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By Erica Dingman
Canada has repeatedly touted its capacity as an “energy superpower.” First uttered in 2006, Prime Minster Stephen Harper sought to capitalize on Canada’s resource wealth, vying for investment dollars in the wake of the Russia-Georgia conflict. Now Canada aims to attract investment from China, reportedly as a result of the XL Keystone backlash in the United States. Harper said. "We want to sell our energy to people who want to buy our energy. It's that simple."
At the same time, the nation has come under criticism for its record on environmental issues such as the oil sands, the XL Keystone pipeline, and its withdrawal from the Kyoto Protocol. As Canada prepares to assume the Chair of the Arctic Council in 2013, Arctic observers are speculating as to the direction Canada may take during its crucial two-year tenure.
When the Arctic Council, an intergovernmental body for cooperation in the Far North, established its original mandate in 1996, the focus was on environmental protection and sustainability issues. At the time, access to potential oil and gas reserves was inconsequential. Today, as the effects of climate change transform the environment, this northern landscape is rapidly shifting from one that was largely impenetrable to a potential gold mine of natural resources and shipping lanes.
Indeed, the Intergovernmental Panel on Climate Change reports that the magnitude of Arctic warming is occurring at nearly twice the rate of the rest of the world. Locally, erosion of Arctic shorelines in Alaska has put Inuit villages in imminent danger of flooding and soil erosion. A 2009 U.S. Government Accountability Office reported that 31 villages were in danger, 12 of which decided to move at a cost of between $95 and $200 million per village. Globally, permafrost thaw could mean the release of carbon and methane at an amount equal to or several hundred times more than the earth’s annual carbon dioxide emissions. And ‘open’ sea-lanes does not mean ice-free. Ice and icebergs are not easy to detect according to the National Sea Ice Data Center, presenting a significant hazard to maritime activities.
These issues were on the mind of Sweden’s Minister for Foreign Affairs and current Arctic Council chair Carl Bildt at the Durban UN Climate Change Conference, where he called a special meeting of Arctic states. In a statement supported by the eight Arctic states, Bildt urged “all countries to take decisive action” on reducing global greenhouse gas (GHG) emissions. As the present chair of the council, Sweden also acknowledges that that the rapid decrease of sea ice is opening up future challenges associated with commercial interests. Sweden is using its tenure to draft guidelines for responsible commercial development based on existing international guidelines and social corporate responsibility. These are both positive advances in light of changing conditions and increasing global interest from non-Arctic states such as India and China.
However, some doubt the sincerity of political will to prevent further climate change. In a radio interview on Canada’s CBC, Mary Simon, president of Inuit Tapiriit Kanatami, the organization representing the interests of Canada’s Inuit, concurred with the interviewer that it sometimes seems that some are waiting for the Arctic sea ice to melt so they can take advantage of the opportunities. Though not directed at any specific country or stakeholder, one can’t help but to speculate that Canada may be one of those sitting in wait.
Consider a few events that have happened over the last year.
For starters, when Canada withdrew from the Kyoto Protocol at Durban in December 2011, it was one of three signatories to the Kyoto Protocol that fell short of meeting their national GHG emissions goals. Had Canada not withdrawn, it would have incurred an estimated $14 billion in penalties. At the time, Peter Kent, Canada’s minister of the environment, announced that the protocol "does not represent a way forward for Canada," but suggested that Canada would set its own targets to reduce emissions. In February, the BASIC countries (Brazil, South Africa, India, and China) made a joint statement raising serious doubts about Canada’s “credibility and sincerity in responding to the climate crisis.”
Juxtapose Kent’s statement and the doubts raised by BASIC nations with an open letter posted by Joe Oliver, Minister of Natural Resources. On the Canadian government’s website he states that Canada seeks to diversify its energy market. With virtually all energy exports now heading to the U.S., Canada is looking to expand its trading partnerships with the “fast growing Asian economies.”
In the same letter Oliver stated, “Unfortunately, there are environmental and other radical groups that would seek to block this opportunity to diversify our trade. Their goal is to stop any major project no matter what the cost to Canadian families in lost jobs and economic growth.” This resulted in a contentious public debate, and to some represents another blow to Canada’s environmental reputation.
Until recently, the exploration and extraction of offshore Arctic oil and gas was unthinkable—attempts to drill in the Beaufort Sea off the shores of Canada in the 1970s and 1980s were aborted when newfound supplies of accessible oil and declining prices caused its collapse. Extraction is still extremely costly, but rising global prices for oil may make this relatively expensive endeavor potentially profitable. Rules and regulations, however, are still in their infancy.
To that end, in December 2011, Canada’s National Energy Board (NEB) released new guidelines for offshore oil and gas drilling, easing a previous regulation that oil companies claimed would prevent exploration. The NEB is maintaining its controversial relief-well regulation, but would give companies a de facto exemption if they can demonstrate that they have alternative methods to quickly kill a blowout. The NEB reported that the review process had considered U.S. government reports on the BP Deepwater Horizon Macondo well, which released an estimated 4.4 million barrels of oil into the Gulf of Mexico. The Macondo project was an exploratory well, and exploratory wells are considered the most dangerous because of the likelihood of blowouts. In addition, Arctic conditions are seen as being far worse in the event of an oil spill since the oil gets trapped under the ice. Under such circumstances, a reasonable assumption is that the NEB would have strengthened the same–season relief well regulation.
Trevor Taylor, policy adviser at the Pew Centre’s Oceans North Canada group said, “The problem with the [NEB] report is that it is not clear what they will accept as a fallback from the same-season relief well.” The group had participated in NEB roundtables leading up to the final report and had released a report called “Becoming Arctic Ready.” The report made policy recommendations for reforming Canada’s approach to licensing and regulating offshore oil and gas. Notably, Canada’s same-season relief well policy was once considered the strongest part of its regulatory regime, but the Pew report shed light on the ambiguities in its guidelines.
Shortly after the NEB’s easement, Chevron and Statoil announced the formation of a partnership to draw up drilling plans in the Beaufort Sea off the shores of Canada. Currently Canada has no offshore drilling operations, but other energy companies—including BP, Shell, Exxon, and Imperial Oil—also hold exploration rights in the Canadian Arctic. Exploration and extraction of potential offshore reserves is in its infancy, but as drilling becomes increasingly likely, it is imperative that national and region-wide regulations are drawn up and that systems for oversight are established in order to ensure that commercial activity is conducted with the greatest of precaution.
Prior to the final NEB report, Exxon Mobil and other energy firms complained that the same–season relief well requirement represented an implicit ban on deep-water drilling because of the short season. Yet regulation need not deter development but can instead lead to innovation and efficiencies that revolutionize an industry. Take for instance the Clean Air Act of 1970, which gave the EPA authority to regulate automobile emissions. The EPA dictated the maximum pollution output, but the oil industry was given leeway to come up with its own solutions for pollution output reduction. This resulted in efficiencies and technological breakthroughs that greatly reduced car and lead emissions by 95 percent. Innovation resulting form these new EPA regulations also resulted in the trend-setting aerodynamic Ford Taurus. It remained in production for two decades, and was credited with saving Ford from bankruptcy (Ford recorded losses of $3.3 billion in the early 1980s, but by 1987 it made a record profit of $4.63 billion). Regulation had resulted in innovation, substantial reductions in emissions, and profitability.
As Canada prepares to take on the chairmanship of the Arctic Council in 2013, it is still unclear how Canada will use this two-year opportunity. On the one hand, it has the opportunity to show its intent to promote a cautionary approach to commercial activity in the Arctic and potentially encourage innovations to decrease the environmental hazards of Arctic development. It could build on the statement put forward by Sweden’s Carl Bildt that urges all nations to take decisive action on reducing global GHG emissions. On the other hand, many are skeptical—Michael Byers, law professor at the University of British Columbia and an expert on law relating to the Arctic, predicts, “the current government will squander this opportunity." For Byers, climate change is the “overriding issue in the Arctic” and Canada has a less than stellar record. Rather than reducing emissions by 6 percent as agreed on in the Kyoto Protocol, Canada’s emissions have increased by 24 percent.
Canada was highly instrumental in the creation of the Arctic Council. In 1989, Prime Minster Brian Mulroney advanced the idea of a council of Arctic nations in Leningrad for the purpose of coordination and cooperation among the states. In 1990, an independent Arctic Council panel was established in Canada to work toward Mulroney’s goal. And in 1995, Mary Simon, now president of Inuit Tapiriit Kanatami, led the negotiations for Canada. At its establishment in 1996, Canada assumed the role as the first Chair of the Arctic Council. Council leadership has now come full circle, and Canada has the opportunity to strengthen the original mandate of environmental protection. A prudent leader—even a self-described “energy superpower”—would plan strong development regulations that prioritize the environment and spur innovation.
Erica Dingman is an associate fellow at the World Policy Institute, focusing on Arctic policy and climate change.
[photo courtesy of Eternal Vagabond]