Canada puts the Arctic "in a snow globe" by freezing the development of oil and gas – just as Norway and Russia accelerate


What follows is the second part of the Northern Exposure, a three part series that examines how a heated Arctic opens the Northwest Passage and economic opportunities, but also creates headaches.

The 49-hour trip from FortisBC's liquefied natural gas facility in Delta, British Columbia, to Inuvik, Northwest Territories, is not for the faint of heart as it passes through mountain passes and frequent avalanche areas.

Despite the 3,615 km distance and risks, the trucks that transport liquefied natural gas from the south of Bahia. routinely make the arduous trip to supply the 3,000-person Inuvik, an Arctic outpost near the Beaufort Sea with fuel for power generation.

An increasing number of remote communities in northern Canada are using LNG as an energy source, as it is cheaper and less emission-intensive than diesel, which is still widely used.

In the eyes of the government of the Northwest Territories and the energy industry, it is painfully ironic that the Beaufort Sea contains an estimated 56 trillion cubic feet of natural gas and 8 billion barrels of oil while remote communities like Inuvik, Iqaluit and many others depend of LNG. or diesel sent from southern Canada to power.

"We are transporting LNG all the way from Delta to burn it at Inuvik," said Premier Bob McLeod of Northwest Territories calling the situation a missed opportunity.

Inuvialuit Regional Corp. president Duane Smith has called in recent months for the development of the Beaufort Sea so Inuvik and neighboring Tuktoyaktuk can generate their own gas power instead of importing it from the south.

Northwest Territories Premier Bob McLeod says the lack of energy development in the region is a missed opportunity.

Bill Braden / The Canadian Press

The IRC did a feasibility study on drilling wells in the region and Smith said some wells show potential.

Overall, onshore and offshore oil and gas development in northern Canada has stagnated in recent years thanks in part to declining oil prices and abundant supplies in less expensive regions such as Alberta and BC A federal moratorium on new permits offshore in the Arctic in 2016 ensured that drilling activity in the region virtually ceased.

Jessica Shadian, president and chief executive officer of the Arctic 360 and a professor at the Munk School of Global Affairs at the University of Toronto, said there is resentment in the territories that part of Ottawa's response to climate change, trying to put the North "in a snow globe" that "a group of people in southern Canada can feel good about it."

Shadian's group is trying to educate Bay Street investors and banks about economic opportunities in northern Canada, which it says are huge.

"You have to understand Alaska, Canada and Greenland as an emerging economy," she said. At the moment, however, "Bay Street knows nothing about the Arctic."

Bay Street knows nothing about the Arctic

Jessica Shadian, CEO of Arctic 360

In addition, she said institutional investors would not fund projects in Canada's territories – despite existing opportunities – until the federal government adopts a long-term vision for territorial economic development, including energy development.

"We do not have a long-term strategy," Shadian said of the Ottawa approach. "I would not say that the federal government thinks of the North as an economic opportunity and as something that should be paying attention and investing in Canada's long-term future."

The Arctic inactive state in Canada is incipient as the United States is trying to encourage businesses to resume exploration in Alaska, and other Arctic countries, such as Russia and Norway, are actively developing their borders to the north, despite concerns with climate change and the melting of sea ice.

"We go to other countries and the Arctic is a kind of economic generator of them. We're optimistic where we're going to end up, "said McLeod of N.W.T.

McLeod expects energy investments to return to their territory in the coming years, especially as Ottawa has agreed to restart negotiations on co-management of natural resource development with the territory.

An oil and gas facility on the edge of the Beaufort Sea in Alaska.

Damon Winter / The New York Times

"Certainly, our GDP on the development side of resources has decreased by more than $ 1 billion – that's almost 25 percent (of the total territory)," he said.

Reversing the trend will be a challenge.

Even before the moratorium, oil and gas activity was declining in the region for years. There have been more than 100 wells drilled in the Beaufort Sea since the 1970s, but only one well has been drilled in the last 20 years. In the same way, 140 wells were drilled in the Sverdrup Basin in the waters between N.W.T. and Nunavut, which contains about 49 trillion cubic feet of natural gas, but there are no new wells in the last 20 years.

Major operators Imperial Oil Ltd. and BP Plc announced in 2016 that they would indefinitely suspend development at Beaufort. Imperial and Royal Dutch Shell also divested a partnership to build the $ 16 billion McKenzie Valley gas pipeline last year. Imperial had also closed down in Norman Wells, N.W.T. almost two years, but have since resumed production in the region.

Imperial declined to provide its investment plan for the region.

The federal moratorium on new exploration licenses is discouraging any investment in the region, according to Paul Barnes, director of the Canadian Association of Petroleum Producers, Atlantic Canada and Arctic.

"If you work with your current exploration and find (oil) licenses, then you need to know that you can develop them," Barnes said, but noted that the moratorium told oil companies that they might never be able to develop exploration blocks.

To complicate the problem, Barnes noted that there are abundant oil and gas sources in other regions of Canada, where operating costs are generally lower, making investment in the Arctic less attractive to business.

"Why produce something in the north when you get a lot cheaper all over the rest of Canada and the US?" Barnes said, but argues that there may still be potential for export projects in northern Canada.

The complete lack of activity in Canada contrasts with what is happening in Russia, Norway and even the United States, Barnes said.

"We are still seeing investments in the Arctic region, but not in Canada at the moment," Barnes said.

Russia, where Moscow sees climate change as an economic opportunity to open new shipping routes, currently generates nearly 20 percent of its gross domestic product from the Arctic region, largely thanks to its huge Yamal LNG three-train facility. .

Earlier this month, Russia said it plans to invest $ 82 billion in regional infrastructure and natural resource development in the Arctic over the next five-year plan.

A sample of crude oil drops into a bottle for laboratory testing at a factory in Russia. oil producers in each country increasingly need to look for remote regions in the Arctic to increase production.

Andrey Rudakov / Bloomberg

The Norwegian government has a clearer view of the sea ice melt and has implemented carbon taxes, carbon sequestration technologies and other emission limiting technologies but is still actively developing its northern gas resources as its legacy production decrease.

The country's Snohvit – Norwegian for "Snow White" – natural gas field and LNG export facilities are active off the north coast of the country.

In June, the Norwegian parliament approved the development plan for the Johan Castberg oil project in Arctic waters in the Barents Sea at a cost of $ 6.1 billion, scheduled for the first oil by 2022, according to state company Equinor ASA. previously known as Statoil).

As US policy on climate change swept former President Barack Obama to incumbent President Donald Trump, the US relaxed its own moratorium on offshore oil and gas exploration and the country is now actively encouraging companies to return to the Arctic .

But the new wave of energetic activity in the Arctic has alarmed environmentalists, who believe the north is particularly vulnerable and in a state of flux with the sea ice melt as global emissions continue to grow.

"The risks and potential impacts associated with the development of offshore oil and gas may be unacceptably high and are incompatible with the climate commitments of Paris," said Simon Walmsley, senior specialist at the World Wildlife Fund for Arctic sustainability, in an e-mail .

"All Arctic nations need to realize that the exploitation of oil and gas in this unique and vulnerable part of the world will make it impossible for us to fulfill our commitment to maintain the global temperature rise by 1.5 degrees," he said.

The exploitation of oil and gas in this unique and vulnerable part of the world will make it impossible for us to fulfill our commitment to maintain the global temperature rise by 1.5 degrees.

Simon Walmsley, World Wide Fund for Nature

Climate change is a real concern in Canadian territories, where sea ice melt is readily apparent.

"This is absolutely real and dynamic, but at the same time people and governments are struggling with things they need to balance," said Roger Epp, a professor of political science at the University of Alberta and director of UAlberta North.

Territorial governments are seeking opportunities for economic development and employment in their regions and do so responsibly.

"Resource saving has certainly been a big booster," Epp said of northern Canada's economy, "but I think the debate has been like the next economy looks like?"

N.W.T. Prime Minister McLeod expects negotiations to resume with Ottawa earlier this year, and the federal government, after years of delays, will present its 30-year vision for the development of the Arctic.

"We see the effects of climate change on a daily basis and we feel we are doing our part," McLeod said.

"All we want are some opportunities to work and feed our families and have some opportunities for our children," he said.

He is also hopeful that the vision will include lifting the moratorium on oil and gas activity.

"The industry looks at us and says," Look, they're imposing a moratorium on oil and gas, a moratorium on mining will not be far behind, "he said.

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