Tuesday, August 19, 2014

Arctic Maritime Transportation: The Heat is On

By Darren Prokop

The US is an Arctic nation. Alaska makes it so. Government officials as well as shippers and carriers could ignore this fact; but doing so leaves a political and economic vacuum that other nations are looking to fill. If we embrace the challenges and opportunities that await us in our Arctic frontier we can open up lucrative avenues for maritime transportation as well as stake our claim to the wealth to be had there.

The Arctic, much like what used to be called the New World, is coveted by many nations for its perceived riches and for alternative transportation routes. While the Arctic may appear desolate and forbidding one should consider how crowded a region it might become in the future. The US's claim in the Arctic comes from Alaska; but the other Arctic nations are Norway, Iceland and Denmark (via Greenland) as well as Russia and Canada. The latter two are particularly important because the US's 200 nautical miles of sovereignty beyond the Alaska shoreline are adjacent to theirs. Furthermore, Russia can challenge the US militarily and is better capable of asserting itself in the region because of their greater number of icebreakers. Canada's relationship with the US is complicated, too, because of the two nations' dispute over the status of the Northwest Passage.

The Northwest Passage was, and may again become, a sought after shortcut between the Atlantic and Pacific Oceans. The great powers of Europe wished to find a northern shortcut to the Far East. Many died trying to find it. However, famed explorer Roald Amundsen discovered a navigable route in 1906. While most of the route Amundsen took is less susceptible to year-round ice than the alternative route farther north, his route is not amenable to today's deep draft tankers and container vessels. Nonetheless, the distance savings using this more northern route is considerable should these waters become viable in the summer. For example, the Port of London to the Port of Tokyo is: 15,000 miles via the Panama Canal; 13,000 miles via the Suez Canal; while only 8,500 miles via the Northwest Passage.

Before the Trans-Alaska Pipeline was announced in 1973 serious thought went into transporting Prudhoe Bay oil to the US East Coast via the Northwest Passage. Canada and the US disagreed on the status of the Northwest Passage (and indeed all the waters between Baffin Island and Banks Island). The issue became dormant after the pipeline was built; but as the polar ice recedes and the Arctic nations consider their options the Northwest Passage will become a point of discussion (perhaps even contention). Matters are complicated for the US and Canada because the US is the only Arctic Nation which is not a signatory to the 1982 United Nations Convention on the Law of the Sea (UNCLOS). Canada considers the passage to be sovereign to itself while the US considers the waters to be an international strait giving it the right of passage without Canada's approval. Of course, if the US presses that view too far it could not block countries like Russia or China from traversing in the same way. So it may be best, commercially and militarily, if the US and Canada reached their own negotiated settlement.

Extending beyond what is known as the contiguous zone under UNCLOS to a point 200 nautical miles from the baseline is a country's exclusive economic zone (EEZ). The country cannot prohibit legal passage of vessels and loitering; but it does have sovereignty over the water column and continental shelf (which includes mining and oil exploration). Beyond a country's EEZ are the high seas (or international waters) where no country has exclusive control; however, if the continental shelf does extend beyond 200 nautical miles the country may appeal to the United Nations for an extension. Obviously, when two countries' EEZs overlap disputes can occur. The Magnuson-Stevens Fishery Management and Conservation Act (1976) – establishing a US EEZ of 200 nautical miles – comports with UNCLOS in that area at least. The main implication of the US not recognizing UNCLOS is that disputes with signatory countries in the Arctic are harder to solve since the US vis-à-vis Canada, the European Union, Russia, etc., are not appealing to the same body of law. For example, as the Northwest Passage becomes a more viable trade route, these disputes may become more pointed in the coming decades. Basically, bilateral negotiations will have to occur. However, the UNCLOS countries and the US all have incentives to explore and map their respective continental shelves into the Arctic. This is because the region, according to the US Energy Information Administration, is estimated to contain 22 percent of the world's untapped natural gas and 13 percent of its conventional oil. Combine this with the potential use of the Northwest Passage and one can understand why China (hardly an Arctic nation) is showing a keen interest in the area.

Whether it be military exploration or commercial transport, a realistic Arctic strategy requires the use of icebreakers. Despite our status as a superpower our ability to explore and project force in the Arctic is supported by only two operational icebreakers (thePolar Star and the Healy). Icebreakers are necessary in order to navigate through the thick and unpredictable ice floes encountered within the Northwest Passage – even in summer. In other words, a retreating permanent ice cap may bring about more navigable waters but at the price of more ice volatility. Whether the US chooses to build more icebreakers or buy them from other countries (though unlikely given the Jones Act) the investment will have to be in the multiple billions of dollars if the demand for commercial transportation grows.

On top of this the US and Canada have yet to resolve a border dispute in the Beaufort Sea. Naturally, the result will determine ownership of its potential energy resources. So the heat is on; but this heat may just be the impetus our federal government needs to get serious about the Arctic in general, and the Northwest Passage in particular, and thereby deal with the aspirations of its other Arctic neighbors.

Just like transportation was critical in exploring the New World so shall it be with the Arctic. Unlike the clashes that occurred among the European powers over wealth and status within the New World, UNCLOS provides a framework within which a discussion can take place. Of course, the US can opt for bilateral negotiations. Perhaps the receding polar ice also reminds us that the region, though potentially wealthy, is also fragile.

Darren Prokop is a Professor of Logistics with the College of Business & Public Policy at the University of Alaska, Anchorage. His latest book, The Business of Transportation, is available from Praeger Publishers.