By Keith Edmund White
Last week, Canadian Prime Minister Stephen Harper kicked off his seventh trek to the Arctic. If you want to learn more about his schedule, check out this informative Montreal Gazette article. Of more interest, to me, is where Canada’s Arctic strategy stands in 2012.
Press Takes on Harper’s Trek
The Calgary Herald, unsurprisingly, comes out in favor of Harper’s Arctic policies. It highlights the Prime Minister’s push to develop and cement Canadian claims to the Arctic. But, to its credit, the article highlights the current costs of developing its Northern region: totaling $2.9 billion for 112,000 people, and funding 77 – 90% of revenues for Canada’s northern territories (the Yukon, the Northwest Territories, and Nunavut. Of a particular note to me is the article’s mention of opposing U.S. and Canadian claims on the Northwest Passage or Canadian Archipelago—with the US claiming the emerging waterway as an international strait, while Canada would naturally prefer these to be Canadian waters. (For those wanting an exhaustive look at Canada’s Arctic claims, check out the 50+ page Sovereignty & Security In Canada’s Arctic, an interim report by a Canadian Senate Committee).
The National Post used Harper’s Arctic tour for discussion on the Polar Bear, probing two questions: (1) whether the polar bear should replace the beaver as Canada’s national symbol, while (2) delving into how Canada patrols its frontier region:
So, without getting into the weeds, how is Canada doing in its Arctic project? Well, according to YahooNews, not that great: “While Prime Minister Stephen Harper and Defence Minister Peter MacKay continue to insist Canada is no slouch in the Arctic, other countries’ Arctic strategies seem to be bigger, stronger and faster.” Reporter Andy Radia then points out that the United States is revving up submarine patrols of the Arctic, Russia is spending over $100 billion on 16 new nuclear submarines, some of which will be patrolling the Arctic, and Sweden and Norway may be in on the Arctic gig too.
But this focus on whether certain waterways in the Arctic will be Canadian waters or international waters misses the (snowy) forest for the trees. Canada will never out-militarize Russia or the United States, but Canada has already turned the land and waters of the Arctic into an emerging hotbed of economic activity. The question is, is even further development worth the public infrastructure costs--let alone the costs of providing security to a no-longer mythical Northwest Passage.
There are three key areas where Canada can develop oil and natural gas: the Mackenzie Valley, the Arctic Islands, and the Mackenzie Valley/Beaufort Sea. A 2012 Lloyd’s of London report found that there’s possibly $100 billion to be made in the Arctic for minerals, fisheries, shipping, and tourism. But the report notes that the extreme weather requires strong public infrastructure investment, effective regulatory control, and greater data-collection on the dangers and benefits of Arctic development.
Press Takes on Harper’s Trek
The Calgary Herald, unsurprisingly, comes out in favor of Harper’s Arctic policies. It highlights the Prime Minister’s push to develop and cement Canadian claims to the Arctic. But, to its credit, the article highlights the current costs of developing its Northern region: totaling $2.9 billion for 112,000 people, and funding 77 – 90% of revenues for Canada’s northern territories (the Yukon, the Northwest Territories, and Nunavut. Of a particular note to me is the article’s mention of opposing U.S. and Canadian claims on the Northwest Passage or Canadian Archipelago—with the US claiming the emerging waterway as an international strait, while Canada would naturally prefer these to be Canadian waters. (For those wanting an exhaustive look at Canada’s Arctic claims, check out the 50+ page Sovereignty & Security In Canada’s Arctic, an interim report by a Canadian Senate Committee).
The National Post used Harper’s Arctic tour for discussion on the Polar Bear, probing two questions: (1) whether the polar bear should replace the beaver as Canada’s national symbol, while (2) delving into how Canada patrols its frontier region:
The roughly 4,700 Rangers — sprinkled in 178 communities across the North — are the backbone of the military’s presence in the region.
They conduct patrols across the vast frozen wasteland and are equipped with Lee-Enfields, bolt-action, magazine-fed rifles that were standard issue during the first half of the 20th century.The Winnipeg Free Press provides a useful counter-weight, highlighting the failure of the Mackenzie Valley Gas Pipeline, a project that has found itself falling prey to the Arctic’s “obvious economic handicaps” of remote from other Canadian industrial centers. Read the section below, or the article, to learn a few more details of the project and the project’s impact of Canadian environmental policy, but the economic message can be summed up in short: Developing the energy-rich Arctic is expensive, and with Canada just one player among many, costly infrastructure projects can go belly-up without careful planning.
From the Winnipeg Free Press:
The Mackenzie Valley Gas Pipeline project of Imperial Oil and others is one of Canada's greatest unbuilt infrastructure projects. After years of investigation and litigation over aboriginal title and further years of environmental review, the project won National Energy Board approval in 2010. It is not being built, however, because U.S. oil and gas exploration companies have found ways of extracting great volumes of natural gas that were previously not recoverable. In the present glutted natural-gas market and low natural-gas prices, the expense of the Mackenzie Valley line is difficult to justify.
Northerners eager to see the Mackenzie Valley line built believe it was killed by too much environmental review. The Harper government agreed and changed the National Energy Board Act to allow itself to set limits to environmental review and speed up approval. The three-member panel studying Enbridge Inc.'s proposed Northern Gateway gas pipeline from Alberta to the Pacific Coast is now operating under the government's tighter timeline.
But it is just as reasonable to conclude that the Mackenzie Valley line is a technically good project that just has to wait until somebody needs the gas badly enough to pay for construction of the line. Environmental review didn't kill a good project -- it delayed an unnecessary project. If the Mackenzie Valley line was reaching completion today, it might stand idle for want of buyers for the gas. The investors would be stuck with an engineering marvel that lacks, for the moment, an economic purpose.
Some Arctic Basics & Grading Canada's Arctic Push
First, just so readers can be hip to Canadian political lingo, Harper announced, in 2009, a four-pillar strategy for Canada Great White North: (1) asserting sovereignty, (2) protecting the environment, (3) promoting social and economic development; and, finally, (4) improving and devolving Arctic governance. The main focus on this posting is on that third aspect—economic development.
Canada is making serious investments in Arctic infrastructure. As detailed in a 2011 Library of Parliament research paper, Canada has spent over $720 million to procure icebreakers; gotten new patrol ships; spent $17 million to establish commercial fisheries in Nunavut; and $100 million “to establish a deepwater port in Nunavut” for its security forces. These are the backbone projects of Harper’s push to develop the Arctic. Should these projects continue and be completed, they could begin the long process of making the Northern territories closer to self-sufficiency (though, Canada should probably use U.S. subsidization of Alaska as a more attainable goal).
First, just so readers can be hip to Canadian political lingo, Harper announced, in 2009, a four-pillar strategy for Canada Great White North: (1) asserting sovereignty, (2) protecting the environment, (3) promoting social and economic development; and, finally, (4) improving and devolving Arctic governance. The main focus on this posting is on that third aspect—economic development.
Canada is making serious investments in Arctic infrastructure. As detailed in a 2011 Library of Parliament research paper, Canada has spent over $720 million to procure icebreakers; gotten new patrol ships; spent $17 million to establish commercial fisheries in Nunavut; and $100 million “to establish a deepwater port in Nunavut” for its security forces. These are the backbone projects of Harper’s push to develop the Arctic. Should these projects continue and be completed, they could begin the long process of making the Northern territories closer to self-sufficiency (though, Canada should probably use U.S. subsidization of Alaska as a more attainable goal).
So, without getting into the weeds, how is Canada doing in its Arctic project? Well, according to YahooNews, not that great: “While Prime Minister Stephen Harper and Defence Minister Peter MacKay continue to insist Canada is no slouch in the Arctic, other countries’ Arctic strategies seem to be bigger, stronger and faster.” Reporter Andy Radia then points out that the United States is revving up submarine patrols of the Arctic, Russia is spending over $100 billion on 16 new nuclear submarines, some of which will be patrolling the Arctic, and Sweden and Norway may be in on the Arctic gig too.
But this focus on whether certain waterways in the Arctic will be Canadian waters or international waters misses the (snowy) forest for the trees. Canada will never out-militarize Russia or the United States, but Canada has already turned the land and waters of the Arctic into an emerging hotbed of economic activity. The question is, is even further development worth the public infrastructure costs--let alone the costs of providing security to a no-longer mythical Northwest Passage.
There are three key areas where Canada can develop oil and natural gas: the Mackenzie Valley, the Arctic Islands, and the Mackenzie Valley/Beaufort Sea. A 2012 Lloyd’s of London report found that there’s possibly $100 billion to be made in the Arctic for minerals, fisheries, shipping, and tourism. But the report notes that the extreme weather requires strong public infrastructure investment, effective regulatory control, and greater data-collection on the dangers and benefits of Arctic development.
The U.S. Energy Information Administration (E.I.A.) sums up the "goods news, bad news" of Arctic economic development:
The Arctic presents a “good news, bad news” situation for oil and natural gas development. The good news is that the Arctic holds about 22 percent of the world’s undiscovered conventional oil and natural gas resources, based on the USGS mean estimate. The bad news is that: (1) the Arctic resource base is largely composed of natural gas and natural gas liquids, which are significantly more expensive to transport over long distances than oil; (2) the Arctic oil and natural gas resources will be considerably more expensive, risky, and take longer to develop than comparable deposits found elsewhere in the world; (3) unresolved Arctic sovereignty claims could preclude or substantially delay development of those oil and natural gas resources where economic sovereignty claims overlap; and (4) protecting the Arctic environment will be costly. The high cost and long lead-times of Arctic oil and natural gas development undercut the immediate importance of these sovereignty claims, while at the same time diminishing the economic incentive to develop these resources.
...
The bottom line for Arctic oil and natural gas potential is that high costs, high risks, and lengthy lead-times can all serve to deter their development in preference to the development of less challenging oil and natural gas resources elsewhere in the world. Also, the less abundant Arctic oil resources will be more readily developed than the Arctic’s natural gas resources. Thus, while the Arctic has the potential to be a more important source of global oil and natural gas production sometime in the future; the timing of a significant expansion in Arctic production is difficult to predict.
Conclusion: Canada and the Arctic
Undoubtedly, the Arctic holds great economic potential for Canada, as well as other Arctic nations. But if Canada fails to push prudent development, it may find itself paying for extensive Arctic infrastructure while finding the promise of Arctic profits a mirage.
Undoubtedly, the Arctic holds great economic potential for Canada, as well as other Arctic nations. But if Canada fails to push prudent development, it may find itself paying for extensive Arctic infrastructure while finding the promise of Arctic profits a mirage.
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