Reprisk Special Report Deep Sea Extractive Activities: Seabed Mining and Deep Sea Drilling

ESG Business Intelligence

RepRisk Special Report Deep Sea Extractive Activities: Seabed Mining and Deep Sea Drilling

June 2015 Foreword from the CEO

I am pleased to announce the release of our Deep Sea Extractive Activities Report, which focuses on the challenges facing Seabed Mining and Deep Sea Drilling.

The scientific community is slowly recognizing that the deep-sea marine environment harbors complex and diverse ecosystems that can potentially benefit mankind. Pharmaceutical companies also believe that the deep-sea may provide resources for the discovery of new medicines derived from natural products.

Exploration of the deep-sea marine environment is in its infancy, and many discoveries undoubtedly remain to be made. Commercial overfishing and pollution have already harmed the world’s oceans, and the interest to exploit mineral and oil deposits in deep-sea locations has raised concerns that these fragile marine ecosystems will be irrevocably damaged before scientists have had time to explore their full potential.

Scientists and civil society organizations are urging companies to consider the cumulative impacts of their extraction in their risk management strategies, and are calling for an international consensus on the protection of the marine environment.

We hope that this report sheds some light on the scale of the challenges facing companies that want to explore the commercial potential of deep-sea environments and will increase awareness of the ESG risks involved in such activities. Philipp Aeby CEO, RepRisk AG About RepRisk

RepRisk is a leading business intelligence provider specializing in dynamic environmental, social and governance (ESG) risk analytics and metrics.

On a daily basis, RepRisk systematically screens big data from a broad range of open intelligence sources in 15 languages in order to identify, filter, analyze and quantify ESG risks (such as environmental degradation, human rights abuses and corruption) related to companies, projects, sectors and countries. This external perspective provides valuable insight on whether a company’s policies, processes and commitments are consistently translating into performance.

Since 2006, RepRisk has built and continues to grow the most comprehensive ESG risk database that serves as a due diligence tool and early warning system in risk management, compliance, investment management, corporate benchmarking and supplier risk. The database currently includes risk profiles for over 53,000 public and private companies and 13,000 projects as well as for every sector and country in the world.

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RepRisk provides the transparency needed to enable better, more informed decisions. For more information, please visit www.reprisk.com. Introduction

Oceans and seas cover over 70 percent be increased interest in developing ex- ing waste, or an oil leak, far beyond of the earth’s surface. Approximately tractive activities in deep-sea areas. the actual sites, and that such inci- 55 percent of these waters harbor dents could even lead to international deep ocean basins that contain mineral Scientists have warned, however, that disputes. resources such as gold, silver, copper, deep-sea extraction represents sig- nickel, cobalt, zinc, lead, and barium. nificant environmental challenges, and The 1982 UN Convention on the Law These areas, known as the “deep-sea,” conservationists claim that such indus- of the Sea established the Interna- can reach depths of over 1,000 meters. trial operations could negatively affect tional Seabed Authority (ISA), which fragile deep-sea ecosystems. became fully operational as an au- Until the middle of the twentieth cen- tonomous international organization tury, scientists believed that life was Multiple NGOs have expressed con- in 1996. The ISA, which counted 167 almost impossible in this eternally cerns that seafloor disturbance could member countries and states as of Jan- dark and extremely cold environment. release toxic particles and expose un- uary 2015, organizes and controls ac- However, probes in the 1970s revealed discovered species to heavy metals tivities on the seabed and ocean floor hydrothermal vents that provide nu- and acids. The claim is that these could that lie beyond the limits of national trients and energy for an abundance accumulate in the tissues of marine or- jurisdictions. of life. In recent years, over 500 pre- ganisms or even cause contaminants viously unknown species have been to enter the food chain eaten by local The number of companies seeking li- discovered in deep-sea areas, some communities. censes to explore deep-sea environ- of which are of major interest to ments is increasing rapidly. There are medical science. Environmentalists are also concerned concerns from various stakeholders about the effect of light on species that that the ISA has signed multiple con- Extracting minerals from shallow are accustomed to a perpetually dark, tracts since the beginning of 2015 depths of up to 100 meters has already deep-sea habitat. There are also fears with member states and companies, been practiced for over a century, and that some marine species, which rely authorizing them to carry out explo- underwater oil wells in salt-water envi- on sound for communication and navi- ration activities in areas including the ronments have been in operation since gation, will be impacted by noise that Central Indian Ocean, the Magellan the early 1900s. However, “frontier” can allegedly travel hundreds of kilo- Mountains in the Pacific Ocean, the technologies are now allowing scien- meters in an underwater environment. Clarion-Clipperton Zone of the Pacific tific exploration at greater depths, and Ocean and the mid-Atlantic Ridge in as the planet’s terrestrial resources Experts also warn that ocean currents the Atlantic Ocean. diminish, there will almost certainly could spread contamination from min-

SPECIAL REPORT SEABED MINING AND DEEP SEA DRILLING 1 Part 1 Seabed Mining

Ocean mines have an economic advan- the seabed, and Mining Watch warned Scientists, university professors, church tage over land mines, as they do not that the Government of Papua New leaders and members of local commu- require expensive installations such Guinea was not capable of monitoring nities have expressed fierce opposition as shafts and tunnels. There is also no this completely new mining technique. to the Solwara 1 Project. Stop Experi- need to build a comprehensive sup- mental Seabed Mining in the Pacific, an porting infrastructure, as the mining Indigenous coastal communities also NGO, claimed that the dangers to the ship can be taken to another site once claimed that the project would pollute ecological system could not be predict- the ore is exhausted. Transportation the seawater, cause other environmen- ed, as seabed mining was a completely costs are also comparatively low as the tal damage, and would have a negative new industrial activity. In November ore is shipped by sea. impact on their livelihoods and food 2013, the government of Papua New sources, which are dependent on fish- Guinea was sued by a coalition of NGOs Environmentalists have raised con- ing. The European Union was accused for granting the license to Nautilus cerns, however, that mining waste re- of disenfranchising local communities and failing to listen to warnings about leased back into the sea could contain by supporting the new mining method the project. heavy metals and other pollutants. through its funding of the Secretariat Greenpeace has warned that deep-sea of the Pacific Community, a regional, In April 2015, however, Nautilus an- mining activities could even reduce fish intergovernmental organization that nounced that the project would contin- populations that support the world’s aims to develop the professional capa- ue and that it hoped to begin produc- fisheries, already at risk due to wide- bilities of Pacific Island people. tion in early 2018. spread commercial overfishing, and the coastal communities that depend In November 2012, a report released by Nautilus has also applied for deep- on them. the Deep Sea Mining Campaign claimed water licenses in other areas, includ- that Solwara’s Environmental Impact ing Tonga, Fiji, New Zealand, and the RepRisk first identified criticism of Study was seriously flawed, as it failed Solomon Islands. In February 2013, a deep-sea mining projects at the begin- to correctly identify the risks associ- member of Portugal’s PCP party criti- ning of 2007, when the government of ated with the project and had underes- cized the company for its plans to se- Papua New Guinea was criticized for timated the impacts on local communi- cure a seabed mining license for an granting a 20-year mining license to ties. Development of the project was area near the Azores islands, in the Nautilus, a company partly owned by suspended in early 2013 due to a dis- North Atlantic Ocean off the west Anglo American, to develop the Sol- pute between Nautilus and the govern- coast of continental Portugal, and wara 1 Project. ment of Papua New Guinea over their warned that the company’s excava- partnership agreement. tion techniques could severely impact The Solwara 1 Project, being developed deep-sea habitats. by the company’s subsidiary, Nautilus Minerals Nuigini Ltd, is a concession Companies most associated with At the end of 2013, the Bismarck Ramu seabed mining that extends over an area of 158,000 Group, an NGO in Papua New Guinea, square meters. Nautilus allegedly plans warned that several planned and exist- to use a 1,600-meter long suction pipe Nautilus Minerals Inc to scrape 80,000 tons of copper and 150,000 ounces of gold from the ocean Most criticized seabed mining Chatham Rock Phosphate Ltd floor each year. The Russian company projects Metalloinvest, previously known as Gazmetall, apparently has a stake in Trans-Tasman Resources Limited Solwara 1 Project the project. Lockheed Martin Corp NGOs including Greenpeace, the Deep Chatham Rise Project Sea Mining Campaign, and Friends of the Earth, raised concerns about the Sandpaper Marine Rock Phosphate Anglo American PLC Project impact of this new mining procedure on

2 SPECIAL REPORT SEABED MINING AND DEEP SEA DRILLING ing seabed mining projects by Nautilus project could damage the environ- that large-scale deep-sea mining in the Minerals could have devastating social ment and the fishing industry. area will destroy underwater ecosys- and environmental impacts. The group tems and damage the habitats of sea claimed that Nautilus was planning a Almost a year later, in February 2015, turtles, whales, and sharks. In addition, new project that would exceed the the EPA also rejected plans by Chatham Greenpeace has expressed concern scope of the Solwara 1 Project. Rock Phosphate to mine for phosphate that the International Seabed Author- off New Zealand’s Canterbury coast. ity (ISA) has already issued 12 contracts Another proposed seabed mining proj- The project, known as Chatham Rise, for deep sea mining exploration in the ect, to be developed by Namibian Mari- had been opposed by the Hokotehi Mo- Clarion Clipperton Zone. na Phosphate, a joint venture between riori Trust, due to concerns about the UCL Resources Limited, Mawarid Min- potential impact on the marine envi- ing, and Havana Investments has also ronment and fears that it would jeop- been criticized. The companies propose ardize the country’s commercial fishing to mine phosphate from the seafloor industry. The annual catch of hoki fish of the South Atlantic Ocean in an area from the Chatham Rise is valued at USD located 120 kilometers from Walvis 730 million, and represents about 30 Bay on the Namibian Continental Shelf. percent of the national hoki catch. Coastal residents and environmentalists have expressed concerns that the In May 2015, the Center for Biologi- USD multibillion joint venture, known as cal Diversity filed a lawsuit against the the Sandpaper Marine Rock Phosphate US government in a US federal court, Project, would disturb the ocean floor targeting the National Oceanic and and natural marine ecology and would Atmospheric Administration over its cause acid pockets that could negative- renewal of permits for deep-sea min- ly impact marine life. The project is cur- ing in the Clarion-Clipperton Fracture rently on hold as the Namibian Fishing Zone between Mexico and Hawaii by Ministry has imposed a moratorium on OMCO Seabed Exploration, a subsidiary marine phosphate mining until the im- of Lockheed Martin. The NGO claims pacts on the ocean environment can be assessed. NGOs engaging against seabed Countries most associated with mining seabed mining Also in Namibia, De Beers has received permission to recover diamonds from the seafloor. Greenpeace International Papua New Guinea

In June 2014, the New Zealand Envi- Center for Biological Diversity New Zealand ronmental Protection Authoity (EPA) rejected an application by Trans- Tasman Resources to mine iron Kiwis Against Seabed Mining Namibia ore in a 66-square kilometer area located off the coast of Taranaki. MiningWatch Canada (MWC) United States of America The company hoped to extract about USD 446 million worth of iron each year, but the EPA withheld their ACT NOW! Azores Islands (Portugal) consent on the grounds that the

RepRisk users can learn more about Seabed Mining on the Topic Tag Profile Page (must be logged into the RepRisk ESG Platform to access).

SPECIAL REPORT SEABED MINING AND DEEP SEA DRILLING 3 Part 2 Deep Sea Drilling

Drilling for oil and natural gas in water Deepwater, Transocean Holdings, Tri- In March 2015, Petrobras and Brazil’s depths of over 1,000 meters presents ton Asset Leasing, Halliburton Energy National Agency of Petroleum were multiple challenges. Drilling equipment Services, and Sperry Drilling. criticized for extracting oil and gas from is subjected to extremely cold tem- Brazil’s Whales Park Pre-Salt Project in peratures and thousands of pounds of BP was also accused of giving mislead- Campos Basin in the Brazilian state of pressure, and the oil platforms can be ing information about the amount of Espirito Santo. Fishermen claim that exposed to hurricanes and cyclones. leaked oil and of exposing workers and the extraction, which is allegedly being However, oil companies are seeking thousands of others to a carcinogenic carried out at depths of 7,000 meters, to explore reserves at even greater cleaning agent. In March 2015, the is destroying their livelihoods as the in- depths and environmentalists are con- NGO Bellona claimed that critics of the dustrial activity is disorientating migra- cerned about the potential risks. ongoing impacts of the spill were fac- tory fish and turtles, and harming cor- ing retaliation and death threats. The als and the seafloor. The Deepwater Horizon explosion on NGO reported that some people had April 20, 2010 focused the world’s at- disappeared or that their houses had Petrobras was also in the news in Feb- tention on the risks associated with been burned, while people who had ruary 2015, when an explosion oc- deep sea drilling. The explosion left 11 contracted oil-related health issues curred on the Cidade de São Mateus people dead and spilled approximately were being spied on. oil platform in Brazil, resulting in the 4.9 million barrels of oil from the Ma- deaths of nine people and injuring a condo Well into the Gulf of Mexico. However, despite the risks exposed by further twenty-six. The National Oceanic and Atmospheric the Deepwater Horizon disaster, BP Administration and Defenders of Wild- and other oil and gas companies have The Wilderness Society in Australia life have estimated that the disaster continued to develop projects in deep- also criticized BP, Santos and Chevron caused the deaths of about 800,000 sea environments. in February 2015 for their plans to con- birds in the Gulf of Mexico’s coastal duct deep sea drilling activities in the and offshore waters. On April 1, 2015, an explosion and fire Great Australian Bight, which would on Pemex’s oil platform in the Bay of allegedly put at risk one of the world’s BP, who operated the Deepwater Hori- Campeche on the north shore of Mex- greatest whale sanctuaries. zon platform, is facing a fine of around ico killed at least four people, injured USD 13 billion, an amount that comes 16 others and forced the evacuation of In October 2014, activists from Green- on top of more than USD 42 billion that 300 people. peace International and Greenpeace the company has paid out or set aside for cleanup and compensation costs. Most criticized deep sea drilling Transocean, the owner of the Deepwa- projects ter Horizon oil rig agreed to pay USD Companies most associated with 400 million in criminal fines and USD 1 deep sea drilling billion in civil fines after pleading guilty Deepwater Horizon (Macondo Well) to violating the Clean Water Act. How- BP PLC ever, other US state governments and Frade Oil Platform cities, including Texas, Harris County and the City of Houston have also Transocean Ltd filed lawsuits against all the compa- Leiv Eiriksson Oil Rig nies involved in the project, claiming Halliburton Company that the spill has caused considerable economic losses and costs related Beaufort Sea Drilling Program; Browse Basin Gas Field; to environmental damage. Companies Chevron Corp Canary Islands Deepwater Drilling facing such lawsuits include BP Explo- Project; ration Production, BP American Pro- Montara Oil and Gas Field (all equally criticized) duction, Transocean, Transocean Off- Royal Dutch Shell shore Deepwater Drilling, Transocean

4 SPECIAL REPORT SEABED MINING AND DEEP SEA DRILLING Italy staged a 36-hour protest on an oil for oil in the Beaufort Sea and claimed gust 2014, Greenpeace claimed that platform operated by Eni Mediterranea that a major incident would trap oil in the seismic tests being carried out Idrocarburi, a subsidiary of Eni SpA, in the sea ice, making it virtually impos- by Statoil caused levels of sound that the Straits of Sicily. The NGO claimed sible to clean up. Imperial Oil and Chev- would be fatal to humans and that that offshore oil drilling could cause ron have plans to drill for oil in this area this noise could be heard thousands significant damages to the environ- before the end of the decade, but are of kilometers from the test sites. Dr. ment and deprive fishermen of their facing strong opposition from the Inuit Lindy Weilgart, a world expert on the source of income. community who fear possible damage impact of sound on whales and dol- to marine species and wildlife, which is phins, warned that seismic surveys are Throughout 2014, various well-known their main source of food. strongly linked to the deaths of marine personalities gave their support to mammals. The coastal community also a campaign against Cairn Energy’s Environmentalists also raised con- expressed concern about the environ- planned oil drilling off the coast of cerns in May 2014, when Russian mental effects of deep sea drilling and Ibiza, a popular Spanish tourist island companies Rosneft and Zarubezhneft the threats it posed to shellfish and the and a UNESCO World Heritage Site. signed an agreement with Cuba to sea fishing industry. The drilling is planned at a depth of explore offshore oil deposits located 1,200 meters but fishermen, local at depths of more than 1,500 me- Also in New Zealand, Shell has faced island governments, and the NGOs, ters between the shores of Cuba and criticism for its plans to drill for oil at Greenpeace, Alliance Mar Blava and Florida. The former US Senator, Bob depths of at least 1,300 meters off the Natural Resources Defense Coun- Graham, warned that Russia did not the coast of Otago. The NGO, Oil Free cil, warned that oil exploration could have experience in deep sea drilling Otago, claimed that the project would impact the island’s tourism and fish- and that Cuba would not have suf- affect the tourism industry, marine en- ing industries and threaten the Bale- ficient capabilities to respond to a vironments, and the climate. aric ecosystem, which is home to spill. Oceanographers claimed that dolphins, whales and a type of sea- in the case of an accident, the oil slick Anadarko has also faced opposition grass only found in Europe. Approxi- would reach the beaches, reefs and for its plans to drill for oil off the coast mately 125,000 people in Spain have marine sanctuaries of Florida in just of New Zealand. Environmentalists voiced opposition to the proposed over a week. have raised fears that an oil spill could exploration, and over 210,000 people threaten the marine ecosystem and from German-speaking countries have Statoil has been strongly criticized for have warned of the possible impacts signed a protest, launched by Ocean its deep-sea activities off the coast on the only existing mainland breeding Care, calling for an end to the project. of Northland in New Zealand. In Au- colony of the Royal Albatross. The Swiss and Austrian Travel Federa- tions have also voiced criticism. NGOs that engage against deep sea Countries most associated with deep drilling sea drilling Repsol is also facing strong opposition to its plans to explore for oil offshore from the Canary Islands. The Spanish Greenpeace International United States of America UNESCO Committee warned that the activities could disturb marine mam- Natural Resources Defense Council Brazil mals, contaminate the seabed with (NRDC) sludge and heavy metal residues, and seriously affect the local popula- Friends of the Earth International New Zealand tion’s access to water, as most water consumed on the island is desalinated Oceana Australia seawater.

The WWF also raised concerns in Cana- Bellona Foundation United Kingdom da in July 2014 about the risks of drilling

RepRisk users can learn more about Deep Sea Drilling on the Topic Tag Profile Page (must be logged into the RepRisk ESG Platform to access).

SPECIAL REPORT SEABED MINING AND DEEP SEA DRILLING 5 DISCLAIMER METHODOLOGY

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