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GAO forecasts ‘limited’ Arctic activity Agency surveys oil and gas and other industries and finds little to suggest a maritime boom associated with diminishing sea ice Wesley Loy For Petroleum News
The U.S. Arctic is likely to remain a relatively sleepy place over the coming decade in terms of commercial maritime activity, a new report from the Government Accountability Office says.
The report is based largely on interviews with people in several industries: shipping, oil and gas, mining, tourism and commercial fishing.
GAO found that Arctic maritime activity is “expected to be limited for the next 10 years” due to a range of factors such as legal and other complications for oil and gas explorers; cost and risk concerns among shipping companies; and lack of interest in Arctic cruises.
GAO is the audit, evaluation and investigative arm of Congress.
It produced the 51-page report, titled “Maritime Infrastructure: Key Issues Related to Commercial Activity in the U.S. Arctic over the Next Decade,” at the request of several congressional members including Alaska Sen. Lisa Murkowski, who disagrees with the central finding.
Because of climate change, the prospect of greater industrial activity in Arctic waters has been a hot topic in recent years.
While assessments vary, the consensus is that Arctic sea ice is diminishing and will continue to do so through this century, the GAO report says.
This could result in more open Arctic waters and, in turn, more industry.
But GAO interviews with industry suggest we might not see the boom some have supposed, at least not anytime soon.
Reluctant shippers The first industry that comes to mind for making greater use of an ice-free Arctic is shipping. But in interviews with shipping companies, GAO investigators didn’t find much in the way of Arctic plans or interest.
The Bering Strait, which separates Alaska and Russia, is highly important as the gateway between the Pacific and Arctic oceans.
Vessel transits through the strait, both northbound and southbound, rose from 217 in 2008 to 484 in 2012, dropping to 434 in 2013, the GAO report says, citing U.S. Coast Guard data.
The data demonstrate that vessel traffic through the Bering Strait is modest. By comparison, the Panama Canal had 13,660 transits in fiscal year 2013, GAO notes.
Much of the vessel traffic in the Arctic is “destinational,” such as tugs and barges delivering fuel or other goods to villages, or vessels supporting oil and gas exploration.
Trans-Arctic shipping, defined as travel between points outside the polar sea, is modest and looks to remain so in coming years.
The report discusses two trans-Arctic routes: the Northern Sea Route running along the top of Russia, and the Northwest Passage over Alaska and Canada.
Of the two, the Northern Sea Route is favored, as it has less ice. The Northwest Passage isn’t as viable due to its shallower depths, limiting the size of vessels, the GAO report says.
According to shippers and industry associations GAO spoke with, container ship companies aren’t interested in either Arctic route due to factors such as the need for ice-strengthened vessels, which reduce cargo capacity, and potential schedule disruptions.
“A tanker shipping industry representative added that ship captains are not willing to take vessels loaded with oil through uncharted waters, such as those in much of the Arctic,” the GAO report says.
“According to a tanker industry group, only one of its members has transited the Northern Sea Route using an ice-classed vessel; however, other companies are interested in the route’s potential. Tanker companies have not used the Northwest Passage for trans-Arctic shipping,” the report says.
Bulk carriers are somewhat more interested in the Arctic, having completed several Northern Sea Route transits.
Oil and gas outlook GAO notes that major oil and gas companies including Shell, ConocoPhillips and Statoil have shown interest in exploring the offshore U.S. Arctic. Shell actually began drilling two exploratory wells in 2012 and used 25 support vessels, which significantly increased destinational maritime traffic.
But GAO investigators say offshore oil efforts today are “generally on hold,” due to factors such as evolving regulations, legal challenges and mishaps involving Shell drilling assets.
“In the next 10 years, oil exploration activity is expected to be limited and the impact on the levels of maritime traffic appears uncertain,” the GAO report says.
The report highlights the long timeline for any oil and gas production from the Arctic.
“One industry representative we spoke with estimated 10 years or more until oil production can begin,” the report says, adding in a footnote:
“According to the oil industry representative, it could take two to three years for exploration and then two to three years for the permitting process for production. The industry also anticipates a round of litigation over regulatory issues such as environmental impacts. After the permits for production, it would take two to three years to construct the infrastructure, and then production can begin.”
The GAO report offers two other salient points. First, even if oil and gas developments go forward, the maritime traffic impact will be moderated by the expected use of subsea pipelines rather than tankers.
Second, the Arctic ice decline isn’t the main factor driving industry interest in the region.
“According to (Interior Department) officials, factors such as the sustained high price of oil and the identified resource potential of large oil fields were greater factors than the diminishing sea ice. Oil companies are not leasing any new areas offshore that are in any deeper waters or farther north than they did in the 1980s,” the report says.
Mining, cruising, fishing The GAO report surveys several other industries and their bearing on the Arctic maritime environment.
Only one major mine operates in the U.S. Arctic, the Red Dog zinc mine near Kotzebue. It ships out ore through a seasonal, shallow-water seaport.
Two more Arctic mines are on the drawing board — the Ambler copper mine southeast of Red Dog, and a North Slope coal mine.
“The effect of the planned mines on the levels of maritime traffic appears uncertain in the next 10 years,” the GAO report says, noting major infrastructure needs such as roads and a deepwater port.
Regarding cruise ships, the GAO report says “a handful of cruises” sail the U.S. Arctic each year, and cruising the Northwest Passage is expected to appeal only to a niche market of adventure travelers in the next 10 to 15 years.
As for major commercial fishing in the Arctic, federal regulations implemented in 2009 banned it indefinitely.
Murkowski disagrees The GAO report reviews the paucity of Arctic deepwater ports, nautical charts and mapping, icebreakers, emergency response capability, and road or rail links. It spells out various federal and state efforts to address these deficiencies.
The report also suggests that improved Arctic infrastructure might be more of an imperative for politicians and agencies than for industry.
For example, GAO says industry people it interviewed had mixed views about the commercial potential of an Arctic deepwater port, to be located possibly at Nome. Shipping industry representatives indicated they wouldn’t use such a port for trans-Arctic shipping due to high fuel costs and the lack of road or rail connectors.
Sen. Murkowski, in an April 18 press release, said she appreciated the GAO report, but added: “I disagree with the suggestion that our development and activity are not on the rise. Given the substantial lack of Arctic infrastructure, now is the time for the United States to invest in its long-term Arctic future.”
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