Security In 21st Century Arctic - Claudia McMurray

Claudia A. McMurray
Assistant Secretary for Oceans and International Environmental and Scientific Affairs
Remarks at the International Conference
Tromso, Norway

Emerging from the Frost: Security in 21st Century Arctic

I thank the Norwegian Institute of Defence Studies for inviting me to this charming city for this very timely conference. As "the gateway to the Arctic" Tromso highlights our challenge to protect this unique place in the face of unprecedented and fast-moving changes.

The Arctic is one of the last and most extensive areas of wilderness, a vast ice-covered area with complex and fragile ecosystems that are teeming with life - from fish, whales, and seals, to caribou, polar bears, and birds - that will be affected by any changes to the Arctic's delicate environmental balance.

Just last week, the New York Times and other media reported that the cap of floating sea ice on the Arctic Ocean shrank more than one million square miles - or six times the size of California. This study, conducted by the National Snow and Ice Center in Colorado, reflects many studies that are showing greater warming in the Artic than in the rest of the world.

Although the patterns of melting are still not fully understood, the study's authors indicate that, "you can't dismiss this as natural variability."

As we gain greater understanding of how warming and the human footprint may affect the environment and ecosystems in the Arctic, it is also clear that these changes - the loss of ice and opening of previously inaccessible areas - also provide new opportunities for energy exploration in the region.

These opportunities come at a time when the nations of the world confront the challenge of securing sufficient, affordable, and reliable supplies of energy for their populations, while at the same time sustaining the current high rate of global economic growth, expanding access to energy in the developing world, and meeting climate change and other environmental goals.

In the United States we believe that through international cooperation we can develop and implement a wide portfolio of near, medium, and long-term measures to successfully meet this challenge.

We believe that international engagement on the energy issues is not only critical to U.S. energy security, but also to that of every nation.

And we believe that energy security is not a zero-sum game, but that in fact, no nation's energy security can be had at the expense of any other.

President Bush has presented a vision for energy security that begins at home, with actions the United States must take domestically. This vision also guides our international energy policy.

Our policy focuses on diversity of energy sources and wise management of energy demand. For example, a centerpiece of the President's plan is to reduce America's gasoline usage by 20 percent in 10 years.

To achieve this, the United States is working to diversify the fuels we use to power our cars and trucks by increasing the use of renewable biofuel, in the form of ethanol, and to use energy more wisely by setting higher standards for automotive efficiency.

We're moving forward on battery research for plug-in hybrid vehicles that can be powered by electricity from a wall socket, instead of gasoline.

We're conducting research on hydrogen-powered vehicles that emit pure water instead of exhaust fumes. We're taking steps to make sure these technologies reach the market. And we're setting new mandatory fuel standards that require 35 billion gallons of renewable and alternative fuels by the year 2017.

The President's plan calls for the United States to double the size of our strategic petroleum reserves and increase our production of domestic oil supply in environmentally sensitive ways. We think doing so will reduce, over time, our nation's oil import dependency and increase our energy security.

The United States' international energy security strategy seeks to promote abroad the President's vision for energy security at home. It supports:

* greater diversity of energy sources, like alternative fuels (including biofuels) and clean coal;

* energy efficiency and conservation through technology, international partnerships, and market pricing;

* a diversity of secure and reliable energy supply routes, and;

* a diversity of energy suppliers working in an open, competitive, and transparent energy marketplace.

The world community faces an unprecedented set of challenges in global energy that makes our energy security objectives more difficult to achieve. These include:

* tight global supply and demand balances;
* geopolitical challenges in major oil production centers;
* exploding global economic growth driving greater energy use; and
* our shared concern over the global environment.

Global energy markets are being shaped and strained by unprecedented economic growth in Asia. Natural gas, oil and coal demand are expected to rise faster in East and South Asia than in any other region in the world. If the forecast growth rate of 3.0% annually is maintained, oil demand in the region will roughly double by 2025.

Many of the world's major oil producing regions are also locations of geopolitical tension, and possibilities exist of unexpected supply disruptions. Instability in producing countries is the biggest challenge we face, and it adds a significant premium to world oil prices.

Concurrently, we are faced with the rise of what is often called resource nationalism, where consumer countries attempt to "lock-up" upstream assets in the pursuit of a false notion of energy security, and where producer countries reject much needed foreign investment and expertise in the face of declining production levels.

Roughly two-thirds of the world's oil and gas reserves are in countries that provide limited access or are completely closed to foreign investment.

National oil companies own about 50 percent of the world's proven oil reserves. And we are seeing increasing instances of manipulation of resources in countries with large resource bases. Examples include: further limiting access to resources for commercialization; renegotiating contracts or even outright expropriation of assets; renationalizing assets; and cutting off supply.

Because of these factors, prices have more than tripled since 2002, and in the last few days have reached record highs, over 84 dollars a barrel. And we don't project much change in this in the near future because the uncertainties I've mentioned will likely still be with us and demand will most certainly increase.

As a result of all these factors, the Arctic region is set to play a major role in the world's future energy security. The United States Geological Survey estimates that the Arctic could be home to more than 25 percent of the world's undiscovered reserves of oil and natural gas.

That said, most would agree that the question is not if the world will extract those reserves, but instead, "How can we do so in an environmentally sustainable and socially responsible way?"

The Arctic poses many difficulties in this regard.

Because of the harsh conditions and expense of operations, there have only been 35 wells drilled in the Alaskan Beaufort and Chukchi Seas. This is a small area tested compared to the size of the area that has been available to lease. The oil and gas industries are working hard to overcome some of the barriers to drilling.

In shallow waters, for example, industry has developed bottom founded drilling platforms that can provide for a year round drilling program.

To address concerns about noise from drilling operations during the short open water season, the Department of the Interior's Minerals Management Service - the federal agency that manages the U.S.'s natural gas, oil and other mineral resources on our outer continental shelf - is involved in several studies to find ways to lessen the sound transmission from drilling structures and seismic noise.

Arctic projects face technical, environmental, regulatory and legal challenges because offshore activities are considered new and unproven. There is currently only one Outer Continental Shelf development project, called Northstar, which took 19 years from discovery to first production.

Northstar faced several challenges to reach production. It was the first stand-alone island production facility in the Alaskan Arctic. It was developed with no road support so the staging of material to the island was a scheduling and logistics challenge.

Moving the oil to market required the design, installation and operation of the first sub-sea pipeline to be installed in the Arctic. Concerns about leak detections led to the installation of a leak detection system, which was also a first for the Arctic.

The Minerals Management Service maintains an ongoing research program to address the improvement of safety and the development of new technology for use in the Arctic and elsewhere in the ocean environment. These research efforts are available to the public on the Service's website.

Future exploration and development activities must be done in a manner that is responsible and respectful to the rich and diverse ecosystem and local native culture.

The Minerals Management Service will continue to work with industry and local communities to ensure that these issues are taken into account, and that local concerns relating to subsistence activities, spill prevention, and clean-up capabilities are addressed in a way that allows operations to proceed.

This effort includes:

* providing opportunities for local residents to actively participate in the operations as marine mammal observers to protect against injury to whales in the area;

* providing for conflict avoidance agreements with subsistence users to alleviate unintended interaction between the operators and the subsistence users; and ensuring that local concerns regarding oil spill response and clean up capabilities are addressed.

Future development in the near-shore Arctic environment will make use of ultra-extended reach drilling - drilling where the onshore facility drills down and then out horizontally sometimes as much as 3-5 miles across.

BP is currently planning the development of the Liberty Field using ultra extended reach drilling. They propose to extend the reach of this type of drilling to over 40,000 ft horizontal departure.

The United States will continue to both share and seek best practices with, and from, our international partners on these and other projects.

Next month, in fact, the United States will sponsor the Arctic Energy Summit's Technology Conference to work together with other Arctic Council nations on the best solutions to the unique set of environmental, social, and technical challenges of energy extraction in the region.

The Arctic Energy Technology Conference will take place October 15-18 in Anchorage, Alaska. It will provide a forum for international, interdisciplinary experts to present research and discuss the Arctic as an emerging energy province.

Topics to be covered at the conference include extractive energy development, renewable and rural energy, and environmental, socio-economic and sustainability impacts of energy use in the North. I encourage representatives from all of the Arctic Council nations to attend.

And speaking of the Arctic Council, the United States is pleased to be a partner with Norway to lead the Arctic Council's assessment of the potential effects of oil and gas activities in the Arctic.

At their 2004 Ministerial meeting in Reykjavik, the Arctic Council Ministers asked the working group, the Arctic Monitoring and Assessment Program, to assess the effects and potential effects of oil and gas activities in the Arctic. This assessment updates and expands on earlier reports.

The assessment will be completed in early 2008 and will include a comprehensive history and projected near-future for oil and gas activities, including:

* past practices modern practices technology developments regulatory systems monitoring and research oil spill response capabilities and a full inventory of Arctic leasing and licensing, seismic data collection, exploration and development drilling, and production volumes.

In addition, for the first time, such an assessment will survey the socioeconomic effects of the wide range of oil and gas activities on local and indigenous populations.

We are fortunate to have strong international partnerships through organizations such as the Arctic Council. The Council, and conferences like this one, provide opportunities for countries with territory in the Arctic to meet and find common solutions and air concerns about the challenges I've mentioned.

Let me in concluding raise a few other challenges that affect our search for energy in the Arctic.

Determining the limits of the continental shelves of the five countries bordering the Arctic Ocean and settling the boundaries between them will be resolved through the provisions established under the Convention on the Law of the Sea and through bilateral negotiations between neighboring countries.

Two days from now the U.S. Senate Foreign Relations Committee will hold a hearing on U.S. accession to the Convention, a step President Bush has long urged and strongly supports. We are hopeful that the Senate will finally give swift approval to U.S. accession.

A U.S. Coast Guard icebreaker, The Healy, recently returned from a four-week cruise that mapped a portion of sea floor on the northern Chukchi Cap.

The Healy did not encounter a significant ice pack at any point in its journey, and the bright blue multi-year ice and former pressure ridges were visibly disintegrating. In fact, the Healy was scheduled for an "ice liberty" where the ship would stop so those onboard could experience Arctic ice first hand, but the ship never encountered a piece large enough to do so.

In previous trips, the Healy would hit an ice pack too difficult to break through, forcing it to try a different route, or in one case to float with the pack until it could break free. This year it was unimpeded, and collected more than three times the data and ventured much farther north than originally planned.

These observations by the Healy are consistent with other observations and predictions of ice melting in the Arctic Ocean. Warming in the Arctic in and of itself is a concern. But the loss of ice also opens up shipping lanes previously inaccessible, and this raises issues, such as:

Navigational rights - Ensuring that the Arctic remain open to international oil companies. International oil companies are the world's most efficient producers of oil and gas, and they are the only companies that have the critical technology experience needed for this challenging environment.

Promoting contract sanctity. Projects have long investment recovery time frames, so stable dependable investment terms and regimes are vital for international oil companies.

The world will soon need the vital resources that the Arctic provides. It is important that we work together to provide them efficiently, sustainably, and cleanly.

It is also critical that we avoid unhelpful sovereignty conflicts and nationalistic policies, and ensure open and transparent investment opportunities for all companies.

William Shakespeare wrote: "One touch of nature makes the whole world kin." This summarizes neatly why we are here at this conference.

We are here because we are all bound together on this planet we share, and together we must work to ensure its future. The issues calling for our action today must be solved by a global community working toward common global interests.

This will be our goal and challenge in the months ahead. Thank you.

ENDS

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