of oil in the Arctic, saying that the environmental damage after a potential oil spill there will be catastrophic. Experts have said that the natural biodegradation of oil in the Arctic will be extremely slow and unpredictable in such an event and that the hostile environment would make cleanup operations very difficult and very expensive.  One hopes that the Chatham House report will reinforce these concerns and will result, eventually, in workable solutions and mechanisms that mitigate the risk associated with drilling or mining in the Arctic.