U.N. Convention on the Law of the Sea Erodes U.S. Sovereignty over U.S. Extended Continental Shelf
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Exploitation of resources from the U.S. ECS is expected to generate royalties in the near future, and the United States will forgo some of those roy- alties if it joins UNCLOS. The potential financial impact of joining UNCLOS is evident from a brief review of how revenue is generated from activities currently taking place on the U.S. outer continental shelf within the 200 nm line.
A wealth of mineral resources (e.g., oil and natural gas) lies below the surface of the U.S. OCS. Alaska’s OCS alone may contain almost 10 billion barrels of oil and 15 trillion cubic feet of natural gas.29 Massive known reserves of oil and natural gas also lie beneath the OCS in the Gulf of Mexico.
The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) in the U.S. Department of the Interior manages the nation’s oil, natural gas, and other mineral resources on the OCS.31 One of BOEMRE’s primary activities is managing sales of offshore oil and gas leases. Through BOEMRE, the United States leases OCS tracts to companies for exploration and exploitation. The companies bid competitively for leases, and the winning company is required to make certain pay- ments to the Secretary of the Interior for deposit into the U.S. Treasury.
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Both the Alaskan OCS and Gulf OCS will continue to generate revenue for the United States for many years to come. According to Interior Depart- ment estimates, the U.S. OCS contains 8.5 billion barrels of oil and 29.3 trillion cubic feet of natural gas in proved and unproved reserves and another 86 billion barrels of oil and 420 trillion cubic feet of natural gas in as yet undiscovered resources.
Such vast resources will continue to generate billions of dollars in royalty revenue for the United States. A recent report by the Institute for Social and Economic Research at the University of Alaska evaluated further development of the Alaskan OCS, focusing on the Beaufort Sea OCS and the Chuk- chi Sea OCS, the two OCS areas off the northern shore of Alaska. Assuming a minimum royalty rate of 12.5 percent, mineral exploitation in these two areas would generate almost $92 billion in royalty revenue over the next 50 years.
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The United States will likely soon begin to exploit the oil and natural gas resources on its ECS. The BOEMRE has already issued exploration leases for areas located, at least in part, on the U.S. ECS. Indeed, during the bidding process, the BOEMRE has given notice to companies bidding on offshore leases about UNCLOS Article 82. Since at least 2001 and as recently as 2008, BOEMRE has advised companies that the Article 82 royalty payment provisions would apply if the United States joins the convention.
The BOEMRE is not alone in its opinion that activities on the ECS will commence sooner rather than later. The report commissioned by the Authority predicts that, while Article 82 “has been dormant since the adoption of the Convention,” it “will soon awaken,” and royalties from that provision may come due to the Authority as early as 2015.
In sum, under current U.S. law and policy, all royalties and other revenue generated from exploitation of the U.S. ECS and owed to the United States would be deposited in the U.S. Treasury to be dispensed in the best interest of the United States and the American people. However, if the United States accedes to UNCLOS, potentially billions of dollars in royalties would instead be transferred to the Authority pursuant to Article 82. How the Authority would dispense those “internationalized” royalties is less clear.
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Some UNCLOS proponents maintain that the United States, if it joined the convention, would have a “veto” over such decisions because the U.S. would hold a permanent seat on the 36-member Council, which is the executive organ of the Authority.54 In fact, UNCLOS empowers the Council only to make recommendations to the Assembly on the disposition of Article 82 revenue, which the Assembly may approve or disapprove.55 Any Council recommendation that is disapproved by the Assembly is returned to the Council “for reconsideration in the light of the views expressed by the Assembly.”56 Therefore, in function and form, the Assembly makes final determinations regarding the disposition of Article 82 revenue.
Thus, it is unlikely that the United States would be able to prevent the Authority from distributing Article 82 revenue to Cuba and Sudan, UNCLOS members that the U.S. State Department has designated as state sponsors of terrorism.57 It would also be difficult for the United States to block the Authority from sending funds to the undemocratic, despotic, and/or brutal regimes in Belarus, Burma, China, Somalia, and Zimbabwe.58 Finally, the United States would have limited ability to stop the transfer of Article 82 revenue to corrupt regimes, especially given that 13 of the 20 most corrupt nations in the world are UNCLOS members.59
By virtue of its seat on the Council, the United States might be able to hinder decisions to distribute Article 82 revenue for purposes to which it objects. Whether the United States would be steadfast in its objections to such distributions and whether the Assembly would make any such distributions without the consent of the Council are open questions.
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UNCLOS is silent on how UNCLOS nations that receive Article 82 royalty revenue should spend it. UNCLOS does not require recipient nations to spend the revenue on anything related to the oceans or the maritime environment. Nor does it require them to spend the revenue on humanitarian or development projects, even though most, if not all, of the eligible recipients are supposed to be poor, developing countries. Recipients are apparently free to spend the funds on military expenditures or simply deposit them into the personal bank accounts of national leaders.
Finally, UNCLOS does not require that Article 82 revenue be spent in a transparent or accountable manner. Apparently, the Authority simply hands over substantial amounts of money to the recipient nation to be spent however that nation sees fit, no matter how corrupt or inept that nation’s leadership is.