U.S. has significant interests in untapped mineral wealth in Arctic
According to the U.S. Geological Survey, the Arctic region is the largest unexplored prospective area for petroleum remaining on earth with an estimated ninety billion barrels of undiscovered oil reserves, and 1,670 trillion cubic feet of natural gas. In addition, the unpredictability of the Persian Gulf region makes the Arctic region even more attractive for exploitation.
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The United States stands atop a precipice, faced with a momentous opportunity to take advantage of trillions of dollars in natural resources, while sim- ultaneously restoring the nation’s economic security through governance and job creation. Governance is the first step. Ratifying the Law of the Sea Conven- tion must be a priority for the administration or the United States will lose economically and could be challenged as the global maritime leader. The Inter- national Maritime Organization will remain the key vehicle for governance mechanisms. AIS expansion, as well as mandated Arctic shipping guidelines and establishing traffic patterns should be top priorities for the United States. Governance needs to be accompanied by a significant acquisition program to keep pace with the other Arctic nations. Ice- breakers, additional aircraft, and infrastructure can no longer be shoehorned into a Coast Guard budget, which has inadequate funding even for recapitaliza- tion of its Vietnam-era fleet.
The United States needs an Arctic economic development strategy that incorporates the departments of Defense, Homeland Security, Commerce, and Energy. Such strategy should include plans for shore-based infrastructure, communications, and surveillance technology, icebreakers, and response aircraft for the region. In an era of declining budgets, the simplest course of action would be to ignore the tremendous potential of investment in the Arctic. However, such willful turning away reduces our ability to reap tremendous economic benefits and could harm U.S. national security interests.
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The U.S. Geological Survey released a report in 2008 that indicated approximately 13 percent of the world’s untapped oil reserves reside in the Arctic region. One-third of these reserves lie inside the U.S. Exclusive Economic Zone (EEZ) off the northern slope of Alaska. The report also estimated that approximately 30 percent of the world’s remaining natural gas reserves reside within the Arctic region.19 In recent years, icecap melting, along with advances in technology, has rendered retrieval of natural resources in the Arctic both feasible and acceptable in terms of environmental risk.
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The potential implications of this extended continental shelf regime are profound. With one of the largest coastlines in the world, the United States is expected to have over 291,000 square miles of extended continental shelf.89 The U.S. continental margin off the coast of Alaska alone may extend to a minimum of 600 miles from the Alaskan baseline.90 Alaska’s extended continental shelf lies over the Arctic Alaska province, one of the many oil- and gas-rich basins in the Arctic.91 It is estimated that there may be almost 73 billion barrels of oil and oil-equivalent natural gas located in the Arctic Alaska province, the second highest estimated production capability of all Arctic provinces.92 The continental shelf within the 200-mile EEZ under the Beaufort and Chukchi Seas alone may have over 23 billion barrels of oil and 104 trillion cubic feet of natural gas.93 Not only would development of these resources promote energy independence, a U.S. national security objective,94 it would also create almost 55,000 jobs per year nationwide and generate over $193 billion in federal, state, and local revenue over a fifty-year period.95 Due to delays in Arctic oil and gas exploration in the Chukchi and Beaufort Seas, both within the U.S. 200-mile EEZ, the earliest estimated date of extraction is sometime after 2019.96
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Oil and natural gas are not the only resources likely to be found in the Arctic valuable minerals may also exist on the seabed. Scientists have long known about unconventional mineral ore deposits known as manganese nodules. These nodules are spherical accretions of manganese, cobalt, copper and nickel which precipitate out of sea water at depth. n48 They form when warm solutions of dissolved metals from the earth's crust leach into cold ocean waters, and they are found on roughly a quarter of the ocean floor.n49 Recovering the nodules can be technically difficult. The nodules are usually found under at least 2 miles of water and dredging them stirs large quantities of sediment which seriously disrupts marine habitat.n50 Thus, excitement surrounding the minerals has calmed significantly since the 1970's.n51 Not only must the technology become cheaper and more widely available, but industrial commodity prices must also remain high to make manganese nodules profitable.n52
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The U.S. Geological Survey estimates that the Arctic might hold as much as 90 billion barrels (13 percent) of the world’s undiscovered oil reserves and 47.3 trillion cubic meters (tcm) (30 percent) of the world’s undiscovered natural gas. At current consumption rates and assuming a 50 percent utilization rate of reserves, this is enough oil to meet global demand for 1.4 years and U.S. demand for six years. Arctic natural gas reserves may equal Russia’s proven reserves, the world’s largest.1 (See Table 1.)
The Russian Ministry of Natural Resources estimates that the underwater Arctic region claimed by Russia could hold as much as 586 billion barrels of unproven oil reserves.2 The ministry estimates that proven oil deposits “in the Russian area of water proper” in the Barents, Pechora, Kara, East Siberian, Chukchi, and Laptev Seas could reach 418 million tons (3 billion barrels) and proven gas reserves could reach 7.7 tcm. Unexplored reserves could total 9.24 billion tons (67.7 billion barrels) of oil and 88.3 tcm of natural gas.3 Overall, Russia esti- mates that these areas have up to 10 trillion tons of hydrocarbon deposits, the equivalent of 73 trillion barrels of oil.4
In addition to oil and gas, the Arctic seabed may contain significant deposits of valuable metals and precious stones, such as gold, silver, copper, iron, lead, manganese, nickel, platinum, tin, zinc, and diamonds. The rise of China, India, and other developing countries has increased global demand for these commodities.5
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One future change in the Arctic region is greater accessibility to, and availability of, natural resources, including offshore oil and gas, minerals, and fisheries. The Arctic contains 10 percent of the world’s known petroleum reserves and approximately 25 percent of its undiscovered reserves.18 The U.S. exclusive economic zone has a potential thirty billion barrels of oil reserves and 221 billion cubic feet in natural gas reserves.19 Minerals available for extraction in the Arctic include manganese, copper, cobalt, zinc, and gold. Coupled with a rise in global demand for natural oil and gas resources and improved accessibility, the Arctic has become a new focus for oil companies looking for untapped resources. Already $2.6 billion has been spent on active oil and gas leases in the Chukchi Sea.20 Yet the extraction of these minerals and petroleum reserves depends heavily upon development and deployment of resilient technology that can function in such harsh conditions, marked by lack of infrastructure and long distances to markets.
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Determination of who owns the Arctic Ocean and any resources that might be found beneath those waters will have significant economic implications. The U.S. Department of Energy predicts a decline in petroleum reserves and, despite oil prices topping $146 in June 2008, the demand for oil is growing.6 In addition to the vast mineral resources, the unpredictability of the Persian Gulf region makes the Arctic region even more attractive for exploitation. Russia and Norway have already submitted their claims to the Commission on the Limits of the Continental Shelf (“the Commission”), while Canada and Denmark are collecting evidence to prepare their submissions in the near future.7 All of these nations can gain considerable oil and gas resources as a result of the Convention.
However, one Arctic state has so far failed to join the race. Unlike the other Arctic nations, the United States has not ratified the Convention. Although the United States has complied voluntarily with the Convention, the failure to ratify the Convention could foreclose its ability to tap into potential energy resources. This failure could prevent significant contributions to American energy independence, and increase security threats. Thus, the best way to guarantee access to the Arctic’s resources and to protect other economic and non-economic interests is for the United States to become a party to the Convention.
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According to the U.S. Geological Survey, the Arctic region is the largest unexplored prospective area for petroleum remaining on earth.21 The agency estimated that the Arctic may hold as much as ninety billion barrels of undiscovered oil reserves, and 1,670 trillion cubic feet of natural gas.22 This would amount to 13% of the world’s total undiscovered oil and about 30% of the undiscovered natural gas. With an average consumption rate of eighty six million barrels per day, “the potential oil in the Arctic could meet global demand for almost three years.”23 The Arctic’s potential natural gas resources are three times bigger, which is equal to Russia’s gas reserves, which are the world’s largest.24
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The economic importance of the energy resources trapped under the Arctic seabed is difficult to overstate. In 2007, Alaska produced 722,000 barrels of oil per day.96 This is only a fraction of the state's 1988 production peak of 2,017,000 barrels of oil per day.97 Today, Alaskan oil production accounts for more than sixteen percent of all U.S. production; in 1988, it was more than a third. Natural gas is a significant energy resource in Alaska (433.5 billion cubic feet are marketed from Alaska per year) but contributes only 2.2% to the U.S. market.98 U.S. Arctic oil exploitation pales, however, in comparison with that of the other Arctic nations.99 Norway, for instance, has produced dramatically more oil from its Arctic sea beds than the United States has over similar periods. In 2007, Norway produced 2,564,884 barrels of oil per day compared to Alaska's mere 722,000 barrels per day; approximately 500,000 barrels per day more than Alaska's 1988 peak.100 The other Arctic nations each produce significant quantities of oil as well.101
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Shrinking ice caps, melting permafrost, and technological advances enable greater access to the region’s abundant oil and gas reserves, which include as much as one-fifth of the undiscovered petroleum on the planet. With longer ice-free periods now available to explore for hydrocarbons, a new scramble for oil and gas could occur especially if oil prices recover to levels above $100 per barrel. In July 2008, the U.S. Geological Survey (USGS) estimated that the Arctic comprises 30 percent of the world’s remaining natural gas resources, or 44 billion barrels, and 13 percent of untapped oil supplies, or 90 billion barrels. Nearly all (84 percent) of the oil and gas is expected to occur offshore, and most of the projected reserves are located in waters less than 500 meters deep and will likely fall within the uncontested jurisdiction of one or another Arctic costal state. “The extensive Arctic continental shelves may constitute the geographically largest unexplored prospec- tive area for petroleum remaining on Earth.”7 The Arctic already accounts for one-tenth of global conventional petroleum reserves, and the projections of the latest USGS study did not even ad- dress the potential for developing energy sources such as oil shale, gas hydrates, and coal-bed methane, all of which could be present. But with it comes the risk of increased pollution, pos- sible spills from oil and gas, and the threat of contaminating water sources during the extraction process.