Sovereignty tussles over Arctic territory threaten to impede oil and gas exploration

This year marks the first International Polar Year since 1958. Far from being a....

This year marks the first International Polar Year since 1958. Far from being a vicarious adventure for wide-eyed audiences listening to crusty geologists talk about hair-raising encounters with polar bears, this event takes place amidst a growing number of potentially serious international disputes.Competition to secure oil and gas leases is already raising red flags amongst scientists like professor Benoit Beauchamp, executive director of the Arctic Institute of North America. “I believe strongly that exploitation of mineral resources will change the north faster than climate change,” he told Oilweek.For Beauchamp, there has been little visible change to the Arctic landscape since 1983, when he first began making frequent journeys to the region on research expeditions. It is still the vast expanse of shimmering frozen territory that continues to yield surprises.In 1990, for example, Beauchamp was travelling with a research team via helicopter near the Borup Fiord on Ellesmere Island when he spotted a large patch of yellow-stained ice on a glacier tongue below. Upon landing the aircraft, smelling the unmistakable odor of rotten eggs, and examining the yellow patch up close, the researchers guessed that it was native sulphur.Ten years later Dr. Steve Grasby of the Geological Survey of Canada confirmed that it was indeed hydrogen sulphide, and that the sulphur was induced by sulphur-oxidizing bac-teria thriving within the glacier. The findings attracted a flurry of attention from scientists at NASA’s Jet Propulsion Laboratory searching for an analog to the frozen environment of the planet Europa, one of the four major moons of Jupiter. If there is life in the Arctic glacier’s depths, could there be life on Europa?Beauchamp is under no illusion that his beloved Arctic will remain unchanged for long. His colleague, University of Calgary professor Rob Huebert, an expert on Arctic sovereignty issues, concurs. “One of the things that is being increasingly understood about the Arctic is that it’s a treasure trove of natural resources,” Huebert says.In July, co-venture partners Imperial Oil and ExxonMobil Canada purchased 205,000 hectares in the Beaufort Sea for C$585 million. The parcel lies offshore, 120 kilometres due north of Inuvik in water depths ranging between 60 and 1,200 metres. Both academics point to the purchase as a harbinger of further exploration interest in the Beaufort.Both Beauchamp and Huebert warn that the dispute between Canada and the United States over the Beaufort Sea boundary will erupt in an international storm of controversy. “I know Foreign Affairs is trying to pretend it’s not a big issue,” Huebert told Oilweek. “But what Canadian government is going to be willing to reach some form of a compromise agreement? What American government is going to be willing to give up oil and gas? That one’s going to get really, really ugly.”Beauchamp has little doubt that scientists are right about climate change. “If any of these models are to be believed, we may well have an ice-free Arctic Ocean in 50 years or so. These people who develop the computer models—these people are no liars,” he says. And the ice-free status may be coming even sooner than that: in late August, scientists reported that the fabled Northwest Passage was navigable, without ice-breaker support, for its entire length.One issue that oil and gas companies are likely to face is the destabilization of permafrost and the predicted rise in the sea level. Beauchamp noted that the three anchor fields of the Mackenzie Gas Project, Parsons, Taglu, and Niglintgak, are close to sea level and that melting of the permafrost could induce subsidence. “This could be a nightmare for engineers.”Two simmering international disputes are likely to flare in the coming decade. “I would definitely pay attention to the Northwest Passage issue,” warns Beauchamp. “It’s one you can predict will become more important in the next 10 to 15 years.”Canada claims that the Northwest Passage comprises internal waters, which means that Canada determines what rules and regulations ships passing through the channel must follow. The Americans, the British, and the Japanese take the position that the Northwest Passage is an international strait. Who decides who is right?The Law of the Sea Convention defines what constitutes “internal waters” and what constitutes an international strait. The problem is that until recently, the possibility that ships bearing international flags would ply the Northwest Passage was so remote as to be not worth worrying about. Politicians now realize that the speed with which climate change is melting polar ice makes it incumbent on them to determine which definition applies.Indeed, business interests are already providing another impetus. The Russian government has contracted a Korean company to build two 120,000-ton, ice-strengthened tankers. Huebert says that the Russians commissioned the DAS icebreakers for use in their own offshore Arctic waters as climate change makes remote areas increasingly accessible.“You don’t start putting money into projects like that until you do your economics,” he says. “There’s great uncertainty, but the potential for great reward.”If Canada is unable to persuade United Nations adjudicators that the Northwest Passage constitutes “internal waters,” the results could be profound. “The way we treat environmental laws is different from the way other countries treat them,” explains Beauchamp. Some countries are more lax when it comes to policing offenders. “Enforcing international laws is not that easy,” he says. “It could result in an environmental disaster.”As the polar ice melts, Canada’s claim to the Northwest Passage gets more slippery. “With the melting of the ice, Canada is losing its number one argument to claim that the Passage is ours,” said Beauchamp. “Put two and two together and you’ve got the recipe for something dramatic.''The second dispute that lies beneath U.S.-Canadian relations like an ash-covered coal ready to glow red is the disagreement over the offshore boundary between Yukon and Alaska in the Beaufort Sea. Canada’s interest focuses on the Amauligak oilfield, which the American Association of Petroleum Geologists says is the most significant Canadian Arctic discovery to date.“The offshore boundary between Yukon and Alaska is interpreted differently by the U.S. than it is by Canada,” Beauchamp says. “The Americans believe the boundary swings quite a bit to the east.”The Canadian government takes the potential dispute with its neighbour seriously. Alaska’s massive Prudhoe Bay field currently produces about 25 per cent of the U.S. domestic production, and according to a paper on the dispute published by the British Columbia law firm Clark Wilson: “With Prudhoe Bay production anticipated to decline and Canadians wanting to protect their interests, both parties are eager to define the Beaufort Sea boundary.”The boundary lies at the 141st degree of longitude. In its 1993 document on the Law of the Sea Convention, the Canadian government states: “How that boundary extends northward on to the Beaufort Sea and the Arctic Ocean is vitally important, for scientific information suggests that the strata beneath the Beaufort Sea have great petroleum potential.” As such, “the implications of an adverse boundary decision in the Beaufort Sea are enormous.”That was 14 years ago. At the time, the government could state confidently, “Petroleum production from the disputed territory is not imminent. Together, these two facts indicate that the two countries are unlikely to go to an adjudicative tribunal for resolution of this dispute.”Beauchamp has titled his opening presentation at the Gussow Geoscience Conference this Oct. 15–17, “The Arctic is Hot: A Perfect Storm of Northern Issues at the Dawn of the 21st Century.” He believes that companies considering exploration of the Far North must understand the effects of change in the region. “They have no choice. If they want to find oil and gas and exploit the resources, they will have to know all these issues.”The Canadian government has allocated $150 million for its IPY involvement—$90 million of which is earmarked for scientific pro-jects. Yet despite Canada’s prominent role in planning IPY activities, so far there has been little international discussion of the potentially explosive issues that affect oil and gas companies planning exploration and development of the Far North.The Gussow Conference, however, which is hosted by the Canadian Society of Petroleum Geologists, may provide the catalyst for such discussions. Representatives from several of the companies most active in the region, including Devon Canada, MGM Energy, and Petro-Canada, will speak, as will both professors Beauchamp and Huebert.“I think we’re still in the infancy of Arctic oil and gas explor-ation,” says Beauchamp.That said, two issues that go hand in glove will propel Arctic exploration from its current state of dormancy: the price of oil and the construction of a pipeline. “Bring the price of oil to $90 and the price of gas to $20 an mcf and it’s a whole different game—and they know there’s oil and gas there. That’s for sure. The pipeline will be the turning point. If it’s built, all of a sudden all kinds of small fields will become enticing.”