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September 2008

Vol. 13, No. 36 Week of September 07, 2008

Canada’s Arctic aim

Harper pushes control of north; money for mapping, military, icebreaker

Gary Park

For Petroleum News

A C$100 million Arctic geomapping program, northern military training exercises, tougher rules for foreign ships plying what Canada deems to be its sovereign Arctic territory and a new C$720 million Coast Guard icebreaker — they’re all part of Canada’s strategy to assert its claims to Arctic waters and resources.

In a three-day swing through the Northwest Territories and the Yukon, Prime Minister Stephen Harper rolled out his long-promised plan to “control the North” as a first step to spur greater oil, natural gas and mineral exploration of the region.

The timing is no accident either, with Harper girding for a possible federal election battle in October, when the future of the Arctic is likely to be a major campaign issue with wide appeal to Canadians who see the Arctic as part of their birthright.

Mapping a 5-year exercise

The five-year mapping exercise, first announced in the 2008 budget, when only C$34 million was earmarked for the program, will involve researchers on the ground and state-of-the-art aircraft with specialized sensors gathering data on the geography of the northern territories.

The information will be used to create geological models of the Arctic and subterranean maps that will help resource firms find the “treasures buried there,” Harper said.

“We know from a century of northern resource exploration that there is gas in the Beaufort Sea, oil in the eastern Arctic and gold in the Yukon,” he said. “There are diamonds in Nunavut and the Northwest Territories and countless other precious resources buried under the sea, ice and tundra.

“But what we’ve found so far is merely the tip of the proverbial iceberg.”

Using his popular refrain, Harper said the first principle of Arctic sovereignty is “use it, or lose it.”

“To develop the North we must control the North. And to accomplish all our goals for the North, we must be in the North,” he said.

Private exploration expected

Natural Resources Minister Gary Lunn said the program is expected to initially generate C$500 million worth of exploration by private companies for new energy and mineral resources.

The announcement dovetails with the launch of a three-week joint United States-Canada scientific expedition, in which U.S. Coast Guard icebreaker Healy and Canadian Coast Guard icebreaker Louis St. Laurent (due for decommissioning in 2017 to be replaced by a vessel named after former prime minister John G. Diefenbaker) will explore the Beaufort using seismic technology to map the ocean bottom.

Meanwhile, a U.S. expedition to define the limits of the U.S. continental shelf is due to return Sept. 5 from offshore Alaska.

The Healy has been mapping out the foot of the slope, which has a depth of 2,500 meters, creating a 3-D map of the seafloor in the Chukchi Gap.

Its second research trip, in collaboration with Canada, “again demonstrates a commitment to reaffirming Canada’s sovereignty in the North,” Lunn said.

“Mapping Canada’s High Arctic, in addition to our other significant investments in the North, is ultimately about turning potential into prosperity for this remarkable region and for our country as a whole.”

He said Canadian researchers have conducted surveys and gathered geological data about the extent of the continental shelf to stretch Canada’s territory beyond the current 200 nautical miles, potentially adding up to 680,000 square miles.

Despite the regional disagreements between Canada and the US, with Canada insistent the Northwest Passage is an internal waterway, the expedition is seen as a key aspect of the grab for Arctic stakes by the U.S., Canada, Russia, Norway and Denmark.

Raising the ante another notch, Canada started Arctic military training efforts Aug. 25.

Operation Nanook is laying the groundwork for a possible future deployment as international marine traffic hopes to take advantage of an ice-free Northwest Passage.

Pollution act to be extended

Harper, in disclosing Canada’s plans to require ships entering Canadian waters to notify Canadian Coast Guard authorities, conceded his plan could run afoul of opposition from other countries, notably the U.S. which does not recognize Canada’s claims to the passage.

“It’ll be interesting to see,” he said. “I expect some countries may object.”

But he argued it is in the interests of every country to ensure “there is some kind of authority in the areas, some kind of environmental and commercial authority. We have no particular power play here.”

Harper said his government will also introduce legislation to extend the enforcement zone of the 1970 Arctic Waters Pollution Prevention Act, which prohibits ships from dumping waste.

“These measures will send a clear message to the world: Canada takes responsibility for environmental protection and enforcement of our Arctic waters,” he said.

Harper warned that an increase in international shipping through the Arctic raises the prospect of accidents, smuggling, illegal immigration and “even threats to national security.”

“It would be desirable if the United States and Canada resolve the territorial disagreements we do have (notably the offshore boundary in the Beaufort),” he said. “That said, all of these disagreements are completely manageable.”

Harper said Canada’s new jurisdictional rules will embrace the full extent of its exclusive economic zone as recognized by the United Nation’s Law of the Sea conventional, which the U.S. has not signed.





Harper a Mac believer

Canada’s Prime Minister Stephen Harper is confident the Mackenzie Gas Project will go ahead, but he offered nothing in the way of money for infrastructure to speed up the drawn-out approval process during a visit to the Northwest Territories on Aug. 28.

“I’m optimistic in the not-too-distant future that this project will come to fruition,” he told a news conference in Tuktoyaktuk.

“I actually am more optimistic about this project coming to fruition than I have been probably at any time in my life,” he said.

And when Canada does reach the go-ahead stage that will “lead to a whole series of infrastructure developments.”

Harper said the Mackenzie Gas Project means more to Canada that just a commercial gas project.

“It is ultimately about opening up a region of the country in a way that it has not been opened up before and of establishing our economic reach and sovereignty in a way that has never been done before,” he declared.

One of the biggest obstacles standing in the path of the MGP is an agreement between Harper’s government and the project partners on the fiscal terms for shipping gas from the Mackenzie Delta to southern Canadian and United States markets.

Harper offered nothing new on where those talks stand or whether a deal is possible before a final report on the environmental and socio-economic impacts of the MGP is released.

Complex regulations an issue

Pierre Alvarez, president of the Canadian Association of Petroleum Producers, said the federal money being spent on the mapping program will not address the more fundamental issues standing in the way of Arctic oil and gas exploration.

He said the complex regulatory process in the North, especially in the Northwest Territories, has done more than anything else to restrain spending in the region.

“There is great interest in going north, but at this stage the policy and regulatory environments are slowing it down,” Alvarez said.

“Companies would be quite happy to invest in the North, but if you look at the amount of land sales and activity going on in northern British Columbia and Alberta, it simply stops at the 60th parallel.”

He noted that the MGP co-venturers have spent years and millions of dollars seeking regulatory approvals without getting a final verdict.

“We’ve had eight major oil pipeline projects announced since May 2001,” he said. “All of those have been approved by the regulators and are either in service or under construction. Over the same period we still don’t have a decision on the Mackenzie Valley pipeline.”

Dave Nickerson, a former northern politician who sits on the boards of several mining companies, said geological mapping is welcome, “but a dysfunctional regulatory system if driving away investment in the North. So my top priority would be to deal with that.”

Alaska closing gap

Northwest Territories Premier Floyd Roland, concerned that an Alaska gas pipeline is fast closing the gap on the MGP, said the Canadian and NWT governments may open the door to private-sector partners to build a toll highway up the Mackenzie Valley to trigger northern resource development and possibly lower costs for the Mackenzie pipeline.

“We’ve got to keep the momentum of the (Mackenzie) project going,” he told the Globe and Mail.

Industry Minister Jim Prentice hinted to reporters the Canadian government could have fiscal arrangements with the MGP partners in place by spring 2009.

Roland said the MGP remains ahead of the Alaska undertaking in terms of licensing and approval, but that lead is narrowing.

He said a toll highway could shrink the capital outlay, but noted that the MGP’s corporate partners are worried about the impact of any further regulatory delays now that the Canadian government has turned over responsibility for land and water-use permits to aboriginal communities under land claims settlements.

—Gary Park


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