Melting polar ice caps heat up industry, spark debate

By CLIFFORD KRAUSS, STEVEN LEE MYERS, ANDREW C. REVKIN and SIMON ROMERO
The New York Times

CHURCHILL, Manitoba, Oct.10 -- It seems harsh to say that bad news for polar bears is good for Pat Broe. Broe, a Denver entrepreneur, is no more to blame than anyone else for a meltdown at the top of the world that threatens Arctic mammals and lends credibility to dark visions of global warming.

Still, the newest study of the Arctic ice cap - finding that it faded this summer to its smallest size ever recorded - is beginning to make Broe look like a visionary for buying this derelict Hudson Bay port from the Canadian government in 1997. Especially at the price he paid: about $7.

By Broe's calculations, Churchill could bring in as much as $100 million a year as a port on Arctic shipping lanes shorter by thousands of miles than routes to the south, and traffic would only increase as the retreat of ice in the region clears the way for a longer shipping season.

With major companies and nations large and small adopting similar logic, the Arctic is undergoing nothing less than a great rush for virgin territory and natural resources worth hundreds of billions of dollars. Even before the polar ice began shrinking more each summer, countries were pushing into the frigid Barents Sea, lured by undersea oil and gas fields and emboldened by advances in technology. But now, as thinning ice stands to simplify construction of drilling rigs, exploration is likely to move even farther north.

Last year, scientists found tantalizing hints of oil in seabed samples just 200 miles from the North Pole. All told, one quarter of the world's undiscovered oil and gas resources lies in the Arctic, according to the United States Geological Survey.

The polar thaw is also starting to unlock other treasures: lucrative shipping routes, perhaps even the storied Northwest Passage; new cruise ship destinations; and important commercial fisheries.

"It's the positive side of global warming, if there is a positive side," said Ron Lemieux, the transportation minister of Manitoba, whose provincial government is investing millions in Churchill.

If the melting continues, as many Arctic experts expect, the mass of floating ice that has crowned the planet for millions of years may largely disappear for entire summers this century. Instead of the white wilderness that killed explorers and defeated navigators for centuries, the world would have a blue pole on top, a seasonally open sea nearly five times the size of the Mediterranean.

But if the Arctic is no longer a frozen backyard, the fences matter. For now it is not clear where those fences are. Under a treaty called the United Nations Convention on the Law of the Sea, territory is determined by how far a nation's continental shelf extends into the sea. Under the treaty, countries have limited time after ratifying it to map the sea floor and make claims.

In 2001, Russia made the first move, staking out virtually half the Arctic Ocean, including the North Pole. But after challenges by other nations, including the United States, Russia sought to bolster its claim by sending a research ship north to gather more geographical data. On Aug. 29, it reached the pole without the help of an icebreaker - the first ship ever to do so.

The United States, an Arctic nation itself because of Alaska, could also try to expand its territory. But several senators who oppose any possible infringement on American sovereignty have repeatedly blocked ratification of the treaty.

Indeed, not everyone agrees that warming of the Arctic merits concern. No one knows what share of the recent thawing can be attributed to natural cycles and how much to heat-trapping pollution linked to recent global warming, and some scientists and government officials, particularly in Russia, are dismissive of assertions that a permanent change is at hand.

"We are not going to have apple trees growing in Vorkuta," said the mayor of that coal-mining city, Igor L. Shpektor, who is also the president of Russia's union of Arctic cities and towns.

But the current thaw is already real enough for the four million people within the Arctic Circle, including about 150,000 Inuit. "As long as it's ice," said Sheila Watt-Cloutier, leader of a transnational Inuit group, "nobody cares except us, because we hunt and fish and travel on that ice. However, the minute it starts to thaw and becomes water, then the whole world is interested."

Increasingly, big corporations, the eight countries with Arctic footholds and other nations farther south are betting on the possibility of a great transformation. Energy-hungry China has set up a research station on the Norwegian island of Spitsbergen and twice deployed its icebreaker Snow Dragon, which normally works in Antarctica, to northern waters to conduct climate research.

Interest in Arctic-hardy vessels has picked up so much that in January, Aker Finnyards, a giant shipbuilder based in Helsinki, created a subsidiary just to develop ice-hardened ships. Its new double-ended tanker slips smoothly through open water bow first but can spin around and use an icebreakerlike stern to smash through heavy floes.

A Finnish energy company bought two for about $90 million apiece, and after buying one Russia licensed the design and is building two more.

In January, the State Department's Bureau of Intelligence and Research held a closed two-day meeting to hear from experts on the implications of a warming, opening Arctic.

"There are likely to be a number of foreign-policy issues that must be addressed by the United States and other nations" if the climate trends persist, said a summary of the meeting. "These issues include the availability and potential for exploitation of energy, fisheries and other resources; access to new sea routes; new claims under Law of the Sea; national security; and others."

A look at a map of the globe with the North Pole at its center explains why a new frontier matters. Some countries that one might think of as being half a world part appear as startlingly close neighbors, and relatively speaking, they are.

In the days of empire, Rudyard Kipling called jockeying among world powers in Central Asia the Great Game. Christopher Weafer, an energy analyst with Alfa Bank in Moscow, says this new Arctic rush is "the Great Game in a cold climate." The Petroleum Rush

To understand the practical terms of this new competition for territory, opportunity and resources, a good place to begin is Hammerfest, Norway, one of the northernmost towns in the world and one of 12 Arctic settlements visited over six months by correspondents of The New York Times preparing this series of articles.

Hammerfest, once an austerely beautiful fishing village burned to the ground by the Nazis in World War II, is starting to swell with young people from other parts of Norway, Finland, Russia and Asia, as well as with highly trained technical workers from Europe and North America. They are drawn by Snohvit (in English, Snow White), a mammoth complex being built to receive natural gas piped from the Barents Sea and liquefy the gas for shipping.

The Norwegian government, which controls Snohvit in part through its majority ownership of the energy company Statoil, is desperate for Snohvit to be a success and put the country in the forefront of Arctic energy exploration. Being first, however, has had its challenges in the severe operating environment of the High North, as Arctic areas are called in Norway. Overruns have put the price of Snohvit at $8.8 billion, almost 50 percent above its original estimate.

The project has a firm backer in John Doyle Ong, the blunt United States ambassador in Oslo. Snohvit is scheduled to start sending liquefied natural gas to the Cove Point port in Maryland in 2007, just as American imports of liquefied gas from competing sources in the Middle East and Africa are set to rise rapidly. Importing natural gas from a stable country like Norway - already the world's third-largest oil exporter, after Saudi Arabia and Russia - is a rare option these days.

"Norway's importance to the United States in terms of our national energy policy is increasing with every passing year," Ong said.

But the United States' interests go beyond that - too far beyond for many in Norway. In September, the opening of frontier areas in the Barents and Norwegian Seas emerged as a central issue in elections that brought a leftist coalition to power, with some coalition members favoring a ban on Arctic oil and gas exploration in environmentally sensitive areas.

And besides supporting Snohvit, Ong, a former energy executive, has stepped into disputes between Norway and Russia over a large gray zone in the Barents. His insistence that Arctic-related matters be "trilateral" rather than bilateral is viewed as belligerent by some Norwegians.

In private, Norwegian officials welcome the heft of the United States in its negotiations with Russia. Norway is eager to resolve the territorial dispute so that some order, and Norwegian drilling expertise and environmental standards, can be imposed on Arctic exploration. Because as large as Snohvit is, it is dwarfed by a far bigger gas field to the east in Russian waters. That field, called Shtokman, is being developed by Gazprom, Russia's gas behemoth.

In September, Gazprom selected five companies - Statoil and Norsk Hydro from Norway, Total from France and Chevron and ConocoPhillips - as finalists in a search for partners to develop Shtokman, in the Barents Sea, 350 miles north of Russia's Kola Peninsula. The development costs are estimated at $15 billion to $20 billion. The field is reported to hold more than double all of Canada's gas reserves.

"They're going to find more of them," Weafer, the Moscow-based energy analyst, said of Arctic gas deposits. "It's the next energy frontier."

And while natural gas is certainly valued, the prize that is generating the biggest interest is oil. Virtually every large international energy company is studying how eventually to win permission from Norway and Russia to explore in the Barents, and the Norwegian Polar Institute has been contacted repeatedly by oil companies to explore the feasibility of drilling in the icier waters north of Spitsbergen.

Jan-Gunnar Winther, director of the institute, said the seasonal melting of the polar cap might allow access to more petroleum deposits but also create more challenges.

"A warmer climate in the north would mean more icebergs, rather than less," he said. "There will be obstacles in getting to the petroleum, but if oil prices stay high there will be enticements as well."

A push into the Barents Sea could help redraw the politics of energy allegiances, and gas in particular puts Russia in a strong position. "It has a good chance of becoming a more effective counterbalance to OPEC," Mr. Weafer said.

As for Norway, the warming world gives it the chance to seek influence far beyond its size. Energy-hungry countries that might have written off the Arctic not long ago are showing considerable interest in Norway's opening of the Barents; one visitor to Oslo in September was India's oil minister, seeking a role in exploration. And if a route farther north opens just four or five months of the year, Norway could even become a major supplier of oil and gas to China, said Sverre Lodgaard, director of the Norwegian Institute for International Affairs.

Norway is trying to position itself as "a dwarf among giants," Mayor Alf Jakobsen of Hammerfest said. "We're attracting young people to Hammerfest instead of sending them away, for the first time in years. The opportunity to become a springboard into the Arctic is upon us."

To discover how the melting ice caps impact national sovereignty, the fishing and shipping industries read the entire article as it appeared in The New York Times (free registration may be required).