NC
Northern Consultants Co.
Water ▪ Wildlife ▪ Protection
52 Lavenham Cres.
Winnipeg, MB
204-888-8888
Consultant: Angela Reeves – 96%
Company Name: Yukon Oil
Date of Consultation: November 26th, 2014
Purpose: Report providing management strategies to identify and mitigate the liabilities for the proposed offshore oil rig
located north of the Yukon in the Beaufort Sea.
1.0 Summary
Yukon Oil is a new offshore oil and gas company located in Yukon, Canada. The offshore oilrig will be located in the
Beaufort Sea and the floor in the area proposed for drilling is approximately 700m below the water surface; reaching the
geological target with a total vertical depth subsea at approximately 6,800m.1 Approximately 80,000 metric tons of crude oil
will be stored on the rig until corporate owned crude tankers transport it to refineries. Drilling for crude oil will take place
during manageable ice months, from approximately May to November. When the end of the season is reached, actives will
be suspended and the well will be safely secured for the winter season.1 This report will provide Yukon Oil with potential
liabilities and management tools and strategies to mitigate the risk These tools will help with the implementation of
processes and procedures; for ensuring and maintaining the integrity of all facilities, structures, and equipment necessary to
ensure safety, and environmental protection, thereby reducing liability to the company.
2.0 Environmental Issue
The main objective of this report is to identify, prevent or mitigate liabilities caused by an oil spill in the Beaufort Sea that
would adversely affect the ecosystem, species and water quality in the area. The severity and likelihood of such an event
occurring depends on the method in which it could occur; a deep water well blowout, transportation accident, or an incident
to the rig itself. Blowouts occur when the integrity of the well is compromised, following the loss of hydrostatic control and
the control of well pressure, causing the failure of a blowout preventer due to initial explosions from pressure.3 This allows
spillage into the ocean and atmosphere of natural gases, oil, saline water and/or well fluids.4 Deep water blowouts are hard
to access, causing leakage of larger quantities until capped or a relief well is drilled. A relief well would take time due to the
depth and would cost millions of dollars. High arctic wind speeds could cause the stored crude oil on the rig or vessels to tip
into the ocean causing a spill and pollution. Severe weather conditions could affect transportation and vessels could end up
in an ice incident polluting the waters. The severity of any type of oil spill is compounded in this area by wind-driven
currents that circle the region in a clockwise direction allowing it to disperse rapidly throughout the deep waters and surface
waters, and to the coastal region.5 Arctic ice complicates the ability of containing a spill after winter freeze over because of
difficulties in accessing it, causing the spillage to continue over the winter season which allows the oil to bind to the ice and
disperse when it melts.5 Crude oil is persistent oil, meaning its biodegradation process is slow and therefore can be present in
an aquatic environment for hundreds of years. In the arctic environment its known degradation speed is 25% per 2 months
during the summer and under ice it retains its toxic properties for prolonged periods, a degradation process of 5% per 9
months.13 This can lead to prolonged implications on bird and aquatic species and water quality.
3.0 Background
Beaufort Sea is an arctic ecosystem that supports a range of species and is a highly used migratory path. Effects of climate
change are already being seen in the area, with a decline of sea ice (3%/decade) and annual snow cover (10%). 6 Pollution of
any kind can accelerate these issues, in attempts to mitigate Arctic Waters Pollution Prevention Act (AWPPA) has been put
in place to preserve ecological integrity of water, ice and land areas in the arctic.
Concerned, threatened and endangered species are either protected by SARA, MBCA, or both. The Bowhead Whale is
currently in recovery from excessive commercial whaling that depleted its population. During drilling season, whales are
primarily in the area because of the nutrient rich conditions making them more susceptible to habitat impacts. Bowheads are
protected under the Species at Risk Act (SARA) and are currently enlisted as “endangered”.
The area provides many nesting sites for migratory waterfowl birds such as the Ivory Gull. Precautionary measures have
been put in place to protect and conserve migratory birds, as populations, individuals and nesting sites through the Migratory
Birds Convention Act (MBCA). The Ivory Gull is also enlisted as “endangered” under SARA.
In response to the declining numbers in populations and diversity, the Canadian Government has designated areas of high
diversity or productivity, known as Marine Protected Areas (MPA) to conserve and protect. Certain activities are restricted
in these areas with the intention of preserving the diversity.
4.0 Environmental Liabilities
4.1 Regulatory Liability – Animal Populations
An oil spill can cause impaired body functions and senses in Bowheads while contaminating their primary food source of
zooplankton5 leading to starvation. Birds are harmed by oil cover from decreasing insolation, waterproofing and buoyancy
leading to death by hypothermia.
SARA states that no person shall destroy any part of the critical habitat or kill/harm any listed endangered species. A
corporation that breaches this act is liable to a penalty up to $1,000,000. In the case of more than one animal, a fine can be
calculated as though each animal was a separate offence. Such an offence can lead the court to prohibiting the person from
engaging in any activity that could result in the repetition of the offence.7 The MBCA states that no person or vessel shall
deposit a substance that is harmful to migratory birds in waters or an area frequented by migratory birds. If offended, a
person is liable to a fine up to $1,000,000, or up to three years in prison, or both.8 Harming the Ivory Gull would be a breach
to both SARA and MBCA and persons would be held liable to penalties from both. These fines can lead to a decrease in
revenue, and the possibility of the oil rig being closed down.
4.2 Regulatory Liability – Marine Protected Areas
Oceans Act (OA) classifies oil as a deleterious substance which would significantly degrade water quality and contaminate
ocean species.9 An oil spill occurring in anyway would contaminate water quality. Under this act follows Tarium Niryutait
Marine Protected Areas Regulations (TNMPAR) that states no person shall carry out any activity in the area that is likely to
disturb damage or destroy any living marine organism or any part of its habitat.10 Although drilling activities would not take
place within the MPA, oil can disperse, degrading water quality and contaminating ocean species in MPA. If the regulation
is contravened, the owner is guilty of an offence and liable to a fine of up to $500,000 under the OA.9 If ongoing, persons
are held accountable for each separate day.
4.3 Regulatory Liability – Ocean quality
In the event of an oil spill, the pollution would breach the AWPPA as it implies no person or ship shall deposit waste of any
type in the arctic waters. Waste is defined as any substance added to water that would alter water quality to the extent that it
is detrimental for man or animal. Liability is held to anyone engaged in exploring for, developing or exploiting any natural
resource on any land adjacent to or in the arctic waters.11 Liability includes all costs and expenses for actions to remedy and
mitigate the results from the deposits of waste.11
4.4 Non-Regulatory Liability - Public Relations
Oil companies are not trusted by the public due to major environmental accidents from deep water oil spills such as BP’s in
the Gulf of Mexico. The reputation, the consultation process and the safety assurances Yukon Oil demonstrates will strongly
influence the future of this company and the project. Public outcry could force the government to announce new policies or
programs adversely affecting the approval process for the company. If after scrutiny it is found Yukon Oils policies and
assurances are not adequate, approval for the project may be denied. Yukon Oil promotes itself as an environmentally
responsible company; but accidents still can happen. If an environmental accident should occur, the public will not forget
and a damaged reputation would impact the ability to conduct business. This could make it difficult to secure future
investments and could affect attempts at future expansion.
5.0 Management Plan
The following management plan identifies tools recommended for implementation to mitigate the aforementioned liabilities.
5.1 - Management Tools Description
Environmental Impact Assessment: Yukon Oil will require an EIA with Regulations Designating Physical Activities
under the Canadian Environmental Assessment Act prior to any construction on this project. This will ensure environmental
considerations are incorporated into project planning and decision making. The EIA will identify any potential adverse
environmental impacts to the Beaufort Sea’s ecosystem to evaluate and mitigate (eliminate, control, reduce or compensate)
issues and identify residual environmental effects prior to irrevocable decisions and commitments being made.14
Risk Management: Risk is created whenever an act or circumstance gives risk to possible gain or loss that cannot be
predicted with certainty like an oil spill in the Beaufort Sea.15 Risk management will identify the key risk areas of an oil
spill, estimating the probability of occurrence of the event and the probable magnitude of adverse effects mild to extremely
severe, and identifying the appropriate tools to manage the risk.15
Environmental Management Systems: EMS is a risk management tool that will produce an oil spill prevention plan for the
company. It will manage the significant environmental aspects of the project. EMS assures processes and procedures will be
established to assist Yukon Oil in analyzing, controlling and reducing the environmental impacts of operating an oil rig in
the Beaufort Sea. It will produce efficiency and will control tracking, managing, and improve environmental performance.16
Audits: Audits are a systematic approach that will evaluate a Yukon Oils environmental performance against legal
requirements as well as your own internal policies and standards.18 Audits will identify compliance problems, weaknesses in
management systems, or areas of risk.18 Audits are a way of ensuring environmental protection by reducing risk and
reducing your company’s legal liability, with the ability of a due diligence defence.
Contracts: Contracts are voluntary agreements with specific terms between two or more persons or entities in which there is
a promise to do something in return for a valuable benefit known as a consideration.17 Contracts are flexible and allows
Yukon Oil to go above standards from statutory requirements, this provides proof of due diligence for the person who issued
the contract.
5.2 – Management Tools Recommendations
The following recommendations will show how the above tools can be used by Yukon Oil to prevent and/or mitigate the risk
of an oil spill and the associated liabilities in the oil rig project. In addition, various strategies have been recommended to
monitor and mitigate individual liabilities.
EMS – EMS involves environmental policy, planning, implementing and operation, checking and review.16 EMS will aid
your company in the prevention of an oil spill and will ensure preparedness in the event of an accident, there by mitigating
liabilities listed in this report. It will also provide Yukon Oil a framework for objectives and targets and set a basis to which
the company can be reviewed and improved. It will identify and comply with legislation and other requirements required.16
EMS provides strategic planning using the risk management tool that identifies risks such as a well blowout and the storage
and transportation of oil and the proper response to mitigate these risks. EMS identifies the proper response to mitigate these
risks. EMS ensures competence, training and awareness of employees on equipment and with procedures.16 The EMS
emergency preparedness and response plan is a component necessary for Yukon Oil to mitigate liability. As well training,
simulation and an emergency response practice exercise is recommended to ensure employees are prepared to respond
quickly and efficiently should an event occur. The training and simulation should involve shutting down the well, deploying
spill response equipment, and testing the emergency response systems. This will reduce the impact of a spill and mitigate
liabilities listed.
EMS requires Yukon Oil to implement procedures to ensure continual monitoring and measuring of the key aspects
identified, to track performance and conformance with set objectives and targets, and compliance with legislative and other
requirements.16 This should all be documented and documentation should be maintained and secured in a safe and accessible
location. Internal communications, such as bulletins should be mandatory reading for employees, and employees should be
required to verify said reading by signature. This will ensure employees are informed of changes to company policy and
procedures before starting a shift. Yukon Oil should mandate checks at regular scheduled times during periodic intervals to
ensure proper functioning of equipment, such as well pressure checks. Checklists should be developed for employees to be
used in the performance of task or duties avoiding mistakes or omissions that may be relative in revealing the possibility of
an oil spill. These checklists should be secured to verify company compliance with regulations, procedures, practices and
direction. By creating policies and procedures the company will reduce the chance of an oil spill and will mitigate the
liabilities. Evaluations will be required on the above policies and procedures to identify nonconformity, determine causes
and take action against reoccurrence, mitigate any impacts caused, document actions taken, and follow up to review
effectiveness of actions taken to correct.16 Through every stage of EMS, documentation and maintaining records is a
requirement to show compliance with effective planning, operations and control of processes relating to managing an oil
spill and lends itself to the due diligence defense in the event a spill occurs.
Effectiveness of an EMS: Shell is an example of a company who has an effective EMS that produced an emergency
response and preparedness plan that mitigated an oil spill efficiently. Once the plan was developed, Shell regularly tested
their plan and preparedness at operating sites, along with other governmental agencies, scientists and oil spill experts long
before it was required. In 2009 pipeline issues in the Gulf of Mexico caused 1,400 barrels to spill into the waters. Because of
constant monitoring and immediate response capabilities, due to their EMS, Shell was able to shut down operation and avoid
continued release.18 By having plans in place, it reduced the amount of oil spilled and clean up began almost immediately
reducing the liability risk. Shell shares techniques openly that could be used to reduce the severity of an oil spill in the arctic
environment. These include: containment booms and skimmers, controlled in situ burning, and dispersants. They also advise
that ice can act as a natural barrier allowing for facilitated remediation of the contaminated water. Shell also uses “hazing”
as a technique in the event of a spill which herds animals away from the contaminated water, minimizing impact on
wildlife.18 Yukon Oil should consider incorporating all or some of these strategies in their plan. Exxon is an example of a
company who failed to have a proper EMS. CNN reported Exxon lacked oversight, prevention and cleanup measures as was
revealed by the spill. The Exxon Valdez accident occurred in 1989 causing 250,000 barrels of oil to leak into the arctic
waters and there were delayed efforts to contain the spill and cleanup the oil residue.19,20 This accident cost Exxon $4.3
billion in compensation, clean-up and fines and wildlife death toll grew to unacceptable levels.19,20
Audits- Auditing is a tool within EMS and internal audits are strongly recommended and should be conducted regularly. As
well, annual audits from outside contracted consultants should be considered to check company compliance with legislation
and company procedures and practices. This will provide Yukon Oil managers with information on employees and the
company’s compliance or lack of.17 It provides managers opportunities to recommend improvements on practices and
procedures and identify if corrective action is necessary.17
Contracts - The following contracts should be considered:
 Contracts with the Canadian Coast Guard and Oil Spill Response, the world’s largest spill response organization to
ensure quick recovery prior to winter freeze over in the event of an accident. Within the contract establish terms
mutually agreed upon to regularly test emergency plans and procedures collectively, as practiced by Shell.
 Contracts with organizations, companies or individual professionals who will track wildlife health prior to and
during operation to identify concerns and to monitor changes. Tracking procedures for background data should be
done similar to Shell, with bird tagging, and marine analysis.18 This helps a due diligence defence under SARA or
MCBCA if required.
 Contract with an organization that will process water samples at various depths and locations surrounding
operation and within the MPA every few hours to test for traces of oil in the water. This will provide a second line
of defence for monitoring for an oil spill ensuring a quick response if oil is detected, reducing the liabilities caused
by an oil spill.
Contracts can mitigate liability and demonstrates Yukon Oil’s commitment to regulatory compliance. They show the
company’s willingness to go far above industry standards to avoid breaching the AWPPA, TNMPAR, MBCA and SARA
regulations. All contractors will be required to sign Yukon Oils EMS to ensure those companies are aware of company
policies, procedures and standards, and to ensure they are in compliance with legislative requirements.
5.3 – Public Image
Having management tools in place shows the public Yukon Oil is a conscious, responsible and a committed corporate
citizen. Further, having round table discussions with all affected stakeholders would help with company image. Providing all
stakeholders with information and reports on the EIA, EMS, Audits, Contracts and Risk management could help create
better understanding of the company’s intent and commitment to safety and the environment, easing public tension. To
create a positive public image, the company must consult the public regularly addressing concerns and must report
positive/negative findings without prejudice. The company can show good stewardship and create trust by advising
stakeholders of the company plan to post daily water sample data on the company website for public viewing. By having
open honest and transparent communications the company could establish itself as an industry leader.
6.0 - Conclusion
Three Regulatory Liabilities and one Non-Regulatory Liability have been presented in this report. I have advised and
suggested tools to mitigate each liability and have made recommendations and /or suggestions to reduce the risk of each.
The report advises Yukon Oil of mandatory legislative requirements, Environmental Impact Assessment that must be
completed before construction. Why the Environmental Management System is a strong tool for mitigating an oil spill and
how it provides the company with an emergency preparedness plan. How Contracts can supplement and benefit the company
both before and during operations because of their environmental expertise. How Audits evaluate the company’s progress by
monitoring and measuring stated goals. This report has also made recommendations and suggestions about the company’s
corporate image. How open, honest and transparent external communication on a regular basis could enhance the company
image. The report provides Yukon Oil with all the tools necessary to proceed with this venture and should an accident occur
Yukon Oil can claim due diligence.
References
1. Imperial Oil. (2012. Dec). Beaufort Sea Exploration Joint Venture. Retrieved from Imperial oil website:
<http://www.imperialoil.ca/Canada- English/Files/PIP_Beaufort_Sea_Explor_JV_with_Cover.pdf>.
2. Press, The Canadian. (2014. Mar, 23) Arctic Offshore Drilling Closer to Reality as Projects Enter
Regulatory Review. Retrieved from CBC news website: <http://www.cbc.ca/news/canada/arctic-offshoredrilling-closer-to-reality-as-projects-enter-regulatory-review-1.2583487>.
3. Deepwater Horizon Accident and Response. Retrieved from British Petroleum website:
<http://www.bp.com/en/global/corporate/gulf-of-mexico-restoration/deepwater-horizon-accident-andresponse.html>.
4. Skogdalen, Jon Espen. Developing Safety Indicators for Preventing Offshore Oil and Gas Deepwater
Drilling Blowouts. Retrieved from Safety Science. Print.
5. Exploring the Risks. Oil Spills in the Beaufort Sea. Retrieved from World Wildlife Foundation website:
<http://arcticspills.wwf.ca/#home/>.
6. Furgal, C. & Prowse, T.D. (2014. May, 26) Impacts to Adaptation: Canada in a Changing Climate.
Natural Resources. Retrieved from Government of Canada website:
<http://www.nrcan.gc.ca/environment/resources/publications/impactsadaptation/reports/assessments/2008/ch3/10325>.
7. Species at Risk Act. (2002, c. 29). Retrieved from Government of Canada Department of Justice website:
http://laws-lois.justice.gc.ca/eng/acts/S-15.3/
8. Migratory Birds Convention Act. (1994, c.22). Retrieved from Government of Canada. Department of
Justice website: http://laws-lois.justice.gc.ca/eng/acts/M-7.01/
9. Oceans Act. (1996, c.31). Retrieved from Government of Canada Department of Justice website:
http://laws-lois.justice.gc.ca/eng/acts/O-2.4/
10. Oceans Act: Tarium Niryutait Marine Protected Areas Regulations. (2010, s.35(3). SOR.190) Retrieved
from Government of Canada Department of Justice website: http://lawslois.justice.gc.ca/eng/regulations/SOR-2010-190/
11. Arctic Waters Pollution Act. (R.S.C 1985. c.A-12). Retrieved from Government of Canada Department
of Justice website: http://laws-lois.justice.gc.ca/eng/acts/A-12/
12. Warner-Cohen, Kimberly. (2014. Mar, 26) Top Oil Companies See Reduction in Natural Gas Profits.
Retrieved from Wall St. Cheat Sheet website: <http://wallstcheatsheet.com/business/top-oil-companiessee-reduction-in-natural-gas-profits.html/?a=viewall>.
13. Atlas, R.M. Howowitz, A. Busdosh, M. (1978) Prudhoe Crude Oil in Arctic Marine Ice, Water and
Sediment Ecosystems: Degradation and Interaction with Microbial and Benthic Communities. J. Fish.
Res. Board Can. 35: 585-590.
14. Shewchuck, Leanne. (2014) Environmental Impact Assessment. Environmental Responsibilities and the
Law
15. Shewchuck, Leanne. (2014) Risk and Risk Management. Environmental Responsibilities and the Law
16. Shewchuck, Leanne. (2014) Environmental Management Systems. Environmental Responsibilities and
the Law
17. Shewchuck, Leanne. (2014) Managing Environmental Liabilities Through Contracts and Environmental
Audits. Environmental Responsibilities and the Law
18. Royal Dutch Shell. Shell in Alaska, Chapter 6: Exploration and the Environment. Retrieved from Shell
website: http://s00.static-shell.com/content/dam/shell-new/local/country/usa/downloads/alaska/os101ch6.pdf
19. Exxon Mobile. The Valdez Oil Spill. Retrieved from Exxon Mobile website:
http://corporate.exxonmobil.com/en/environment/emergency-preparedness/spill-prevention-andresponse/valdez-oil-spill?parentId=ef7252d1-7929-4f5c-9fa2-05404bde2a0f
20. Heiman, Marilyn. (2011. Mar, 4). What Exxon Valdez Spill Can Still Teach Us. Retrieved from CNN
website: http://www.cnn.com/2011/OPINION/03/24/heiman.exxon.valdez/