Icy Hot | The Race To Develop The Arctic Is Heating Up

Development of oil and gas fields, the use of the Northern Sea Route as the shortest cargo transit route between Europe and Asia and the development of industrial, transport and tourist infrastructure.


https://businessfacilities.com/2016/01/icy-hot/
Development of oil and gas fields, the use of the Northern Sea Route as the shortest cargo transit route between Europe and Asia and the development of industrial, transport and tourist infrastructure.
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Icy Hot: The Race To Develop The Arctic Is Heating Up

Development of oil and gas fields, the use of the Northern Sea Route as the shortest cargo transit route between Europe and Asia and the development of industrial, transport and tourist infrastructure.

Icy Hot | The Race To Develop The Arctic Is Heating Up

If you want a fix on the amount of ice covering the Arctic, the place to go is the National Snow and Ice Data Center at the University of Colorado in Boulder, CO, which has been keeping records on Arctic sea ice since 1979. Next month, the center will conduct its 2016 “winter peak” measurement, which represents the maximum ice coverage at the coldest time of the year. Development of oil and gas fields, the use of the Northern Sea Route as the shortest cargo transit route between Europe and Asia and the development of industrial, transport and tourist infrastructure.

We can safely predict that this year’s number will be lower than last year’s. In fact, the February 2015 winter peak tally for Arctic sea ice—5.61 million square miles—was 425,000 square miles less than the 1979-2000 average, 6.12 million square miles. So the polar ice cap that Santa Claus calls home has shrunk by more than 14 percent since the beginning of the 21st century. Measured in terms of thickness, the deterioration is worse: according to a 2015 research study, average mean ice thickness in the Arctic has decreased from nearly 12 feet in 1975 to four feet in 2012, a 65-percent reduction.

We’re only talking about winter ice here. At the present rate, most of the Arctic ice cap may disappear during summer months before the end of this century.

As the Arctic ice recedes, a herd of developers from nearly a dozen nations bordering the region is gearing up to fill the void with an expanding range of development projects, including tourism and fishing as well as energy exploration. At the conclusion of the World Economic Forum last week, Russian Foreign Minister Sergey Lavrov declared that Russia is eager to mine the Arctic for rubles and prepared to partner with other nations to develop its portion of the Arctic zone.

“We are open to joint implementation of large-scale projects in the region, including the Arctic zone of the Russian Federation,” Lavrov said. “This refers, in particular, to the development of oil and gas fields, the use of the Northern Sea Route as the shortest cargo transit route between Europe and Asia, and the development of industrial, transport and tourist infrastructure.”

The Northern Sea Route referenced by Lavrov already is getting crowded: in 2009, only five cargo ships went through the Russian zone in the Arctic, according to a study by the Council on Foreign Relations; by 2013, that figured climbed to 71. The International Maritime Organization, meanwhile, has yet to adopt an enforceable code for ships operating in polar waters; it expects to have one in place by 2017.

Guggenheim Partners, the Chicago and New York-based global investment giant (with a reported $240 billion in assets), estimates that $1 trillion will need to be invested in infrastructure projects during the next 15 years to support the looming Arctic gold rush with housing, transportation, telecommunications, medical services and other basic necessities. Guggenheim is in the process of putting together an Arctic Infrastructure Inventory that it says will give priority to infrastructure needs that are “socially and environmentally sound for investment and opportunity.”

We’re still waiting for a serious global discussion on the wisdom of ripping fossil fuels out of the Arctic—or whether it really makes sense to develop the Arctic at all—but we won’t hold our breath. That sled already has left the barn, so the pending question is whether the world can agree on a set of ground rules for business expansion into the Arctic.

The good news is that a recently proposed set of guidelines is being embraced as the starting point for negotiations between international players in the Arctic development sweepstakes. Last year, the World Economic Forum convened the Global Agenda Council to create a framework for international business in the Arctic. The 22-member Council team (with members from all of the nations in the Arctic region) last week unveiled a six-point protocol laying out a set of principles for “sustainable business practices” in the region.

Dubbed the Arctic Investment Protocol and drafted with input from scientists, environmental groups and non-political organizations like the Arctic Business Council, the guidelines include building resilient societies through economic development; respecting and including local indigenous communities; pursuing measures to protect the Arctic environment; practicing responsible business measures; consulting scientific and ecological knowledge; and strengthening pan-Arctic collaboration.

The protocol was immediately endorsed by Guggenheim Partners, which helped to draft it. “The Arctic Investment Protocol is an important step forward and a solid foundation upon which to build for the future. It sets a higher standard and allows further advancement of sound practices for sustainable development,” Scott Minerd, Guggenheim’s Global Chief Investment Officer, said in a statement.

Even if a consensus develops around the protocol, the guidelines will be voluntary, like those of last month’s much-heralded Paris Agreement on climate change (nearly 200 nations agreed to the climate-change reduction plan at the COP21 conference in Paris, but the deal left certain emission targets non-binding). Environmental activists already are expressing concern about the lack of specific environmental regulations in the Council’s framework for the Arctic. Greenpeace is threatening court action to block future investors from receiving licenses for new development opportunities on the Arctic frontier, beginning in Norway.

The push to expand human activity into the not-so-frozen North—and to exploit the Arctic’s potential riches—probably is unstoppable. This polar gold rush will be turbocharged by the exponential growth of global population and an intensifying competition for a finite amount of resources. Unfortunately, it will take decades to know for sure whether the development of the Arctic was a very large mistake. By then it may be too late to undo the damage.

Don’t believe us? Just ask the folks in the Amazon rain forest.

 

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