TED Case Studies


Russia Oil Spill


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          CASE NUMBER:        265
          CASE MNEMONIC:      KOMI
          CASE NAME:          The Russian Arctic Oil Spill

A.        IDENTIFICATION

1.        The Issue
          
     The oil spill near the town of Usinsk in Northern Russia (Komi
republic) is one of the most serious environmental disasters of the
decade. The pipeline just south of the Arctic Circle had been
leaking since February 1994 but the oil was contained within a dike
built for this purpose.  On October 1st, the dike collapsed because
of cold and snow. Following the collapse, around 102,000 tones of
oil began to pour onto the Siberian tundra.  The spill reached the
Kolva River, a tributary of the Pechora River, which falls into the
Barents Sea.  Life within the rivers as well as the fragile
environment of the Artic have been endangered by this oil spill. 
Experts estimate the spill to be eight times greater than the Exxon
Valdez oil spill.

2.        Description

     The ruptured pipeline is the third largest oil spill in
history.  Russia has more than a million miles of gas and oil
pipelines, many of them poorly maintained. "Every year, up to a
fifth of Russia's total oil production is lost - partly through
theft, but much of it through leakage".  Komineft, the company
responsible for the 20-year-old pipeline, has a history of
accidents caused by age and corrosion.  Along the oil pipelines,
which experience hundreds of leaks and breakages each year, the
ground is saturated with oil. Some of the oil has already seeped
into the water table.  "One of the main reasons for the large oil
spill is the lure of black gold which drives officials to strain
the antiquated infrastructure in the fuel sector and keep supplies
moving despite breakdowns".  The oil spread across 170 acres of
streams and fragile bogs and marshland.

     A Russian company called Komineft was busy trying to meet its
responsibility for the operation and maintenance of an old 
pipeline that runs between the Kharyaga oilfield and Usinsk. 
Sizable leaks from pipelines of this type in Russia are not
uncommon, and by late September, 1994, spilled oil was being stored
behind an earth dam.  These are often constructed to contain such
spills, but heavy rains in October broke down the dam and allowed
a large lake of oil to spread over the tundra.  The huge volume
of this spill is actually the result of a combination of two weeks
worth of pumping through the ruptured pipeline as well as an
accumulation of oil from many prior spills.  It is the dam break
that finally brought this problem to outside attention.

     Much of this released oil flowed into the Kolva and Usa rivers
at a time when weather conditions helped it to be contained and
somewhat collected.  However, much of it remained spread out over
vast areas of tundra and marshland (about 72 sq. miles), where it
proceeded to freeze during the Winter months.  The concern now is
this year's Spring thaw, which threatens to release much of the
remaining oil into the rivers again.  The Kolva and Usa rivers feed
into the Pechora River which contains large amounts of salmon and
other valuable fish species.  At this time, there have been no
reports of contamination of the Pechora and its salmon stocks. 
Yet, preventive measure are being taken to avert the possibility
this summer.  As a part of the clean up operation over the last six
months, crews have set fire to the spilled oil in different areas
in order to burn it away before it can spread further as a result
of the season's warmer temperatures. 

     There have been at least five major accidents in the Komineft
oil complex and pipeline since 1986.  In 1988, a fire swept through
the Usisnk oil complex and 20,000 tones of oil leaked when a
pipeline burst.  In 1992 two incidents caused almost 30,000 tones
of oil to leak from ruptured pipelines which contaminated the
Pechora, Kolva and Ussa rivers.  Russia loses many millions of
barrels of oil as a result of faulty pipeline equipment.  This
caused losses of up to 20 percent of all oil extracted.  However,
oil is Russia's primary foreign exchange earner and experts say
that without sales the country cannot repay its debts or keep a
strategic hold on neighboring ex-Soviet republics which are
dependent on Russia for their energy needs.  

     In the Soviet Union, the energy sector historically increased
production without regard for either efficiency or the environment. 
"The entire environmental technologies sector is in its infancy in
Russia...the extraction, production and transportation of oil have
caused damage to countless ecosystems".      

     Oil spills can have serious impacts.  At low temperatures, oil
tends to persist for long periods of time because of the low rates
of evaporation.  The frozen ground prevents the oil from seeping
in, and this makes it travel for long distances.  In addition,
"disturbance to the thin layer of vegetation covering a frozen soil
can precipitate a catastrophic meeting of the underlying ice and
result in extensive thermokarst erosion".  Tundra environments are
particularly susceptible to disturbance, and effects remain visible
for many years.  For example, it can take decades for a tree to
grow just a few feet, and tire tracks in tundra vegetation can last
up to 100 years.

     "For at least a kilometer along one dying stream bed, a shiny
layer of crude oil lies more than one-third of a meter deep.  Birch
and pine trees growing on the banks look as if they were smothered
with thick black shoe polish.  A nearby lake is a favorite resting
ground for migrating mallard ducks, but if the stench of oil
burning nearby does not deter, they will perish".  There are many
species that are likely to be affected by this spill. For example,
the Komi region holds one of the largest herds of domestic
reindeer, estimated to number around 65,000-120,000 in the 1980's. 

     Tundra environments are characterized by rich lichen
communities which are susceptible to pollutants such as crude oil
which they absorb very quickly.  Reindeer are entirely dependent on
lichen and are therefore likely to be severely impacted by any
widespread damage.  Commercial reindeer herding is one of the major
industries in the Komi Republic.  Furthermore, the Pechorskoye Sea
(within the Barents Sea) holds some of the largest concentrations
of white whales.  There are also a number of birds and freshwater
fish species that are may be at risk.   

3.        Related Cases

     EXXON case
     SHETLAND case
     COLORADO case
     ECUADOR case
     SELLA case
     OGONI case

     Keyword Clusters
     (1): Trade Product                 =    Utilities [UTIL]
     (2): Bio-geography                 =    COOL
     (3): Environmental Problem         =    Pollution Land [POLL]

4.        Draft Author:   Ilinca Bazilescu and Bret Lyhus

B.        Legal Clusters

5.        Discourse and Status:    AGReement and INPROGress

     Komineft was fined $600,000 for its pipeline spill.  Although
the company is unable to pay much of that sum because of its severe
financial problemS, it did give each resident of Ust-Usa 36,000
rubles (about $7) in accident compensation.            

     There have also been several agreements regarding
environmental protection.  In hopes of increasing environmental
awareness, more and more legislation being adopted contains strong
environmental language.  The Russian Federation's Law on
Environmental Protection, adopted in December 1991, emphasizes the
"rational use of natural resources and protecting human life and
health from damaging pollutants".  Also, the 1991 draft State
Ecological Program stressed a policy of "introduction of the most
modern and ecologically clean equipment and technology, including
recruiting foreign firms under preferential conditions to create
installations of the nature protection infrastructure using modern
technologies".

6.        Forum and Scope:   RUSSIA and UNIlateral

     This case is being handled by the Russian government in terms
of cleaning up the oil.  The European Bank for Reconstruction and
Development has lent the clean-up operation $25 million and the
World Bank has provided $100 million.  A US-Australian joint
venture (AES/Hartec) was also hired to clean up the spill.  Its
teams have built or reinforced enormous drainage dams and
constructed massive earthworks to hold oil-laden floodwaters back

7.        Decision Breadth:    1 (Russia)

8.        Legal Standing:   LAW

C.        GEOGRAPHIC Clusters

9.        Geographic Locations

     a.   Geographic Domain   :    EUROPE    
     b.   Geographic Site     :    Eastern Europe [EEUR]
     c.   Geographic Impact   :    RUSSIA

10.       Sub-National Factors:    NO

11.       Type of Habitat:  COOL

     After breaking the original dams constructed to contain the
spill, the oil then flowed into the Kolva and Usa rivers. 
Fortunately, a southern wind at the time of the spill pushed the
oil into a bay of the Usa, where it was then contained and 
collected.  If this had not occurred, much of the oil would have
flowed into the larger Pechora River which then empties into the
Arctic Ocean.  Most of the remaining oil remains in a marshland
(usually frozen) 70 kilometers north of Usinsk.   However, this
year's Spring thaw threatens to release much of this oil into the
Kolva and Usa rivers again.  This region is roughly at the same
latitude as the Arctic Circle.

D.        TRADE Clusters

12.       Type of Measure:  Regulatory Standard [REGSTD]

     In June of 1994, the Sakhalin Accord was signed by Prime
Minister Chernomyrdin and was then forwarded to the State Duma for
passage.  This law, if enacted, will serve to smooth the way for
foreigners in their effort to invest in the energy sector.  Mainly,
the law will provide a firm legal framework upon which the
multinational oil corporations can depend for future stability. 
Separate environmental regulations, which impose fines on
enterprises that engage in polluting activities, have not been well
enforced throughout the Russian Federation.  In view of the fact
that the flow of oil will not be interrupted for long periods (due
to the need for the hard currency), it appears that the most
effective way of preventing further spills is to permit the flow 
 
of foreign capital under mutually acceptable terms as soon as
possible.  A great deal of investment is needed to bring the
distribution system up to an acceptable safety standard.   New
and better materials, state-of-the art designs of pipeline
networks, and better automated control equipment is what Russian
companies like Komineft need the most to carry out their task
without further incident.  

13.       Direct vs. Indirect Impacts:   Indirect [IND]

14.       Relation of Measure to Environmental Impact

     a.   Directly Related    :    YES  [UTIL]
     b.   Indirectly Related  :    NO
     c.   Not Related:        :    NO
     d.   Process Related     :    YES  [SPLL]

15.       Trade Product Identification: [OILGAS]

16.       Economic Data

     By combining the oil export figures below with the exports
of natural gas, this constitutes 50% of total exports from the
Russian Federation to nations outside of the former Soviet Union. 
Although the production rate has decreased since the previous
year by -13.6%, this sector is clearly one of Russia's best
sources for hard currencies from abroad.
17.       Impact of Measure on Trade Competitiveness:  LOW

18.       Industry Sector:    [OILGAS]

19.       Exporter and Importer:   RUSSIA and MANY

E.        ENVIRONMENT Clusters

20.       Environmental Problem Type: Pollution Land [POLL]

     Many different species are likely to be affected in the
Pechora and Kolva Rivers, the Barents Sea, as well as in the
tundra vegetation.  The oil spill produced fires as well which
have serious impact on the environment.  The smoke clouds from
the burning of oil could have significant effects upon the
productivity of marine and terrestrial ecosystems, and even pose
a hazard to human health.

     As one executive with a joint venture in Komi explained:

     "The attitude is very much 'so what?'  Spillages are the
norm rather than the exception in Russia.  You can see damage
like this all over Siberia.  Just because someone happened to
notice some oil floating down the river a couple of days back, it
suddenly makes the headlines, but the sad fact is it is not
unusual."

     Greenpeace members believe that if their initial estimate of
the spillage - 60,000 tonnes (about 420,000 barrels) - is
confirmed, that this would be the third largest oil disaster in
all history.  In first place is the 1991 oil slick in the Persian
Gulf after the U.N./Iraq Gulf War (5 million barrels), followed
by an explosion on a Venezuelan oil platform in 1979 (3 million
barrels).

21.       Name, Type, and Diversity of Species

     Name:          MANY
     Type:          MANY
     Diversity:     MANY

          Table 265-1
     Species at Risk in Komi Area

SPECIES                  GENERA                   DIVERSITY

Reindeer                 Rangifer tarandus        65,000-120,000
Beluga                   Delphinapterus leucas    50,000
Bewick's Swan            Cygnus columbianus  
Whooper Swan             Cygnus cygnus  
Common Eider             Somateria molissima 
King Eider               Somateria spectabilis    
Steller's Eider          Polysticta stelleri 
Long-tailed Duck         Clangula hyemalis   
Northern Fulmar          Fulmarus glacialis       2,500 pairs
Glaucous Gull            Larus hyperboreus        8,500 pairs
Black-legged Kittiwake   Rissa tridactyla         29,000 pairs
Ivory Gull               Pagophila eburnea   
Little Auk               Alle alle                10,000-50,000
Brunnich's Guillemot     Uria lomvia    
Black Guillemot          Cepphus grylle           5,000
Atlantic Salmon          Salmo salar    
Inconnu (Nylma)          Stenodus leucichthys     
Whitefish                Coregonus      
Smelt                    Osmerus eperlanus   
Pike                     Esox lucius    
Burbot                   Lota lota 
Perch                    Perca fluviatilis   
Arctic Flounder          Liopsetta glacialis 

22.       Resource Impact and Effect:   MEDium and SCALE

23.       Urgency and Lifetime:    MEDium and 100s of years

24.       Substitutes:   ALTERernative Energy

     One option which is presently being studied is to build a
new "dry" line in the Komi republic to move only crude oil.  This
may be an option because many of the pipelines move alot of
water- which is corrosive - along with the oil.  The Komi
pipeline carried about 35% water.

F.        OTHER Factors

25.       Culture:  YES

     Local villagers have suffered for years from the effects of
the petroleum pollution from the many oil spills in the region.
Most natives are worried about the fish living in the Kolva
river.  "The river used to have lots of fish, now there are
hardly any at all and when we cook them they smell bad...people
here survive but they are worried about the future". 

26.       Trans-Border:  YES

     Pollution due to crude oil can migrate unless it is cleaned
up in time.  If it is not cleaned up, it can effect other areas
beyond the Barents Sea causing international problems.

27.       Rights:   NO

28.       Relevant Literature

Albrecht, Jorg "Environmental Nightmares-Russia's Total Mess"    
World Press Review (February 1995).

Bischel, Amanda, "Russian Oil Spill Leaves Stain on Economic     
Reform Efforts" Christian Science Monitor (November 1994).

Efron, Sonny, "Russian Tundra- a Vast Study in Slime" The Toronto
Star (May 1995).

"Environmental Group Says Second Spill Found In Area   Damaged
Two Months Earlier," International Environmental Reporter, The
Bureau of National Affairs, Inc., 16 November 1994, p. 933.

Epstein, Lois and Scott Hajost "Leaky Oil Pipelines Need Closer
Mention" Christian Science Monitor (November 1994).

FYI Information Resources, "Environmental Technologies in the
Energy Sector" Market Reports (March 1995).

Karey, Gerald. "Sakhalin Accord Hailed As Gateway," Platt's
Oilgram News, 24 June 1994, p. 1.

"Large Amount of International Aid For Russia Targets Energy
Sector," Russia and Commonwealth Business Law Report, 3 May 1993,
vol. 4.

Lemonick, Michael, "The Rivers Ran Black" Time (November 1994).
Rosett, Claudia "Big Oil-Pipeline Spill in Russia May Be a Sign
of Things to Come" Wall Street Journal (October 1994).

Odling-Smee, John et al., IMF Economic Review-Russian Federation
1993,  Washington, D.C.:  International Monetary Fund, 1993.

"Over 4 Million Gallons of Oil Leaked In Area Around Russia's
Arctic Region," International Environmental Reporter, The Bureau
of National Affairs, Inc., 2 November 1994, p. 881.

"Russia:  Legacy of Neglect Leads To Massive Costs For Komineft,"
Petroleum Economist, 31 December 1994, p. 18.

Shapiro, Margaret, "Magnitude of Pipeline Spill in Russia Emerges
with Spring's Thaw" International Herald Tribune (May 1995).

Tiwari, Rajiv, "Lure of Black Gold Behind Russian Arctic Spill"  
Inter Press Service (October 1994).

Upperton, Jane. "Russia Still Downplaying Spill's Impact" 
Platt's Oilgram News, 72 (October 27, 1994), p. 4.

"White Sees Work On Law In Russia Having Stalled," Platt's       
Oilgram News, 7 November 1994, p. 5.

"World Bank To Provide $120 Million Loan For Cleanup Of Major
Pipeline Spill In North," International Environmental Reporter,
The Bureau of National Affairs, Inc., 22 March 1995, p. 221.

Yergin, Daniel.  The Prize:  The Epic Quest for Oil, Money, and
Power,  New York:  Simon & Schuster, 1991.

                           References




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1/11/97