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Future of Arctic enterprise

curryja

by Judith Curry

As a complement to the discussion on Arctic sea ice decline at Climate Dialogue, lets take a look at the outlook for the development of existing and new economic activity in the Arctic marine region, as a result of this change.

The Smith School of Enterprise and the Environment at the University of Oxford published a report entitled The future of Arctic enterprise:  Long-term outlook and implications.   From the Executive Summary:

Over the next 20 years, shipping, oil and gas, mining, tourism and aquaculture will be the key sectors of economic activity. The factors shaping the future development of each economic sector are diverse and include, political, economic, socio-cultural, technological, demographic, legal and regulatory, and ecological-environmental changes. Furthermore, there are synergies in the development of individual sectors, most notably in linkages between shipping and other sectors.

Despite the considerable uncertainties relating to existing and future economic development in the Arctic, concerns about the long term and sustainable development of the Arctic marine region are set to increase. This study draws attention to new ‘hotspots’ that could emerge from the synergies between different sectors and the interplay of economic activity with political and social developments in the context of climate change and cumulative environmental impacts.

Further excerpts:

The primary drivers can be summarised quite simply: the increase in enterprise activity is being driven by the global demand for resources and logistical efficiency. In addition, the reduction in sea ice is opening new shipping routes that are also driving and enabling enterprise activity. This is either directly through trade, or indirectly by accelerating resource exploitation. The implications of this produce a set of secondary issues that are the key issues governments will need to address in order to keep stability in the region.

Secondary drivers are sovereignty and territory issues, governance and regulations, issues for indigenous communities, and pollution and biodiversity loss.

Hot spot issues

Environmental

Societal issues

Economic issues

Governance issues

From the conclusions:

The factors shaping the future development of each sector are diverse and include, political-,economic-, socio-cultural, technological-, demographic-, legal and regulatory-, and ecological environmental changes. There are significant uncertainties associated with the scale, nature, and environmental impacts of different sectors of economic activity and stemming from the interplay between different sectors.

For example, there are significant technological and operational challenges involved in existing economic activities in oil and gas and mining. Uncertainties persist about the nature of oil and gas reserves, as well as considerable operational and technical challenges in producing and transporting oil and gas under extreme conditions of pressure, temperature and weather. There is also uncertainty about the impact of oil and gas operations on the marine ecosystems that unique to the Arctic, and how both might be affected by climate change related impacts.

Shipping activities will be driven by a combination of factors, including servicing the logistical needs of other economic activities, such as mining, oil, and gas, and the growth of tourism in the region. The extent to which an ice-free Arctic facilitates the relocation of global shipping lanes and traffic routes from the Suez and Panamanian Canals is unclear. In sectors such as fishing and aquaculture, the impacts of climate change on Arctic marine biophysical- and ecosystems will also determine the scale and location of activity. It is unclear, whether and how fast new forms of enterprise, such as bio-prospecting, deep ocean mining or renewable energy, might enter into the region. There is a lack of shared and systemic understanding of the complex interplay of changes unfolding in the region.

Despite the considerable uncertainties relating to existing and future economic development in the Arctic, concerns about the outlook for indigenous communities and marine Arctic ecosystems are set to increase. The dynamic interplay of an increasing number of users and uses, in a context of political and regulatory uncertainty and global environmental changes, has catalysed stories of hope, hype and horror about the future of the Arctic. Economic activities in the region are governed by a variety of international and national agreements and laws, and the management of different uses and users is evident in the shift towards more integrated marine management planning approaches by member states of the Arctic Council.

However, the nature of the Arctic marine environment economy is unique in terms of the numbers of jurisdictions, interests and dimensions of challenge involved. The scales of enterprise range from community fishing to global mining, shipping, oil, and gas. The communities that depend on the Arctic include coastal towns, indigenous peoples, and nation states, within and beyond the Arctic region.

Developing more shared and systemic understanding of changes, synergies, and challenges is needed if peaceful and sustainable development is to be possible. Given the limits of forecastbased planning in situations of social and political ambiguity, and the complex interplay of uncertain dynamics, scenario based initiatives are needed to enable more proactive, collaborative approaches. For example, scenarios focussed on the interplay of economic developments in the Arctic and associated cumulative environment, developed in a process that involves a range of different sectors and wider stakeholders, would provide a basis for the redevelopment of more detailed regulations and/or cross-industry guidelines.

Shell

The challenges for resource extraction in the Arctic are illustrated by this WaPo article Shell thwarted in plans to drill for Arctic oil this year.  Some excerpts:

Here’s a perfect example of how tricky Arctic drilling can be: On Monday, Royal Dutch Shell announced that it was abandoning its plans to harvest oil from Alaska’s Chukchi Sea this year, after the company sustained damage to a containment dome designed to cap any major spills.

The time required to repair the dome, along with steps we have taken to protect local whaling operations and to ensure the safety of operations from ice floe movement, have led us to revise our plans,” Shell said. 

Shell has spent $4.5 billion and nearly seven years obtaining leases to drill for oil in the Chukchi and Beaufort Seas off the Alaskan coast. The company has fended off dozens of lawsuits from environmental groups and Alaskan tribes who say that drilling could threaten sensitive wildlife habitats. 

But there was still the unruly Arctic to deal with. Shell managed to drill for about a day before encroaching sea ice forced the company to move its rig out of harm’s way. And the damage to the containment dome during testing has forced the company to abandon its oil hopes this summer—the Interior Department’s permit was contingent on Shell having a spill-containment system in place.

This latest setback for Shell comes after a number of snags throughout the year. Even though the Arctic sea ice melted to a record low this summer, the ice happened to be exceptionally thick this spring in several areas where Shell held leases. That forced the company to postpone its drilling plans by three weeks. Then, in July, the Coast Guard delayed Shell’s oil-spill barge after questioning the ship’s ability to operate in stormy weather. Later that month, Shell’s Noble Discoverer drill ship escaped from its mooring off the Aleutian Islands and drifted to within 100 yards of shore. (The rig crew reported no damage.)

JC comment: You can understand the substantial interest that people have in decadal sea ice projections.  Apart from socioeconomic issues discussed here there are a host of international security issues associated with increased accessibility to the Arctic.

In view of the uncertainties, I strongly support the scenario planning approach described by the Smith Institute to attempt to understand the complex dynamics of what might transpire in the Arctic.

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