WILL RECORD TEMPERATURES IN SIBERIA, COVID-INSPIRED DECREASES IN DEMAND FOR OIL, AND A MAJOR OIL SPILL FORCE RUSSIA TO RE-CONSIDER THE PRIMACY OF FOSSIL FUELS?

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A few weeks ago Russia experienced a major oil spill in the Arctic region near the Taimyr Peninsula, which occurred due to melting permafrost and instability as well as negligence in maintaining oil storage and infrastructure.

According to Oilprice.com, on May 29:

a fuel storage tank owned by Russian nickel and palladium mining company, Nornickel, collapsed and spilled 21,000 tonnes (about 158,000 barrels) of diesel into the nearby Ambarnaya river outside the Siberian city of Norilsk.  The accident–which has drawn comparisons to the Exxon Valdez accident off Alaska in 1989– is being regarded as the worst of its kind in Russia’s Arctic region. One source has reported that as much as 29,000 tonnes (about 218,000 barrels) of diesel could have found its way into the soil and nearby water bodies.

President Vladimir Putin declared a state of federal emergency in the Krasnoyarsk region as Nornickel scrambled to try and contain the spill from contaminating the Arctic zone. But their best efforts have failed, and now there are reports that the oil has flowed 12 miles north and seeped into a nearby Arctic Lake where it might cause untold damage to marine ecosystems.

Putin was reportedly furious about the handling of the spill by the Nornickel corporation, including its alleged failure to adequately maintain the tank as well as a delay of up to two days in reporting the incident. In addition to declaring a federal emergency Putin ordered billionaire part-owner of Nornickel, Vladimir Potanin, to pay the full cost of the cleanup.

Though government investigators and environmental groups in Russia have blamed negligence by Nornickel in its maintenance of the tank, the accident occurred within the backdrop of Russia suffering global warming and its effects at 2.5 times the rate of the rest of the world:

A large number of industries, roads, and entire cities are built atop the permafrost terrain in Russia. When the permafrost thaws, the ice that has remained stable and buried deep in the ground loses stability. Experts have already noted that thawing permafrost is responsible for fissures that have appeared in apartment buildings in Norilsk.

Environmental groups such as the World Wildlife Fund and Greenpeace Russia have pointed out that the risks of thawing permafrost to Arctic infrastructure are public knowledge, and companies like Nornickel should take the necessary steps to avert disasters.

Just this past weekend, Siberia saw record-high temperatures of 100 degrees. As I discussed in a post last year, though a substantive environmental movement has been slow to effectively get off the ground in Russia, many Russians are increasingly concerned about climate change and other environmental issues as major storms, floods and wildfires on an unprecedented scale have been occurring throughout the country. As reported by private Russian news agency Interfax, a recent state-run poll of Russian opinion revealed that 1/3 of Russians were unhappy with the government’s handling of environmental issues, with the majority of those dissatisfied residing in small to medium sized cities further away from Moscow and St. Petersburg. The Interfax report also noted that “Ecological issues have been among the most prominent causes of public protest in Russia in the last few years, with demonstrations against waste disposal being held from Moscow to Murmansk Region.”

Some are wondering if the oil spill will finally be the catalyst for implementing more environmental reforms and regulation. As Bloomberg reported:

Yet stricter regulation to prevent and liquidate oil spills has been stalled in parliament since 2018, when a draft bill passed its first reading. The law would require companies with fuel storage or pipelines to maintain detailed plans to contain spills and create financial reserves to fix any damage.

After the accident, Putin ordered checks of similar tanks around Russia and urged the quick adaptation of new legislation. This week, Prime Minister Mikhail Mishustin revived talk of the 2018 bill.

But the legislation in question has been criticized as insufficient:

The draft is too vague to make an impact and needs a clear mechanism to create provisions, according to Darya Kozlova, head of oil and gas regulation at Moscow-based Vygon Consulting. A better approach would be to rely on insurance policies and online monitoring, she said.

But it isn’t just environmental and public interest groups that recognize the increasing implications of the problem for the economy and society. Russia’s energy minister, Alexander Novak, has publicly acknowledged that, with the drop in oil demand caused by the Covid pandemic and the more competitive cost of renewables, the future role of fossil fuels in providing the world’s energy needs will likely fall:

Firstly, the Russian official explained that lifestyle changes, such as less flying and fewer car trips, would mean that the energy industry will be “experiencing a structural change” in the coming years.

The development of digital, cloud and IT technologies will also affect the energy sector, the energy minister said. “More electricity will be consumed, less will be generated from hydrocarbon sources, more from renewable energy sources,” he stated.

Due to these changes, Novak explained that he no longer agrees with previous estimates that the share of hydrocarbon energy would drop down to 75 percent by 2040. Due to the increased efficiency and reduced cost of renewable sources, the minister believes this prediction will be wrong.