Far East Seas, Whales and Oil Drilling

Statement of Common Demands by Environmental NGOs
regarding the Sakhalin-1 and Sakhalin-2 Oil and Gas Projects

January 08, 2003
This document is a list of common demands from Sakhalin, Russian Far Eastern, Russian and international environmental non-governmental organizations regarding key environmental issues associated with Sakhalin oil and gas development on Sakhalin Island and on the island's coastal shelf, as well on the shelf and coastal areas of Khabarovsk Region that will be affected by development of the Sakhalin-1 and Sakhalin-2 projects.

Environmental organizations believe that the Sakhalin oil and gas projects, including:

• Sakhalin - 1 (operator: Exxon Neftegaz Ltd, a subsidiary of ExxonMobil Corporation, further referred to as Exxon);
  
• Sakhalin - 2 (operator: Sakhalin Energy Investment Company, Ltd, a subsidiary of the Royal Dutch/Shell Corporation, Mitsui, and Mitsubishi, further referred to as Sakhalin Energy-Shell)
  

Environmental organizations believe that until oil companies fully comply with these minimal criteria, Russian and Sakhalin authorities, international financial institutions, consumers, and other interested parties should not allow the Sakhalin projects to move forward.

1. General Demands

• All companies must use best available technology. For example, companies should re-inject drilling wastes back into the geological formations.

• All companies must comply with highest global environmental standards, norms, and rules. For example, companies should comply with the "zero discharge" standard and oil spill prevention and response preparedness standards as used in Alaska and the North Sea.

• All companies must comply with Russian law, especially environmental protection law. For example, it is unacceptable to violate the laws in the way that Sakhalin Energy - Shell has done, by discharging drilling wastes into the sea even though the Russian Federation Water Code and other Russian laws directly forbid this action.

2. Gray Whale Conservation

• Any anthropogenic activity that could potentially disturb gray whales, or deleteriously impact the ecosystems in which they feed or migrate, should fully protect gray whale habitat and should be mitigated to eliminate disturbance while feeding and protecting this critically endangered species. Oil companies must use the precautionary principle to prevent any potential impacts to the species.

• Any proposed drilling platform should be installed sufficiently distant from shore and gray whale feeding habitat to mitigate all potential acoustic and other impacts. Specifically, the new proposed platform for the Piltun-Astokhskoye field for Sakhalin Energy - Shell's Sakhalin-2 Phase 2 must be moved at least 12 nautical miles from shore in order to ensure that the platform does not harm gray whale habitat. Exxon needs to ensure, with the help of preliminary scientific study that is freely available to the public, that its onshore drilling pads at Piltun will not have a negative acoustic impact on the gray whales.

• All underwater pipelines should be constructed and routed outside of the gray whale feeding habitat to ensure their safety. In particular, Sakhalin Energy - Shell should change the route of its proposed pipeline from Molikpak to shore further to the South - at least 12 nautical miles from gray whale feeding habitat - to fully avoid any disturbance to critical gray whale habitat.

• Sakhalin Energy - Shell must immediately stop all discharges of drilling muds and cuttings, as well as all other types of waste water, from Molikpak into the sea and must refuse to discharge any wastes from any future platform to prevent deleterious impacts to benthic communities and to prevent toxic impacts to the whales themselves.

• Any disruption of the seabed must be avoided year-round in the feeding area of gray whales or within 12 miles of gray whale habitat.

• Exxon should not construct pipelines in or otherwise disturb Piltun Lagoon. Alternatively, Exxon should construct its pipeline by land around the north end of Piltun Lagoon.

• Exxon should eliminate planned construction of a pier off of Piltun Lagoon into gray whale habitat and any marine offloading of equipment in gray whale habitat and within 12 miles of habitat. Alternatively, Exxon should transport equipment to site by road;

• All oil companies should avoid any seismic exploration within 30 km of gray whale feeding habitat and migration corridors during periods that whales are present in these areas;

• All companies should avoid any construction activities in gray whale feeding habitat and in a 30 km zone around that habitat as well as in migration lanes during those portions of the year when gray whales are found in these areas.

• All companies should reject any development of underwater quarries or dredging of the seabed (as was done to provide seabed for the Molikpak platform), and should limit impact to the seabed within the specific infrastructure areas.

• All companies should review the issue of cumulative impacts to gray whales and to their habitat from all oil production projects on the Sakhalin shelf over the entire period of development.

• All companies should guarantee financing for independent, peer-reviewed scientific research with complete transparency of information from all research projects.

3. Pipelines

• Environmental organizations demand that offshore-to-onshore pipelines not cross either gray whale feeding habitat or Piltun Lagoon. These pipelines must be constructed in a manner that eliminates any noise impact in gray whale habitat.

• Although there are problems even with the Trans-Alaska Pipeline, environmental organizations demand that the safety level of Sakhalin pipelines be no lower than that used for construction of the Trans-Alaska pipeline.

• All pipelines for the Sakhalin-1 and Sakhalin-2 projects must be built with all necessary safety measures to protect from seismic activity and to guarantee accident free operation without ruptures in the event of a 9.0 Richter scale earthquake. To ensure this, pipelines must be built above ground on special vertical support systems to guarantee adequate flexibility without ruptures during earth movements.

• Pipeline crossings across all spawning rivers and streams on Sakhalin Island and on the coast of Khabarovsk Region must be made with a bridge over the river, on specially designed suspension systems, to avoid damage to the streambed and water channels. Environmental organizations categorically oppose trench crossings of salmon streams and rivers.

• Environmental organizations demand that the construction of new pipeline infrastructure be limited to a minimum in order to maximally protect spawning rivers, fisheries resources and forests. Therefore, environmental organizations demand that oil companies involved in the Sakhalin-1 and Sakhalin-2 projects use a common infrastructure for transport of oil (processing, pipelines, and off-loading terminals). First and foremost, this should involve improving the current Rosneft - Sakhalinmorneftegaz pipeline to the mainland and using this pipeline to transport all oil from both shelf projects to a single off-loading terminal facility on the mainland.

4. Oil Spill Dangers

• Environmental organizations believe that Sakhalin Energy - Shell and Exxon must adopt much more aggressive and effective measures in order to prevent oil spills and to be prepared for their clean up. The first priorities for such measures should be the primary recommendations from the report "Sakhalin's Oil: Doing It Right," (Yuzhno-Sakhalinsk, 1999) including the establishment of mandatory, safe tanker routes along all coastlines, mandatory inspections of each tanker by independent inspectors, introduction of tugboat escort of tankers in critical navigation areas, installation of a real-time, continuous tanker traffic monitoring system for the entire route in coastal waters and continuous communications between tankers and shore side dispatchers, a significant increase of the volume of oil spill response equipment stockpiled on Sakhalin Island and its placement at special bases along tanker routes and in those locations most vulnerable to oil spills (for example, at the entrances to the bays in northeastern Sakhalin) or that are considered dangerous from the point of view of potential accidents (for example, La Perouse Strait) (cf: "Sakhalin's Oil: Doing It Right," (Yuzhno-Sakhalinsk, 1999).

• Sakhalin Energy - Shell and Exxon must carry out response trainings in the open sea and in coastal waters in various weather conditions, and that provide for both product cleanup and also for wildlife and environmental response.

• Sakhalin Energy - Shell and Exxon must categorically reject the use of dispersants as an oil spill response technique in or near gray whale habitat and within a 30 km zone around this habitat, and in or near key fisheries areas. Dispersants should in no instance be used in waters less than 40 meters deep.

• Environmental organizations categorically oppose any winter transport of oil in ice conditions with the use of icebreakers, as currently proposed by Exxon from the port of De-Kastri, and demand that Exxon develop an alternative that does not involve transport of oil through ice-clogged seas. Any current oil transport operations in the vicinity of Molikpak must also occur only in ice-free conditions.

5. Discharge of Drilling Wastes

• Sakhalin Energy - Shell must provide for zero discharge, i.e. 100% reinjection of all drilling wastes (including oil-based, synthetic-based, and water-based drilling muds, drilling cuttings, produced waters, and sewage) back into the formations. "Zero discharge" standards must be applied at Molikpak and at any other platform. Environmental organizations fully support the decision of Exxon to introduce the "zero discharge" standard that calls for 100% reinjection of all drilling wastes at all future drilling platforms and drilling sites.

• Sakhalin Energy - Shell must fully reject its plans to discharge production and sewage wastes into Aniva Bay in southern Sakhalin. All the wastes from the proposed LNG plant, LNG offloading terminal, and oil offloading terminal in the area of the village Prigorodnoye on the coast of Aniva Bay should be 100% reinjected underground or separated and stored in as safe a manner for the environment as reinjection. Discharge of any wastes into Aniva Bay is categorically impermissible.

• Existing discharge at Molikpak must be immediately halted.

6. Fisheries

• Sakhalin Energy - Shell and Exxon, prior to the start of operations, must fully estimate damage to commercial and non-commercial fisheries resources, to spawning grounds, to migratory fish populations (salmonids), to terrestrial flora and fauna that is caused during construction and operations. All damages must be compensated to stakeholders (government, fishermen, indigenous peoples, hunters, municipal administrations, etc.).

• Special routes and safety corridors must be set up for all tankers transporting oil along the eastern shore of Sakhalin Island and through the Tatar Strait, as well as in the Sea of Japan. All other types of vessels should be denied entry into these areas. Losses caused to fisheries as a result of annexation of fishing zones for tanker corridors should be paid by the oil companies to the fishing community.

• All technical plans and decisions whose implementation will have a negative impact on fisheries must be coordinated with all fishing companies and organizations, and personally with the heads of the ten largest fishing companies in the region whose interests will be affected by such plans.

7. Access to Information and Public Participation

• Sakhalin Energy - Shell and Exxon must provide complete access to all information on the status and protection of the environment, and in particular, all data on environmental monitoring. The public must be provided information, in print and electronic forms, promptly upon a first inquiry. Environmental organizations believe that the responsibility associated with the current extreme difficulties in receiving environmental information about the Sakhalin projects are first and foremost the responsibility of Sakhalin Energy - Shell and Exxon.

• Oil companies must coordinate their activities, projects, and activities with all interested parties, and in particular with all indigenous peoples upon whose traditional lands the projects are developing, which has not yet fully occurred. It is necessary also to fully research all potential impacts to all interested parties together with their representatives.

• All scientists carrying out research as part of the Sakhalin projects must be allowed to freely use and disseminate all information obtained. Oil companies must exclude from contracts all conditions requiring the confidentiality of scientific research and scientists should retain all rights to publish such research. The right of final review of all scientific research must rest only with the authors of this research, and not with international consulting firms hired by oil companies or with the oil companies themselves, as is now the general practice.

• Sakhalin Energy - Shell and Exxon must adopt and guarantee much more proactive measures to ensure effective and appropriate public participation than is currently provided. For example, Shell's public participation measures both for public consultations on phase 2 of its project and for public discussions of its Western Gray Whale Protection Plan were extremely lacking and did not provide the public with the opportunity to make substantive recommendations for improving this work. Exxon's public participation measures for public consultations on phase 1 of its project were also extremely lacking.

• Since the Sakhalin-1 and Sakhalin-1 projects affect the interests of practically the entire population of the Russian Federation and create a direct environmental threat to Japan, public hearings should not be limited to Sakhalin Region. Hearings must be held in other cities of the Russian Far East, in Moscow, and also in Japan.

8. Socio-Economic Issues and Financial Responsibility

• Environmental organizations are extremely concerned that research by the Russian Federation Audit Chamber (2000-2001) shows that the people of Sakhalin will not receive their fair share of project revenues. Sakhalin Energy - Shell and Exxon must agree to immediately restore all Sakhalin regional and local tax payments from the Sakhalin-1 and Sakhalin-2 project and from all project contracts and subcontracts.

• Environmental organizations believe that the oil companies, in order to solve a very serious energy crisis on Sakhalin, must sell extracted natural gas on the local market for heat and electricity at domestic Russian prices and not at world prices as is now planned by Sakhalin Energy - Shell.

• Production sharing agreements for both projects should be available to the public (except for information that by Russian law is secret). The project budgets for all development phases must also be transparent to avoid financial dealings of the "Enron" type and to avoid unjustified project cost overruns and infringement upon the interests of Sakhalin and Russian contractors.

• Sakhalin Energy - Shell and Exxon must fully pay for normative and excessive emissions and discharges to the environment, as required in the Russian Federation "Law on Protection of the Environment." Exxon currently refuses to comply, which is unacceptable.

• Sakhalin Energy - Shell and Exxon must incur full financial responsibility for any oil spill, without exception, that results from their operations, including tanker accidents, oil loading, and other causes. This responsibility must include an obligation to pay for all clean up costs of polluted areas, damage and compensation payments to oil spill victims (local residents, indigenous peoples, fishing companies, tourist companies, local governments, etc.) as well as all non-economic (environmental) damages.

• Sakhalin Energy - Shell must immediately cease flaring gas at Molikpak since it is not prescribed in the project and was not approved through the government environmental impact review ("ekspertiza") or by Russian officials and so therefore is illegal. Such irresponsible corporate behavior with valuable resources leads to thoughtless environmental pollution and losses on the Russian side, which could use this gas as fuel.