Take It or Leave It? Arctic Governments and the Oil and Gas Question

The subject of expanded oil and gas drilling in the Arctic, as the region becomes more accessible to fossil fuel exploration, has always been a thorny one from an environmental viewpoint. However, the rapid drop in oil prices since early 2014 also called into question the cost-effectiveness of Arctic oil and gas, given the high costs of extraction, safety measures and transportation. With petroleum prices reaching a two-year high this month as global economic growth boosted demand, there is still no clear sign as to the long-term direction of the energy market, especially given the volatility of both the political and security situations in oil-producing regions such as the Middle East.

In light of this uncertainty and despite lower fossil fuel prices, Several Arctic governments have recently been wrestling with the question of whether to increase oil exploration and drilling efforts. For Moscow, the question is largely a non-issue, as Russian energy firms have taken a ‘full speed ahead’ approach to Arctic oil and gas, with several projects in various stages designed to take advantage of greater accessibility and transport options.

As the Putin government remains under American and Western-European-led sanctions, Russia has expanded cooperation with China in projects including the Yamal Liquefied Natural Gas enterprise, and has also moved forward to develop overall Arctic infrastructure in Siberia in anticipation of future economic benefits. This week, Russian Prime Minister Dmitry Medvedev met in Beijing with Chinese President Xi Jinping to confirm that the Russian Arctic has been officially added to Beijing’s expanded ‘Belt and Road’ initiative in the form of a ‘Silk Road on the Ice’ (SRI), which will result in further joint economic cooperation in the far north, including in the area of energy.

The question of drilling is more complicated in other parts of the region. Arctic drilling factored into the most recent election campaign in Norway, and there have been reservations about whether drilling in the Barents Sea will produce short or even long-term results in light of so-far tepid discoveries in the waterway. Adding to the difficulties has been a lawsuit brought forward by two environmental NGOs, against the Norwegian government, claiming that Barents Sea oil exploration was in violation of the country’s constitution. The case is expected to be heard in Oslo this month.

In Alaska, the Trump government is set to reverse the provisions of its predecessor, those of Barack Obama, potentially opening the door to oil exploration in the Alaskan National Wildlife Reserve (ANWR), in the northeast corner of the state abutting the Yukon Territory. The topic of energy exploration in the region has been a divisive one for decades, especially between Democrats and Republicans, (President Bill Clinton vetoed a push for such drilling in 1995). Shortly before leaving office, President Obama, in conjunction with Canadian Prime Minister Justin Trudeau implemented a moratorium in December 2016 on Arctic Ocean oil and gas exploration, but the American side of the ban was also overturned by the Trump administration in April the following year in the hopes of furthering US ‘energy independence’.

The stance of the Trump administration on Arctic drilling has placed Alaskan policymakers in a complicated position. Senator Lisa Murkowski (R) has broken from the overt scepticism of the inner circle of the Trump government by stressing that while climate change is a reality, clearly experienced in Alaska, she is also a supporter of drilling in the ANWR as a way of assuring a brighter economic future of the state. Speaking at the Arctic Circle conference in Reykjavík this month, Ms Murkowski stated that the Arctic must continue to be a priority for the new US government, and that there is a need for greater sustainability in Alaska.

The current debate about ANWR drilling has continued to drive a wedge between the two American political parties, as evidenced by this week’s meeting by the US House of Representatives’ Energy and Natural Resources Committee, which saw Democrats stating that the region was too ecologically sensitive for any drilling in the region, with Republicans, including Senator Murkowski, advocating that oil extraction could take place without great risk to the local environment. The subject is a sensitive one given that the Alaskan economy has been buffeted by the fall of global petroleum prices, and therefore supporters of Arctic drilling argue that such initiatives are an economic necessity for the state.

The Canadian ban on offshore Arctic drilling by Prime Minister Trudeau and his Liberal government has also not gone unchallenged, as over the past month the Premier of the Northwest Territories, Bob McLeod, has been increasingly critical of the restrictions, as well as a proposed carbon tax, as being detrimental to his territory’s economy. Speaking at the Arctic Circle conference, the Premier criticised the imbalance of economic and political power between the territorial and central governments in Canada, noting that ‘colonialism is not entirely absent’ in Canadian governmental thinking, as was exemplified by the decision to implement the oil and gas exploration ban without consultation with the territorial authorities or with indigenous persons’ organisations.

Making reference to the Pan-Territorial Adaptation Strategy paper released in September 2016 by the governments of the NWT, Nunavut and Yukon, Premier McLeod also stressed the need for economic self-sufficiency via responsible resource development and job creation as well as greater economic diversity and infrastructure development, including greener energy alternatives. However, the NWT leader saw the ban as not only a challenge to the territory’s economic sovereignty but also as the potential of closing a door to future economic development in the Canadian Arctic.

In early November of this year, the Premier issued a ‘red alert’ via the NWT government news portal calling for a national-level dialogue on the subject of the territory’s future, suggesting that colonialist attitudes were re-emerging and that Ottawa, by implementing ‘new and perplexing’ economic restrictions on the territory, was threatening to stifle northern development. The document added the placing of constraints on regional energy industries, which make up forty percent of the NWT economy, would result in a negative effect on incomes and the attraction of the territory to outside investment.

The premier also noted a double standard in place, given that other energy producing areas in Canada, such as Alberta, were still producing oil at a normal pace, and that such extraction has contributed to climate change effects in the Canadian Arctic. McLeod’s stance has been supported by other northern leaders, including Premier Sandy Silver of Yukon, but it remains to be seen whether there will be any alteration of the drilling ban by Ottawa.

As the Arctic ice cap continues to melt leading to greater opportunities not only for oil and gas development but also mining and shipping, the question of how to balance economic possibilities versus environmental concerns is becoming more urgent for the entire region, even though Arctic governments remain divided on the best approaches.