A new ocean has begun pooling around the North Pole, and the world has taken notice. The Arctic is warming twice as fast as the rest of the globe, melting sea ice and opening access to natural resources long stuck in deep freeze. The opportunities are great: oil and gas, gold and copper, fishing grounds and shipping routes. So are the risks in what remains a harsh environment. The stakes go beyond money and include the well-being of indigenous communities, a clean environment and, potentially, regional peace.
In a sign of the challenges, oil and gas producers, which have led the first wave of Arctic investment, have lately encountered setbacks beyond depressed oil prices. Royal Dutch Shell bet $7 billion on the Alaskan Arctic and lost. The company quit the region in 2015 after experiencing technical difficulties and finding less fuel than it expected. Across the Arctic Circle, Norway’s drillers have also faced under-producing fields. A Canadian company hopes to extract gold, copper and the alloying agent molybdenum at the proposed Pebble Mine in Alaska's Bristol Bay, a massive project, but faces opposition on environmental grounds. At the same time, the melting of Arctic ice, which has happened faster than many scientists projected, has opened shortcuts for trade. Late-summer ice now covers about 40 percent less of the Arctic Ocean than in the late 1970s. About a dozen ships a year are taking advantage of the Northern Sea Route, which makes the trip from northern Europe to Japan 40 percent shorter than going through the Suez Canal. For $22,000, passengers can now take a 32-day cruise through the storied Northwest Passage, from Anchorage to New York. Increasingly, technology companies like Facebook are locating their server farms in the Arctic to reduce cooling costs.
Drilling, mining and fishing have gone on in the Arctic for decades — the debate about exploring for oil in Alaska’s Arctic National Wildlife Refuge dates to the late 1970s. But large-scale development of the region — which is thought to hold 22 percent of the world’s undiscovered, technically recoverable oil reserves and 30 percent of its undiscovered gas — looked far-fetched until recently. The worst fears that geopolitical tension would turn hot over potential Arctic riches have not come to pass. Only Denmark and Russia have made territorial claims, the latter sending a submarine two miles deep to stick a flag into the sea floor at the North Pole. Other Arctic countries have watched cautiously as Russia has expanded its Northern Fleet, demonstrating that it will protect a region that provides about a fifth of its economic output. The Arctic Council — which includes Russia, Denmark, the U.S., Canada, Iceland, Sweden, Norway and Finland — has met for 20 years to forestall commercial and geopolitical conflict. The Arctic's four million residents, many of them indigenous, are represented, and a dozen countries have observer status.
Some environmentalists oppose developing the Arctic and point to the irony of climate change facilitating the production of fossil fuels that promote climate change. They say the region should be protected from catastrophes such as the 1989 Exxon Valdez and 2010 Deepwater Horizon oil spills. Cleaning up mishaps in remote Arctic locales would be particularly difficult. For indigenous communities, the area's rapid changes pose the challenge of balancing income from drilling and mining against the risks of environmental degradation and disruption to traditional ways of life. Advocates of exploiting the Arctic's riches say it can be done responsibly. A committee of the World Economic Forum published a protocol recommending that investors take a long-term view, consult local authorities, weigh economic benefits against environmental goals and develop common standards across Arctic nations. Done this way, developing the region could be expensive. To be sustainably networked into the global economy, the Arctic needs perhaps $1 trillion for ports, rail, roads, aviation, telecommunications, energy facilities and industry, according to Guggenheim Partners.
The Reference Shelf
- A Congressional Research Service report on changes in the Arctic.
- The World Economic Forum’s protocol for Arctic investment.
- A Center for Strategic and International Studies report on Arctic economics.
- An interactive multimedia guide to economic and political issues in the Arctic, by the Council on Foreign Relations.
First published April 17, 2014
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