Canada, U.S. to ban offshore oil and gas licences in Arctic waters
Dan Healing, The Canadian Press
Published Tuesday, December 20, 2016 4:29PM EST
CALGARY -- The federal government announced Tuesday plans to ban offshore oil and gas licensing in the Arctic, citing the need to protect the environment from future energy development, but the move was largely dismissed by industry observers as a weak gesture that won't harm their interests.
The measure was part of a joint announcement with the U.S., which designated the bulk of its federally controlled waters in the Arctic Ocean and certain areas in the Atlantic Ocean as indefinitely off-limits to future oil and gas leasing.
Prime Minister Justin Trudeau said Canada's ban is intended to ensure a sustainable Arctic economy, preserve the region's ecosystem and prevent future risks associated with offshore oil and gas activity -- goals that earned applause from environmental groups such as Greenpeace and the World Wildlife Fund.
But experts pointed out that there are no drilling plans in the region now, suggesting that the ban is of little consequence.
Michael Byers, a University of British Columbia professor who recently published a book called "Who Owns the Arctic?", said the only surprise in Ottawa's announcement is that it provides for a five-year review.
Byers said the move seems to be politically motivated and is designed to show that Trudeau is protecting the environment despite a recent decision to sanction two oil pipelines -- the Trans Mountain expansion and Line 3 replacement project.
"Closing the door to Arctic oil and gas helps to position himself on the climate change file by saying that there are limits in terms of the development of new oil and gas fields, therefore drawing a line in the sand from a climate change perspective," he said.
"There's no activity taking place in the Canadian Arctic right now, so saying 'No' doesn't require anyone to stop."
Last year, Imperial Oil applied to extend the expiry date on its licences to drill in the Beaufort Sea off the Northwest Territories from 2020 to 2028, citing insufficient time to conduct technical work and complete regulatory processes.
Byers said the federal ban means the Imperial licences can simply be allowed to expire, likely without liability for the federal government.
Imperial Oil spokeswoman Killeen Kelly said the company would not speculate on whether it would seek compensation for its licences if they aren't extended.
The last oil well drilled in the Beaufort Sea off the Northwest Territories was completed in 2006 by Devon Canada.
Chris Seasons, who was president of the company at the time, said Tuesday's decision to close the Arctic to drilling may hurt companies with interests there in the long run, but won't cause any immediate pain.
"People always like to have the maximum number of options available as technology changes and as views change on the commerciality of some of those resources, but I don't think it has a big impact on Canadian companies at this juncture," Seasons said.
He said other companies made discoveries in the Arctic in the 1970s and 1980s, but those resources can't compete for investment because they are less environmentally risky and much closer to consumer markets.
Byers said oil and gas production in the Arctic doesn't make sense economically or environmentally, estimating that benchmark U.S. oil prices would have to triple to above US$150 per barrel to make oil from the region profitable.
He said the extremely short drilling season represents a huge and costly risk for companies that explore there, adding that transportation is a "nightmare."
Trudeau also said his government will encourage the use of energy efficiency measures and renewable power in an effort to reduce reliance on diesel in Northern communities.
The Canadian and U.S. governments said they are launching processes to identify sustainable shipping lanes throughout Arctic waters, including the Beaufort and Chukchi Seas.
