Arctic Oil and Gas: A Regional or Global Concern?

By Andreas Østhagen Due to environmental concerns spotlighted by NGOs like Greenpeace and Bellona, Arctic petroleum activity is being scrutinised as never before by governments, local inhabitants and the international community alike. In addition, with the Arctic now experiencing an influx of commercial interests, collaboration between Arctic states and private companies operating in the Arctic is increasing. The Arctic Council is consequently working on a binding agreement for oil spill preparedness, similar to the search and rescue (SAR) agreement signed in Nuuk in 2011. The IMO is also finalising its work on a Polar Code for shipping. Developing common frameworks for both preparedness and prevention will bring benefits to companies, in the form of regulatory certainty, and governments, in the form of capacity building and legitimisation. The general sentiment amongst the Arctic littoral states seems to be that frameworks for different aspects of petroleum cooperation will eventually come together; it is just a question of what, when and how. 

The debate on which framework is best suited for Arctic oil and gas cooperation prompts the question of how to define the key actors in Arctic petroleum development. This also prompts the question of how to define relevant participants in an Arctic regulatory debate. The Arctic littoral states have kept emphasising that the Arctic is a regional concern where they have sovereignty and jurisdiction. In contrast to Antarctica, the Arctic is populated and developed, with clearly defined national boundaries and agreements governing its usage. Non-Arctic actors, on the other hand, like China and the European Union, portray the Arctic as a global concern, in need of broader international collaboration. Both points of view are to some extent valid, as the Arctic comprises both national sovereign territories and international waters.

China and the EU, along with Japan, South Korea and Italy, have subsequently applied for permanent observer status to the Arctic Council. Denmark, which welcomed the Chinese as a permanent observer, released a statement saying the position would come with some stipulations (no voting rights and a promise to recognize current boundaries), but the application is still pending for the next ministerial meeting in 2013 [1]. The Chinese ice-breaker capacity as a non-Arctic state is already beyond that of the United States, highlighting just how strongly the commercial potential of the region spurs external interest. The European Union is also developing its own Arctic Policy, wherein the European Commission has been stressing the EU’s status as a legitimate Arctic actor. At the same time, The European Parliament has been flirting with the idea of a moratorium on resource extraction, while the stances of the EU member states range from opportunism to indifference.

Whatever stance interested actors take towards the region, the prospect of petroleum activity has undeniably spurred interests that lie beyond the Arctic states, and has raised the question of whether the Arctic is a regional or a global concern. Is petroleum activity in the Arctic of international significance, and should it therefore be subject to the governance of the international community at large? 

Such a debate naturally holds relevance for any oil and gas activity in the region. The larger the number of participating actors, the more difficult it can prove to reach any form of agreement related to petroleum activity. In addition, a stronger international focus from actors which do not necessarily understand the complexity of the region can lead to unexpected results. The EU’s ban on seal products from 2009, which completely disregarded the Greenlandic local communities’ dependence on such activities, serves as a fitting example.

On the international scene, the Arctic littoral states seem to be content with the current situation, where they have retained primacy in Arctic discussions through the use of the Arctic Council. When and how to incorporate new observers – which might threaten the interests of existing members – is a question that has caused some dispute, and will likely continue to do so in the lead-up to the next Ministerial meeting in Kiruna, Sweden, in 2013. Nevertheless, the different Arctic territories still fall under the sovereignty of each state, and are subject to the decisions made by that state. From the short term perspective, it would appear that any framework for oil and gas prevention beyond the current work on oil spill preparedness must follow the non-binding line already established by the Arctic Council. Producing recommendations and best practices arguably has less effect than binding agreements, but can still serve a distinct purpose, triggering a process of harmonisation amongst the Arctic states. 

From the long term perspective, a few factors are likely to influence the development of a framework for Arctic oil and gas. First, any major incident related to oil and gas activity might change the pace of development. The Exxon Valdez tanker oil spill from 1989 in Alaska is frequently highlighted as a symbol of the devastating consequence of human error in the pursuit of hydrocarbons in the Arctic. The 2010 Deepwater Horizon oil spill in the Gulf of Mexico has also led to questioning of the industry’s safety regulations and its ability to operate in such a fragile environment. Throughout history, similar incidents have, regrettably, caused regulatory frameworks and new procedures to be put in place only after the harm has been done. Should another disaster occur in the Arctic, due to lack of safety procedures or comprehensive regulation, the drive for new agreements would probably follow suit. 

A framework for the region might also develop independently of what is produced between the states in intergovernmental decision-making. With increased regional shipping, and members of the oil and gas industry developing individual safety requirements, frameworks for cooperation have the potential to develop outside of the littoral states’ domain. Much of the projected development is dependent on capacity-building that governments do not necessarily have the funding or the short term incentives to invest in. This is particularly true in Alaska, leading to a situation in which multinational companies have great influence as providers not only of petroleum equipment, but also the capacity to serve regional needs in general. The Arctic is dominated by a few large oil and gas companies, and how much these are included in the region building will subsequently determine much of the future trajectory of the Arctic. 

Whether the emphasis is placed on the environment or petroleum, it is clear that regional capacities need to be improved. A holistic and comprehensive approach must be adopted that includes the input of states, regions, companies and indigenous communities alike. Although activities in the Arctic have expanded to a whole new level in recent years, one can argue that, compared to most other petroleum sites in the world, the Arctic is still a project for the future. If Arctic oil and gas activity is to achieve the potential and safety standards so frequently boasted by Arctic companies and governments, cooperation amongst all the different actors – horizontally and vertically – is of utmost importance to both the Arctic environment and its people.