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Oil & Minerals
Offshore oil

From here to indefinitely

Editor’s Briefing | Barack Obama and Justin Trudeau want to make the Arctic free of oil-drilling. The measure they announced on Tuesday makes that happen, if only temporarily to start with
Oil & Minerals
The stopping starts here (File photo: Office of the Prime Minister)

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Did you get caught off guard by Tuesday’s announcement that US President Barack Obama and Canadian PM Justin Trudeau had moved to stop oil-drilling in Arctic waters? We did too. Here’s a rundown of the basics.

What happened?
Messrs Obama and Trudeau issued an order they hope will prevent oil from being drilled in the North American Arctic.

The statement announcing this, released on Tuesday, states: “the United States is designating the vast majority of U.S. waters in the Chukchi and Beaufort Seas as indefinitely off limits to offshore oil and gas leasing, and Canada will designate all Arctic Canadian waters as indefinitely off limits to future offshore Arctic oil and gas licensing, to be reviewed every five years through a climate and marine science-based life-cycle assessment”.

By “vast majority”, Mr Obama is referring to just about everything in US Arctic waters, except 11,000 square kilometres along a portion of Alaska’s coast that is managed by state authorities.

Otherwise, as James Bell, editor or Nunatsiaq News, a Nunavut newspaper, tweeted, there will be “no future oil and gas licencing … Period. Full stop”.

For further reading: Trudeau Joins Obama in Freezing Arctic Offshore Oil Drilling (Bloomberg News)

Can they do that without asking their legislatures first?
In short, yes.

In the US, the case is clear, and comes as th crescendo of a series of statements intended to block offshore drilling. Yesterday’s statement relates to parts of the Atlantic, as well as the Arctic, and follows a decision in November not to sell any offshore licences in US waters between 2017 and 2022.

That decision was issued as a rule, however, which, though time consuming, could have been reversed by the incoming administration, something that the industry expected would happen, given the its positive view of oil-drilling.

Yesterday’s announcement takes things a step further by seeking to place the areas in question out of bounds for good.

In the Canadian case, there is no rule Mr Trudeau can base his decision on, but, initially, it will stick, since licences to operate in the Arctic are issued by the minister of aboriginal affairs and northern development.

In order to secure the decision against it being overturned by an oil-friendly government, the next step will be to build up the specific guidelines that the ban would be held up against during the quinquennial review.

Before that happens, Mr Trudeau is seeking to give his decision a foundation by pointing to the environmental and economic rationale of preventing drilling, and the fact that yesterday’s move builds on a pledge he and Mr Obama made in March to protect 10% of their countries’ waterways.

For further reading: Obama said to use 1953 law to block sale of new offshore drilling rights in much of U.S. Arctic, Atlantic (Arctic Now)

Can’t the measure be overturned by a later president or PM?
In the Canadian case, the matter appears straight-forward: the measure will be reviewed every five years, meaning that factors such as change in political leadership, economic necessity or even improvements in technology that made drilling safe could result in a decision not to extend it.

But, as noted above, such a decision will based on objective guidelines that now need to be drawn up.

In the US, it depends on who you ask. The industry is arguing that Donald Trump, who will replace Mr Obama as president on January 20, could follow the precedent set by George W Bush, who, in 2008, undid a similar move made by Bill Clinton at the end of his term.

Those in favour of the measure are calling it permanent protection. This may be an overstatement. No-one disputes that the law Mr Obama invoked permits him to withdraw areas from licencing consideration, but there is no indication of whether such a move could be reversed. In fact, opponents argue that protecting areas permanently violates the spirit of the legisation.

Both sides have said they will defend their position in the court.

For further reading: Can Trump Reverse Obama's Arctic-Drilling Ban? (The Atlantic)

Are companies that are operating there now going to get kicked out?
This doesn’t appear to be addressed directly, but the first thing to note is that measure relates to “future” licencing, which would seem to indicate that they wouldn’t. More evidence of this being the case is that the Trudeau government has reversed its position and said it will not extend the terms of exisiting licences when they expire.

The second thing to note is that there is a difference between companies that have licences to operate in some form or other, and those that are. Currently there is no active exploration or production in the US or Canadian Arctic. This is due mostly to price, but things like regulation and the region’s challenging weather and geology are also a turn-off to oilmen.

According to Canada’s National Energy Board, several companies have made significant discoveries, but no drilling has been done there in the past decade. Most recently, ExxonMobil and BP suspended their activities there.

Likewise, Shell’s withdrawal from the Chukchi Sea last year means there is no activity in US Arctic waters at present.

For further reading: Shell relinquishes Canadian Arctic drilling rights (National Observer)

What do folks in Alaska and northern Canada have to say about it?
Everyone is surprised, and most, it seems, unpleasantly so.

National lawmakers from Alaska issued a statement attacking both the measure itself and the secretive nature in which it appears to have been drawn up. Bill Walker, the governor, was also critical of the move, saying it robbed the state of an economic opportunity.

Canadian lawmakers from the region, as well as indigenous leaders that oppose the measure, also wondered why they had not been consulted first.

Even those in favour a ban, including Jerry Natanine, the former mayor of Clyde River and the public face of a lawsuit seeking to stop seismic testing in Baffin Bay, were unhappy the statement was so vague.

“Today’s announcement is an important first step. But it says nothing about the seismic blasting that my community is presently fighting against. The Trudeau government must make it clear: there should be no exploratory activity in our Arctic waters unless the Inuit have consented and unless the proposed activity meets rigorous, science-based environmental standards,” Mr Natanine said in a statement.

For further reading: Nunavut, N.W.T. premiers slam Arctic drilling moratorium (CBC North)

What about drilling elsewhere in the Arctic?
Coincidentally, there are news reports that Russian and Norwegian offshore oil exploration will be expanding. Likewise, Greenlandic officials said they had no plans to close off the country’s waters to oil exploration.

For further reading: Oil-hungry Norway expands Arctic exploration (The Independent Barents Observer)

Anything else?
Unfortunately, the discussion about oil has overshadowed other elements of the statement, which announced measures to improve fisheries legislation and to work with Northern populations to develop Arctic shipping lanes. Canada also used the statment as an opportunity to announce a review its education, infrastructure, and economic development policies in the North.

For further reading: United States-Canada Joint Arctic Leaders’ Statement (Office of the Prime Minister)