Managing riches in the Arctic

AN unprecedented warming of the Arctic region is underway. According to a study by the Intergovernmental Panel on Climate Change (IPCC) the region is set to become ice free by 2070. Yet more recent studies and satellite imagery have moved that date to anywhere between to 2020 to 2035. Whatever may be the case, the region which had until recently been considered impassable is now set to become the playground for exploration of natural resources ranging from oil to gas. Nearly a quarter of the world’s estimated undiscovered oil and gas and massive deposits of other valuable minerals are thought to be located in the polar region. Looking beyond the vast untapped deposits of oil and gas, the Arctic supplies 40% of the world’s palladium, 20% of diamonds, 15% of platinum, 11% of cobalt, 10% of nickel, 9% of tungsten and 8% of zinc.
 

It had been feared that Arctic nations that include Russia and the United States would engage in armed brinkmanship to settle scores over the “race to riches;” that has not happened. Contrary to popularly held beliefs, the five states with Arctic coastlines, namely, Canada, Denmark, Norway, Russia and the United States have effectively used the UN Convention on the Law of the Sea (UNCLOS) as the basis for settling maritime boundary disputes and enacting safety standards for commercial shipping.
Although the United States had a hand in its drafting, for decades senators on both sides of the political divide have blocked its ratification. As pointed out by Scott Bogerson in his article ‘The coming Arctic Boom’ published in Foreign Affairs, “UNCLOS allows countries to claim exclusive jurisdiction over the portions of their continental shelves that extend beyond the 200-nautical-mile exclusive economic zones prescribed by the treaty.
 

In the United States’ case, this means that the country would gain special rights over an extra 350,000 square miles of ocean — an area roughly half the size of the entire Louisiana Purchase. Because the country is not a party to UNCLOS, however, its claims to the extended continental shelf in the Beaufort and Chuchi seas (and elsewhere) cannot be recognised by other states, and the lack of a clear legal title has discouraged private firms from exploring for oil and gas or mining the deep seabed.” Ratifying UNCLOS could be the first step for the US to form a coherent Arctic policy.
Energy hungry nations of Asia led by China and India have already taken the lead to gain a foothold in the new Arctic spring that has just begun to unfold. China for instance has already begun to make inroads into the region, signing a free-trade deal with Iceland and setting up the largest embassy in the country. Denmark’s sway on Greenland, which is recipient to an annual $600 million could wane as foreign direct investment from South Korea, China and other nations outstrip the aid it gives to the now autonomous region.
 

The race for riches is on. The biggest question that looms large at this stage is to strike a balance between exploitation of natural resources and conservation of the environment. The stakes couldn’t be higher. Given the delicate ecosystems in the Arctic already strained by consequences of climate change, the coming boom in economic activity will inevitably lead to make them more precarious. The construction of pipes and roads, noise pollution from offshore drilling, seismic surveys and added maritime traffic could all collude to make matters worse.
 

The world’s leading drilling companies are in a rush to tap the Arctic’s untapped resources. Hence, it becomes more imperative than ever to set up an appropriate liability regime. The European Union at present is mulling over a proposal that would oversee companies’ compliance requirements for both equipment standards and financial guarantees. As pointed out by Lloyd’s report titled ‘Arctic Opening: Opportunity and Risk in the High North’: “Arctic Council Task Force is developing recommendations on an international instrument on Arctic marine oil pollution, preparedness and response, due for release in 2013. This aims at developing a more streamlined process to ensure more rapid clean-up and comprehensive payments. Given the potential trans-national impact of spills, this may include an international liability and compensation instrument. Greenland, for example, has argued that ‘different national systems may lead to ambiguities and uncertainty delays in oil pollution responses and compensation payments’ and that any regime must adapt as understanding of the ‘worst case scenario’ in the Arctic changes.”
 

Given the region’s remoteness and difficulty in accessibility, Arctic countries need to take into account the infrastructure gaps and address them accordingly. Similarly, environmental regulation and liability issues must be addressed through adoption of regulatory mechanisms that will go a long way in mitigating risks associated with mining and drilling.