Lisa Murkowski
United States Senator
Presentation to the Conference of Arctic Parliamentarians
Akureyri, Iceland
September 6, 2012
Good morning and thank you for the opportunity to make a presentation on Economic Opportunities in the Arctic.
Let me begin by making a statement that everyone in this room and everyone in my home state of Alaska knows to be true, but the rest of the United States is just now beginning to realize. The United States is an Arctic nation.
It is an ongoing education process to remind the American public and officials in Washington, D.C. that the United States is surrounded by three oceans, not just the Pacific and Atlantic.
But the reality of our geographic location seems to be gaining traction in Washington, in large part because of the tremendous natural resource potential that the Arctic region holds. And when we discuss economic opportunities in the Arctic, we have to start with the natural resources.
According to the U.S. Geological Survey, the USGS, exploration for petroleum has already resulted in the discovery of more than 400 oil and gas fields north of the Arctic Circle, accounting for approximately 40 billion barrels of oil, more than 1,100 trillion cubic feet of natural gas, and 8.5 billion barrels of natural gas liquids. Nevertheless, the Arctic, especially offshore, is essentially unexplored.
In 2008, the USGS published a Circum-Arctic Resource Appraisal, estimating the amount of undiscovered oil and gas north of the Arctic Circle. The Appraisal conducted quantitative assessments in geologic areas considered to have at least a ten percent chance of one or more significant oil or gas accumulations – a significant accumulation being recoverable volumes of at least 50 million barrels of oil and/or oil-equivalent natural gas using existing technology.
As the table shows, the Appraisal estimates nearly 90 billion barrels of oil, 1,669 trillion cubic feet of natural gas, and 44 billion barrels of natural gas liquids, combining for 412 billion barrels of oil and oil-equivalent natural gas located above the Arctic Circle.
These resources account for 22 percent of the undiscovered, technically recoverable resources in the world, with 84 percent of these resources expected to be offshore.
Taking a closer look, and breaking the numbers down even further, seventy percent of the undiscovered oil resources is estimated to occur in five provinces: Arctic Alaska, Amerasia Basin, East Greenland Rift Basins, East Barents Basin, and West Greenland-East Canada.
Of great interest to Alaska, and the United States, is the estimated 30 billion barrels of oil off of Alaska’s north coast. To put that into perspective, the U.S. Energy Information Adminstration reports that in 2010 the United States, as a whole, has 23.2 billion barrels of proved crude oil reserves.
For natural gas, the USGS appraisal estimates that 70 percent of the undiscovered natural gas occurs in three provinces: the West Siberian Basin, the East Barents Basin, and Arctic Alaska.
With the combined 30 billion barrels of oil and 221 trillion cubic feet of natural gas in the Arctic Alaska OCS, there is a significant amount of interest in the area.
Along with hydrocarbons, the Arctic has tremendous potential for rich mineral deposits. A preliminary analysis of dredge hauls conducted by the US Coast Guard Cutter Healy on its Arctic expeditions off of Alaska’s north coast in 2008 and 2009 suggests high concentrations of critical and strategic metals.
These metals include rare earth minerals, cobalt, lithium, and molybdenum (moll-lib-de-num) which are used in high-tech applications like electric car batteries, super magnets, cell phones, computer chips, and x-ray imaging just to name a few.
So it appears likely that the Arctic Continental Shelf contains mineral-rich deposits that are valuable components of technologies utilized around the world and would provide economic benefit to the Arctic nations as well.
Just as a reduced polar cap allows for greater access to natural resources, it also allows for increased circumpolar maritime traffic via sea lanes that are open for longer periods of time.
According to the US Office of Naval Intelligence, maritime activity in the Arctic increased 5.1 percent each year from 2008 to 2011. Granted, the starting point is not high – Arctic traffic accounts for just one to two percent of global civil maritime activity – but trends are moving upward. Over the 2008-2011 timeframe, cargo-ship activity increased 36 percent and tanker activity increased 114 percent.
We all know that a circumpolar maritime route between Europe and Asia, and the United States’ West Coast can shave a significant amount of time and distance from shipping costs, but there is a common challenge for the Arctic nations if we are to benefit from increased shipping in this region of the world.
While an Arctic route can provide single-ship savings, it could end up costing the shipping company even more because of the disruption to their shipping network that relies upon a hub and spoke model with ships loading and offloading along the way to maximize time, cargo volume, and network routing efficiency. Arctic routes do not have major trans-shipment or regional hubs for cargo routing and routing a single ship via the Arctic could result in a dead-head return or the re-positioning of ships around the world.
In order for Arctic nations to see the full benefit of that circumpolar navigation can afford, we need to make the Arctic a shipping hub, which could also have the side benefit of lowering the cost of shipping products to the communities in the Arctic region.
In addition, Arctic tourism has been on the increase as well, growing by almost eight percent in 2008-2011 due to more ships in the region. Most of that growth is in the cruise industry as “risk-engaged” tourists are interested in seeing new and exciting things.
The cruise lines and their insurance companies, however, are not as interested in dangerous activities, so if the Arctic nations view the cruise industry as a viable option for economic activity we need to make obsolete the saying that you bring your rescue with you.
That means our nations must address the lack of infrastructure and support capability in the Arctic.
I understand that Russia is in the process of building ten emergency centers along the Northern Sea Route. That is a start and Russia is to be commended. We also need icebreaking capabilities, which is an area that the United States is well behind on. We have one operational medium icebreaker in the Healy and two heavy icebreakers that are non-operational. Compared to our fellow Arctic nations’ capabilities, the U.S. is lacking in this area.
In addition navigational aids and greater communication capability are needed to help establish the Arctic as a viable cruise destination and shipping hub.
I would be remiss if I did not provide an update on the status of the Convention on the Law of the Sea in the United States Senate. As you know, the Treaty has been pending in the US Senate for a number of years now. We had a window of opportunity for its consideration during the Bush Administration but were unable to capitalize.
We are in a similar situation today. The Senate Foreign Relations Committee has held a series of hearings on the Treaty, building strong national security and economic arguments for its passage, but opposition remains among those who are not convinced of the Treaty’s merits and are concerned about its impact on the United States’ sovereignty.
There is hope that we might be able to consider the Treaty following the November elections, and thereby take the politics out of the issue, but that will be dependent upon our ability to demonstrate that the votes are there to make its consideration worthwhile. Senator John Kerry, the Chairman of the Senate Foreign Relations Committee, and I have held a number of one-one-one meetings with our colleagues and there seems to be a greater awareness and understanding of the issue but hurdles remain.
I am concerned that if the Treaty is pushed off yet again into a new Congress, we will have lost valuable supporters of the Treaty, like Dick Lugar of Indiana, and the incoming Senators who take their seats will not necessarily be as supportive, if at all. So if the US Senate does not act on the Treaty this year, I am not optimistic that the Treaty will be taken up again in the near future.
As I conclude my presentation, I would like to offer one last thought. I have spoken on the potential economic benefits that might occur as the Arctic becomes more accessible and increased shipping and resource development becomes reality. But there is another aspect that decision-makers and policy planners should also take into account; the impact of these activities on the indigenous peoples of the Arctic.
Communities in the North depend on the land for sustenance and as a vital part of their culture. Many of these communities are remote, with no road access and fuel costs much higher than more populated areas. Air and water transportation is often unreliable and the only way for these communities to survive is to continue their subsistence traditions of taking food from the ocean – whales, walrus, seals, and fish.
We need to keep in mind the impact that activity in the Arctic could have on this traditional way of life, and in some cases the only way to sustain life. I am glad that we have permanent observers from the indigenous populations here in the Arctic Parliamentarian group and in the Arctic Council as well. It is important for the elected members to be informed of how our decisions will impact their way of life.
With that, I thank you for this opportunity to make this presentation and to be with you today.
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