OFFSHORE DRILLING:

Calls for Arctic policy intensify as Shell nears final OK for exploration

The prospect of oil exploration this summer in Alaska's northernmost waters is triggering calls for Washington to take a more comprehensive international leadership role in managing a new era of economic, military and scientific development in the Arctic.

With Royal Dutch Shell PLC expected to receive final permits in the coming days to explore for oil and gas in the Beaufort and Chukchi seas, drilling supporters and critics say Washington must finally make Arctic policy a top national priority.

Alaska lawmakers and energy companies want streamlined ground rules for development and more funding for infrastructure and national security. Environmentalists advocate more explicit protections for the region's sensitive ecosystems and the Native communities' subsistence lifestyles.

Yesterday, Interior Secretary Ken Salazar answered some of those demands, announcing plans for "targeted leasing" in the Alaska waters, while taking precautions to protect sensitive waters, wildlife and Alaskan subsistence hunters (Greenwire, June 26).

"I can tell you that President Obama and his administration take very seriously the complexities and unique conditions in the Arctic," Salazar said in speech at an energy drilling conference in Trondheim, Norway. "It is a frontier. It is a place where development can only safely expand if we also expand our understanding through science and experience."

Sen. Lisa Murkowski (R-Alaska) insists it's time for America to become the world role model for international Arctic development.

"As an Arctic nation, I think the United States needs to be more aggressive," she said. "When we talk about an Arctic policy, it really needs to be more than just, 'How are we going to fund a new icebreaker?' I want us to assume the role of a lead nation on the Arctic issues that are important to the United States and important to the Arctic region as a whole."

Shell, which paid $2.1 billion in 2008 for leasing rights in the U.S. Arctic waters, is the first of several multinational oil companies that have lined up to explore for oil and gas in the region. ConocoPhillips and Statoil are also planning to move into the region during the next two years.

Canada, Norway, Russia and other Arctic nations are also encouraging oil and gas drilling off their northern shores. Norway, where interest in Arctic energy drilling is booming, yesterday announced plans to award oil and gas exploration permits next year in 72 blocks in the Barents Sea.

In Alaska, the sparsely populated northern communities will be dramatically affected if Shell's exploration is successful, said Charles Ebinger, director of the Brookings Institution's Energy Security Initiative.

"If Shell finds the mother lode, you will see a stampede," he said. "And I'm not sure that's good."

Yesterday, Salazar made it clear that change is coming to the American Arctic. Speaking to reporters, Salazar said the government will soon release its five-year plan for oil and gas that will allow leasing in the Beaufort Sea in 2017 and the Chukchi Sea in 2016.

The U.S. Geological Survey estimates that the Beaufort and Chukchi seas combined could hold as much as 27 billion barrels of oil and 132 trillion cubic feet of natural gas.

Oil development is only one facet of the changes coming to the Arctic, noted Alaska Sen. Mark Begich (D). "It's not just energy," he said. "It's also transportation, the visitor industry, scientific research, military. Some are looking at the mineral potential. When you put it all together, we see this a frontier that I think people underestimate."

With global warming causing Arctic waters to remain ice-free for longer stretches each summer, transportation companies plan to cut shipping costs by moving cargo through the Arctic Ocean. Tourist boats are popping up in Barrow and other Native communities along Alaska's northern shores.

Increased marine traffic is raising transportation safety and national security concerns, forcing the U.S. Coast Guard and military to expand their operations in the region. Meanwhile, scientists are eager to study the impacts of warming ocean waters and economic development on the remote Arctic ecosystems.

Deputy Secretary of the Interior David Hayes, who heads a governmentwide task force on Arctic energy use, said the administration will take an "integrated holistic" approach to energy development. He was less clear, however, on whether the task force will extend oversight on shipping, tourism and other types of economic growth in the Arctic.

"The Arctic's ice shelf and coastal, terrestrial and marine ecosystems are changing too fast for sector-by-sector, project-by-project or issue-by-issue management," Hayes said in a speech at the Norway meeting. "Getting it right in the Arctic calls for a fully integrated approach if we expect to protect natural resources and subsistence values while continuing commercial activities."

Heather Conley, senior fellow at the Center for Strategic and International Studies, said the time is ripe for a comprehensive Arctic policy. "We have to decide how much do we want to develop," she said. "It's a balance between exploring it and exploiting it and protecting it."

Other Arctic nations are far ahead of the United States in developing road maps for their Arctic futures, said Fran Ulmer, chairman of the U.S. Arctic Research Commission and former Alaska lieutenant governor.

"Canada, Norway and Russia have developed strategies that define cohesive plans of action to allocate funding and resources to pave the way for Arctic development," Ulmer said. "It's only recently that the U.S. has figured out that the Arctic is both valuable and vulnerable and needs more careful thought.

"Given how rapidly the private sector and the international business community is moving forward in the Arctic, I think the time is now -- or maybe slightly past due -- for the U.S. to focus on designing a way that we move forward."

International campaign

During the past year, Obama has sent clear signals of his goal of making the United States a key player in international Arctic development.

At the Norway meeting this week, Salazar met with energy ministers from Canada, Iceland, Norway and Russia to discuss offshore oil and gas safety issues. In early June, Secretary of State Hillary Rodham Clinton also stopped in Norway for Arctic oil development talks with top Norwegian leaders.

Last year, both Cabinet members were in Greenland when the Arctic Council, a coalition of the world's eight Arctic nations, approved a binding marine search and rescue agreement for the Arctic. The council is now hammering out an oil spill response accord for the region and is developing guidelines for Arctic ecosystem-based management for Arctic development.

Back home, the White House has increased pressure on the Senate to pass the U.N. Convention on the Law of the Sea, which sets rules for freedom of navigation, fishing, oil and gas development, deep seabed mining, and environmental protection. Obama recently sent several Cabinet members and top military commanders to Capitol Hill to argue for passage.

The treaty has been approved by 160 nations, including all other industrialized countries, since it was written in 1982.

In the United States, however, the pact continues to be blocked by conservative Republicans who argue that it would undermine U.S. sovereignty. Former Defense Secretary Donald Rumsfeld recently opposed the measure, warning that the treaty would send a small portion of royalties from oil drilling on the extended continental shelf to be distributed by a U.N. body (E&E Daily, June 15).

Despite that opposition, Obama administration officials say the treaty could be approved later this year. Begich, however, said chances of ratification remain slim until after the November presidential election.

Moving toward an integrated Arctic plan

Although the Obama administration has been highlighting its international Arctic policy, U.S. domestic policy remains splintered and underfunded. Federal oversight of Alaska's energy projects has remained scattered among more than a dozen agencies -- from the State Department and the U.S. Coast Guard to Interior, the National Oceanic and Atmospheric Administration, and U.S. EPA.

During the last days of George W. Bush's presidency, the State Department adopted a white paper laying out the goals for a unified U.S. Arctic policy. But that policy statement contained no legal teeth, regulatory direction or funding priorities.

The lack of a U.S. Arctic policy has been frustrating to Alaskans, who see their state at the brink of a major economic revolution. "Shortly after our [Bush administration] Arctic policy paper came out, Canada came out with one," Murkowski recalled.

"Ours was the skimpy little white paper. The Canadians have a level of detail and an action plan to how it all rolls out," she said. "Canada is serious about the Arctic. Russia is not just sitting back and doing nothing. They're both committed to a level of engagement and aren't afraid to say so."

Last July, Obama created the interagency panel to streamline government oversight of Alaska's onshore and offshore energy development. That panel, which helped shepherd Shell's permits through the tangled federal regulatory system, includes representatives of more than six federal agencies and the Alaska state government. Now the White House appears to be signaling a wider role for the task force.

Yesterday's announcement by Salazar that the government will impose new controls on oil and gas development in the Arctic won cautious praise from some environmentalists.

"The interagency working group is really trying to move beyond just discussions of permitting for oil and gas development, looking more broadly at the Arctic Ocean," said Eleanor Huffines, manager of the U.S. Arctic program for the Pew Environment Group.

"They're saying we have federal responsibilities, we have scientific responsibilities, we have responsibilities to the communities -- how are we approaching this comprehensively? What does an integrated Arctic plan look like? How do you address multiple uses?"

But other green groups objected to Salazar's suggestion that he is likely to approve Shell's final oil permits. Natural Resources Defense Council President Frances Beinecke, who was a member of the president's commission studying the 2010 Deepwater Horizon oil spill, charged that the decision "invites an environmental nightmare of unimaginable proportions."

'A whole new frontier'

As the eyes of the nation follow the progress of Shell's oil drilling, some suggest that a major oil discovery could change the political equation in Washington for government policy changes and economic investment. Positive publicity, they reason, could grease the skids for passage of the Law of the Sea treaty and make it easier to get funding for new icebreakers and other federal resources.

Begich argued that a gusher in the U.S. waters could demonstrate to senators from other states why they should vote for the Law of the Sea convention.

"Let's say Shell gets a bigger find than they thought," he said. "Do you think Russia is going to sit around there? No, they're going to figure out how close they can get and do directional drilling" into American Arctic waters.

"Once you start finding economic interest up there, that's when you get the territorial disputes," he said. "The Law of the Sea provides a dispute settlement process to handle that kind of situation."

Murkowski is hoping that if Shell's drilling armada is allowed to sail to the Arctic in the coming weeks, the American public will be inspired by the adventure and excitement of new oil exploration in the nation's icy, northernmost waters.

After all, Alaska's motto is "North to the Future."

"When you think about the opportunity to have a role in a new and developing frontier -- that's why kids in school get excited about space," Murkowski said. "Because it's something that we really don't know that much about, and it's far away."

She added: "Now we're looking at the Arctic. Wow, it's a whole new frontier. It's just now developing. The potential is enormous. Why can't we capture the attention of a nation about the excitement of the Arctic?"

Unlike the citizens of Canada, Norway and Russia, most Americans do not view the United States as an Arctic nation. However, that could change as drilling shines the spotlight on Alaska's Arctic.

If Shell is able to channel Arctic oil to the lower 48 states and international shipping companies begin to route their vessels through North Pole waters, new icebreakers might be considered a top national priority.

"People that are growing the wheat in North Dakota should care about how grain moves around the world and the opportunity the Arctic could present if we have shipping lanes that are open through a good portion of the year," Murkowski said. "We need to make it real to other people in the country in this tough budget climate."

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