238.As climatic conditions change, and Arctic sea ice reduces, parts of the region that were once considered to be largely inaccessible will begin to open up. Increasing access to the Arctic is likely to bring the opportunity for increased economic development and investment—although not without some countervailing difficulties.
239.The Arctic is home to significant projected hydrocarbon and other mineral resources. More open waterways may bring the potential for greater volumes of transit and destination-based shipping, in addition to increased tourist traffic. Any such economic intensification would have environmental, social, regulatory and political consequences, both positive and negative. While opportunities would arise for Arctic residents and international investors, the struggle to find a balance between economic development and environmental protection was a consistent theme in the evidence that we received.
240.It is important to re-emphasise that the Arctic is not a pristine, untouched wilderness. There is a long history of economic activity, across a range of sectors and throughout the region. Coal has, for example, been mined in Svalbard for many decades; the world’s largest apatite mines, on the Kola Peninsula, have been mined since the 1930s and exploration for oil and gas off the shore of Alaska began in the 1970s. Harvesting of natural resources, including industries such as logging in Finland, has long been an important source of income for local communities. Arctic islands and waterways in Alaska and northern Scandinavia also saw substantial military and security activity during World War II and the Cold War.
241.Some of these historic developments have caused environmental damage. Professor Frances Wall of the University of Exeter described the legacy of mining on the Kola Peninsula:
“All efforts went into mining and—you already know the next thing that I am going to say—very little effort went into environmental remediation. There is certainly some environmental damage there that everybody can see. You drive along the road past the smelter at Monchegorsk and there are tens of kilometres of black aureole around the town where acid mine drainage from the smelter has destroyed the forest, which is then destroyed by fires. The first thing to say is that the Arctic is not necessarily pristine”.357
242.The regulations governing economic development of Arctic resources, together with shipping, are defined by each of the eight Arctic states individually, complemented by a number of relevant international agreements (such as the forthcoming Polar Code358) and treaties, including those such as UNCLOS which cover the Arctic Ocean. As such, it is principally for the Arctic states, working where appropriate within the provisions of international agreements, to determine the approach taken to economic investment, the standards and regulations required of developers and investors and the environmental protections and safeguards that accompany such developments. The exception is the international high seas area of the central Arctic Ocean, which is currently largely ice-covered and inaccessible, and the potential exploitation of the central seabed lying beyond all states’ continental shelves.
243.The Arctic Council has set out the importance of balancing any new economic development with the need for environmental protection. The Swedish Ambassador to the UK described the position adopted by the Council at its 2013 Ministerial meeting:
“The real issue is how we manage economic development so that commercial advantage is not gained at the expense of the life of the indigenous people or environmental destruction. This is very much echoed in the Kiruna declaration from 2013, which stresses the importance of the sustainable use of resources and environmental protection and commits to strengthen efforts to diminish the negative effects of climate change on the fragile Arctic environment”.359
244.Greenpeace and WWF, however, felt that the recent track record of the Council in this respect was not entirely positive.360 The formation of the Arctic Economic Council (AEC) in 2014 was viewed as a particular cause for concern, with the WWF worried that the proposed body would be “neither open nor transparent, and accountable to no-one but the large industries expected to cover the costs of the group”.361 Greenpeace told us that the formation of the AEC represented a “swing towards economic development” and that it “seems to be more a forum to give business and oil companies a direct link to the senior officials”.362
245.Vincent Rigby, the current chair of the Senior Arctic Officials, told us that the AEC had been established as an independent body and that businesses had decided on its governance structures and operating procedures. Mr Rigby suggested that debate was ongoing amongst Arctic states as to the relationship between the AEC and the Arctic Council itself.363 We believe that the need for high standards of transparency and accountability should be emphasised in the ongoing debate concerning this relationship.
246.WWF told us that they were not in favour of fossil fuel developments in the Arctic (or elsewhere in the world) but, in principle, they supported development in the region that sought to integrate environmental protection and management:
“We are definitely not saying no to development. In the wider sense, economic development relates to human development and we would not deny anyone who has the right to develop resources to do so. We do not view several recent developments as necessarily a good idea, but in a wider fashion we are also desperately urging, in the 21st century that we are in, where the world is a connected place and we see the limits of our planet in front of us, that policies on development and ecology come together and become integrated”.364
247.We were told that we should “proceed from the premise that development of Arctic Ocean resources is inevitable”.365 Dr Ilan Kelman argued that the challenge lay in ensuring that changes brought advantages and opportunities for local communities:
“Change in the Arctic is inevitable and few people and communities object to the principle of change. Change can and should bring advantages and opportunities, but it takes effort to ensure that occurs, rather than only disadvantages and difficulties resulting”.366
248.We consistently heard that Arctic residents were not systemically opposed to new industrial and economic developments in their territories, providing that they were properly consulted about such developments, and were able to secure an appropriate degree of benefit from them.367 Safeguards to limit the potential for environmental damage, and to protect ecosystems, were also important.368
249.It was apparent, however, that when companies pursued projects that were not seen to adhere to these principles, problems could ensue. Representatives of the Sámi Parliament of Norway told us that difficulties had been encountered with some mining companies that lacked a positive record of engaging with local people, and that the livelihoods of reindeer herders could be negatively affected by poorly planned development.369
250.Canadian Inuit views were summarised to us as follows:
“There is no one-size-fits-all response to resource development inquiries. It is about striking a balance and making economic development work in tandem with social development—wherein lies the trick of trying to keep that balance so that it is done in an environmentally responsible manner, as well as a socially responsible manner”.370
251.In order to strike this balance, and pursue development in an environmentally responsible manner, a thorough understanding of communities, ecosystems, environmental change, and the environmental effects of development are required. We have already considered, in the previous chapter, the current deficiencies in baseline surveying of some Arctic ecosystems. The UK could play a significant role in improving knowledge in this area.
252.We were told by NERC that UK science funding supports a range of activities that could provide evidence to inform decisions about the potential environmental impact of economic development activities.371 It is apparent that the UK can make a wider contribution to supporting environmentally sustainable development in the Arctic. The Canadian Polar Commission stressed the challenges involved in operating in the sensitive, remote and cold environment of the Arctic and the consequential need for new scientific and technological approaches to inform the sustainable development and management of commercial opportunities. The Commission suggested that “given the strength of the UK research and technology development community” (see paragraph 276 below) this was an area in which the UK could make “a substantial contribution”.372
253.The UK has played an important role in helping to deal with Russia’s nuclear legacy from the Soviet Union, particularly that associated with the nuclear submarine fleet in north-west Russia.373 This work, undertaken in collaboration with states including Norway, provides an example of how the UK can work in partnership with Arctic states to manage and limit environmental risks.
254.In addition, London is a global centre for the finance and insurance sectors. WWF suggested that UK-registered financial institutions could have an important role to play in backing sustainable business development which will be of benefit to the Arctic and its peoples, and in seeking not to support unsustainable activities in the Arctic.374
255.There is a significant history of economic and commercial development in the Arctic. Further development is inevitable, but will need to be balanced and achieved in tandem with actions to limit environmental damage and preserve biodiversity. To achieve that, further advancements in understanding of the environmental and social consequences of change will need to be made at a rate that keeps ahead of development. The UK can play a significant role in developing the scientific knowledge and understanding required to inform policy decisions.
256.In addition, the UK’s research and technology strengths can be used to develop new techniques and approaches for undertaking developments in sensitive climates; its significant financial and insurance sectors also have a role to play in ensuring that only sustainable business developments are pursued in the Arctic.
258.Currently, around 10 per cent of global oil production and 25 per cent of gas production takes place in the Arctic; 97 per cent of this oil and gas production comes from onshore fields in Russia and Alaska (with the clear majority of this in Russia). Overall production of oil and gas in the Arctic has remained relatively stable since the late 1980s.375
259.In 2008 the United States Geological Survey estimated that undiscovered conventional oil and gas north of the Arctic Circle amounted to about 90 billion barrels of oil, 1.67 trillion cubic feet of natural gas and 44 billion barrels of natural gas liquids. The total estimated resources amount to about 30 per cent of the world’s undiscovered, recoverable, gas and 13 per cent of its undiscovered, recoverable, oil. Around 84 per cent of the undiscovered resources are expected to be found offshore and under less than 500 metres of water.376
260.This potential for significant hydrocarbon discoveries in the Arctic has led to sustained interest from governments, businesses and the media in recent years, as well as from campaign groups opposed to further extraction in the region. Although rising temperatures and receding sea ice could improve access to energy resources, we received evidence concerning the wider effects of climate change, including thawing permafrost, increased wave and storm action and unpredictable sea ice movements, all of which would hinder construction, extraction and transport to markets.377
261.The Government’s 2013 Arctic Policy Framework highlights the importance to the UK economy of natural gas imports from Norway (in 2012, 55 per cent of UK gas imports were from Norway), stating that “Norwegian success in further developing its Arctic gas reserves is important to UK energy security and for British companies that are active on the high northern areas of the Norwegian Continental Shelf”.378
262.British companies active in the Arctic region include BP, which has projects in the US, Canada, Greenland and Norway (in addition to owning 19.75 per cent of the Russian company Rosneft),379 and Shell, which is active in Alaska, Canada and Greenland.380 Cairn Energy, a smaller UK company, drilled a number of exploratory wells off the coast of Greenland between 2008 and 2010, at an estimated cost of over $1 billion,381 but did not find commercially significant amounts of oil.382
263.There are a number of barriers to future development of Arctic energy resources—particularly those to be found offshore. The average lag for Arctic oil between discovery and going on-stream is more than 13 years, the second longest in the world.383 The barriers to exploiting energy resources in the Arctic include the distance to markets; supply chains; lack of infrastructure; seasonal restrictions on operations, due to the presence of sea ice in some oil and gas provinces and extreme weather conditions; onshore transportation difficulties due to surface thawing of roads in summer; high labour costs due to travel distances and conditions and stringent natural environment regulations.
264.The presence of sea ice is a significant complicating factor in undertaking Arctic oil operations. Statoil told us that their approach to the Arctic divided the region into three different zones. The first was the ‘workable Arctic’, in which “hardly any” sea ice was present.384 The next was the ‘stretch Arctic’, where exploration was taking place, but further technological development was required. The third zone was the ‘extreme Arctic’, where ice was present for almost all of the year, and where Statoil, while holding licences, “did not see that we will have any development for the coming many years”.385
265.We were told that the Norwegian government had restricted oil and gas activity in certain parts of the Barents Sea. These restrictions were informed, in part, by the presence of sea ice, with a prohibition on any drilling within 50 kilometres of the sea ice edge.386
266.We received substantial evidence concerning the environmental effects of oil and gas development in the Arctic. Much of this evidence centred on the extent to which oil spilt from offshore projects or from the shipping of oil could be successfully retrieved without causing significant environmental damage. The International Association of Oil and Gas Producers (OGP) highlighted some of the factors that needed to be taken into account when considering prospective energy developments in the Arctic:
“Arctic conditions that must be fully understood include weather, daylight, remoteness, tides, water depths, ice, biological systems and ecosystem services important to local communities and indigenous peoples … In any territory, oil spill response is challenging and the first priority for OGP members is prevention. Arctic conditions (e.g., ice, cold temperatures, remoteness, darkness) can add to these challenges. However, oil spill response is entirely possible in the Arctic”.387
267.It is important to note that the risk of oil spillage arises not just from exploration or extraction, but also from transportation; the 1989 Exxon Valdez oil tanker spill off the coast of Alaska resulted in 1,300 miles of shoreline contaminated with oil. We detail, in paragraphs 307 and 308, a number of shipping hazards in the Arctic, including poor hydrography and limited GPS capacity, which exacerbate this risk.
268.The eight Arctic states, in 2013, negotiated an agreement on marine oil pollution preparedness and response. This sets out requirements for the monitoring of oil spill incidents, establishes contacts between the Arctic states for communicating the occurrence of spills and introduces provisions for Arctic states to reimburse one another for assistance rendered in the event of a spill. Greenpeace were critical of the agreement, stating that it contained “no worthwhile de minimis technical standards” and no enforcement mechanisms.388
269.OGP noted that techniques for containing and cleaning up a spill in the Arctic could include the use of booms and skimmers, in-situ burning and chemical dispersants.389 They also detailed the testing of oil spill responses that was being undertaken through their Joint Industry Programme.390
270.Ben Ayliffe of Greenpeace told us that sea ice was the biggest driver of their concerns regarding Arctic oil drilling, explaining that:
“When you consider that there is no known way of cleaning oil that is spilled in ice, we do not think that you should be operating there. The challenge is mechanical recovery: booms and skimmers simply do not work in ice-infested waters; in-situ burning is disrupted by wind and things like that; and we do not know the long-term eco-toxicological impacts of putting chemical dispersants in the Arctic. The colder waters reduce the efficacy of the chemicals themselves. All in all, a spill in the Arctic would be the nightmare scenario”.391
271.OGP representatives acknowledged that retrieving every drop of oil from a spill “had proved impossible”392 and that sea ice was a complicating factor. While broken sea ice could act to physically contain a spill, oil trapped under sea ice was “much more of a challenge”.393 The former UK Chief Coastguard, Rod Johnson, was sceptical of the prospects for recovering spilt oil from ice-affected water:
“Skimming is not possible in ice-covered water because there is literally ice in the way. The oil would go under the ice. In addition, oil is very temperature sensitive. To pump around a cargo of crude oil or oil fuel it needs to be the temperature of a very hot cup of tea to make it flow. Therefore, as soon as you introduce it into cold water under ice it becomes very viscous and difficult to deal with. I have seen incidents of small losses of lighter fractions of oil as a result of grounding in the Northwest Passage and conventional booming technology—in other words, putting an inflatable boom around the ship—has contained the spill. However, we have not seen an incident involving a large-scale loss of a viscous fraction where ice is present, so at the moment that is indeterminate. I certainly would not want to try it”.394
272.There are, therefore, valid concerns regarding the capacity, at present, for recovering substantial amounts of spilt oil from ice-affected waters. This presents a challenge to the development of energy resources in such areas.
273.In addition, Arctic oil resources—for all of the reasons highlighted above—are at the more expensive end of the cost spectrum. Dr Mazo explained why, in his view, the prospects for immediate Arctic oil development were limited:
“One of the reasons why we do not see hydrocarbon extraction in the Arctic as likely to have a greater relative share of the global energy market is that it is one of the most expensive options. It is certainly the most expensive oil and gas at the moment, more expensive than conventional oil and gas and in some cases more so than some of the unconventional sources”.395
274.A more immediate challenge to Arctic energy extraction, therefore, is presented by current world oil prices. Analysis suggests that developments in the Barents Sea, such as OMV Group’s Arctic Wisting discovery, require prices of around $110 a barrel in order to break even.396 With oil prices falling to $50 a barrel in January 2015,397 the development of Arctic resources may not be viable in the current economic climate. In late 2014 Statoil handed back three of its four Greenland offshore oil and gas exploration licences.398
275.While OGP were of the view that Arctic resources may ultimately be required to meet projected demand over the next 30 to 50 years399, Professor Mike Bradshaw from Warwick Business School felt that the need to “book reserves” might sustain energy company interest in the Arctic, without substantive development of such reserves actually taking place.400 Charlie Kronick of Greenpeace offered a broadly similar assessment:
“There never was a high likelihood of extraction any time soon. We would certainly argue, and we have heard from many people in the capital markets, that the exploration, certainly in Alaska but to a certain extent in Russia and Norway as well, is about reserve replacement. I am sure you well know that oil companies are valued largely in the capital markets by their reserve replacement ratios. The question I would ask is are these genuine plays for production or are they about reserve replacement”.401
276.The UK has an excellent science, technology and research base supporting oil, gas and mineral exploration and extraction, as well as a thriving and respected industry (particularly in Scotland) which has much to offer in terms of expertise and leadership to any burgeoning hydrocarbons industry in the Arctic.402 We were told that UK companies—large and small—had substantial experience of developing technologies and approaches for working in harsh environmental conditions, and for responding to oil spills.403 The UK is, therefore, in a position to make a contribution to enhancing the understanding of operating in Arctic conditions, and developing the approaches and technologies required to undertake operations safely.
277.Given the relatively high costs of hydrocarbon extraction in the Arctic, and current low global energy prices, there may be limited potential for new Arctic oil and gas production in the short to medium term. This may offer a window of opportunity for taking stock and gaining increased clarity on whether oil and gas extraction in ice-affected Arctic waters can be achieved safely and responsibly and, if so, how.
278.Maximum advantage needs to be taken of this ‘breathing space’ to establish whether it is possible to reach a point where it is categorically clear that the risks of a major spill are acceptably low and that the damage caused by a major spill could be contained. This should also provide an opportunity to improve wider understanding of the impacts of oil spills in ice-affected waters and to consider whether any international standards on where drilling can be undertaken in relation to ice can be agreed.
279.The UK has significant technological and research expertise in oil spill responses, and operations in harsh environments; the Government should work, with UK Trade & Investment, research funders and others, to ensure that the UK is in a position to make a strong contribution to this work.
280.Non-petroleum minerals, such as nickel, gold, zinc, lead and rare earths are also to be found in the Arctic. Arctic sources of these minerals are significant to both global supplies and investors and the economies of the countries concerned. We were told, for example, that 20 per cent of Swedish tax revenue comes from iron ore mining in Kiruna.404 In 2010, 36.8 per cent of Alaska’s foreign export earnings came from exports of zinc, gold, lead and copper, generating $1.3 billion.405 In Canada, mining accounts for around half of the income of the Northwest Territories.406
281.The Arctic region—particularly in Russia and Scandinavia—has important platinum metal deposits, valuable for technology such as fuel cells and catalytic converters. In addition, it is estimated that 25 per cent of the world’s future supply of rare earth minerals might be found near Kvanefjeld in Greenland.407 Rare earth elements are a group of 17 chemically related elements for which there has been increasing demand in recent decades for a range of uses, from electronic displays and ICT equipment through to glass polishing.
282.A number of UK companies are active in Arctic mining operations—either as the principal operators of mines, or as junior project partners.408 Anglo American operate a significant diamond mine at Snap Lake in the Canadian Northwest Territories and have also undertaken work, since 2004, to develop a copper-nickel-platinum group mine in Sakatti, in northern Finland.409 Smaller UK companies active in the Arctic include Beowulf Mining, who are involved in the development of iron ore resources in northern Sweden.410
283.The scale of investment required to establish a new mining operation in the Arctic should not be underestimated. The Baffinland iron ore mine in Canada, which commenced production last year, required the construction of a new port, new roads, an airstrip, and the development of accommodation for a substantial number of migrant workers. The up-front investment required for the project was in the region of $6 billion.411
284.In addition, we were told that the effects of climate change may make mining in the Arctic more difficult. Professor Frances Wall from the University of Exeter explained that mining companies “have to deal with having less time in which they can drive over the ice roads … those roads will be open for shorter periods of time. Increased precipitation is likely to be an effect of climate change so they will have to deal with more snow and that can give them slope stability problems and so on.”412
285.As detailed previously, historical mining in the Arctic has left a negative environmental legacy. We were assured that modern standards of operation and environmental management were much more stringent. Whilst regulatory regimes vary from one jurisdiction to another, it is usually the case that mining companies are required to undertake extensive environmental assessments and social licensing agreements before progressing with new projects.413 In addition, a closure plan is typically produced and approved before operations commence, setting out how the environmental legacy of mining operations will be managed.414 Richard Morgan of Anglo American explained how and why standards had changed over time:
“I think that standards have got progressively more demanding, whether that is coming from the Governments per se … or from our own self-governance. Obviously from a reputational point of view you need to be seen to have covered every potential risk as well as you can, because if you have a reputation for having not done something well in a sensitive environment, you are not likely to get permission to do it again somewhere else. It is a mixture of greater scrutiny and greater standards. I think there are shared standards across international bodies now, under which everyone knows what you are referring to when you say, ‘Yes, we will meet that standard or this standard’. There is greater expectation”.415
286.Social licensing—securing the consent and participation of local communities for mining operations—is also important. Mining operations in the Arctic can be a particularly important source of employment for indigenous peoples and local populations. Mr Morgan told us that 60 per cent of the workforce at the Hudson Bay mine operated by Anglo American came from the Cree community.416 We were told that an Impact Benefit Agreement was usually negotiated, in which targets for local employment and training were agreed by the developer and local authorities, along with a timescale for the replacement of expatriate labour by local people.417
287.Mining industry representatives suggested that it is sometimes more straightforward for large companies to deliver against these enhanced requirements than it is for smaller companies, because of their capabilities and experience.418
288.UK companies are active in Arctic mining operations, and receive some support from UK Trade & Investment (UKTI—see paragraph 439 below). We were told that “there is no reason why UK companies should be anything other than world leaders in responsible mining practices”.419
289.To protect Arctic species, indigenous livelihoods and tourism, as well as to ensure that the UK remains a respected partner in Arctic operations, UK companies engaged in mining operations in the Arctic—at all levels of operation—should pursue the highest possible environmental standards of operation and remediation. They should engage proactively and effectively with local residents when developing their operations, and source as much of their labour as possible from local communities, investing in training and capacity building. We recommend that the Government encourage such high standards, and promote this sustainable approach to UK businesses in all future UKTI activities.
290.At present, most Arctic shipping is around the periphery of the Arctic Ocean and is primarily for re-supplying communities in the Arctic, marine tourism or moving natural resources out of the Arctic. This is usually known as destination-based shipping. The 2009 Arctic Marine Shipping Assessment reported that there were around 6,000 vessels active in the Arctic.420
291.As sea ice continues to melt, two shipping routes for transiting all the way through the Arctic Ocean may become increasingly commercially viable. These are the various waterways located along the Canadian Arctic coast known as the Northwest Passage, and the Northern Sea Route along the Russian Arctic coast.421 While it is possible to traverse the Northern Sea Route (NSR) and the Northwest Passage at present, access is inconsistent, and is restricted to summer months due to the presence of sea ice.
292.As sea ice melts these routes may become more accessible. Estimates suggest that shipping routes between Asia and Europe through the Arctic could be up to 30 per cent shorter than routes via the Suez Canal. The journey from Yokohama to Rotterdam, for instance, would be cut from 11,212 nautical miles to 7,825,422 theoretically bringing substantial reductions to fuel costs and associated emissions. There has been significant media interest in this prospect, even comparing the NSR to a new ‘Great Silk Road’ between Europe and Asia.423
293.There are limitations, however. We were told that both the NSR and Northwest Passage would have shallower draft restrictions than the Suez Canal and the Panama Canal (once new locks are inaugurated on the latter).424 Licence fees are also applied on some parts of the NSR425, as are regulatory requirements to inform the Russian authorities some 15 working days in advance of any NSR transit.426 In addition, the average cost for icebreaker escort through the NSR is $200,000.427 All of these factors limit the potential advantages.
294.However, recent years have, on balance, seen an increase in the number of ships traversing the NSR. The overall volume of ships involved, though, is small and there was a steep fall in usage in 2014, when sea ice conditions were not as favourable as in preceding years.
Sources: Northern Sea Route Information Office and Arctic Bulk AG428
295.Lord Fairfax of Cameron, a member of the board of Russian shipping company SovComFlot, explained the potential benefits of the NSR, telling us that “the distance saving is massive. When we did our first shipment, we might have saved as much as 50 per cent in mileage, and therefore you have saved fuel and emissions”.429 He went on to explain that there were, however, considerable challenges, including the need to invest substantially in the shipping hardware required for traversing Arctic routes.430 These limitations were also set out by Dr Dougal Goodman (Foundation for Science and Technology):
“Although the Northern Sea Route offers advantages of shorter voyage distances from Europe to south east Asia or vice versa, not many ship operators are taking advantage of the option probably because the ice conditions can be very variable from year to year, the high cost of fees to transit the route, the few places of refuge if a mechanical problem develops and water depth limits along parts of the route”.431
296.Tom Paterson, Senior Vice-President, Ship Owning, Arctic and Projects for Fednav, concluded that:
“With the ice being so unpredictable … you cannot possibly plan your voyage. The most important thing to understand is that the newspaper clips we see of Chinese vessels going from China to New York via the Northwest Passage or through the Northern Sea Route to Europe are not going to happen. I would not use the word ‘probably’; it is not going to happen because it does not make money”.432
297.While the potential for trans-Arctic container shipping may be limited at present, the prospects may differ for destination-based shipping. We were told that this traffic was likely to increase.433 This was attributed, in part, to a potential increase in wider economic activity in the Arctic, and the need to move resources and products in and out of the region.434
298.The Arctic is an increasingly popular destination for tourists, attracted by the unique and changing environment of the region. The number of tourist passengers staying overnight at Longyearbyen in Svalbard grew from under 10,000 in 2000 to almost 60,000 in 2012.435 Dr Goodman told us that:
“Adventure tourism has grown rapidly and represents an important income stream for settlements that can be easily accessed by sea in the summer by tour ships. Longyearbyen … and Nuuk in Greenland are popular destinations”.436
299.As a result of this increased interest, cruise and tourist traffic in the region has increased substantially in recent years with, for example, the number of cruise ships stopping at ports in Greenland doubling between 2003 and 2008.437 We heard that these cruise trips included significant numbers of British tourists.438 In 2003 an Association of Arctic Expedition Cruise Operators was set up to establish best practice for small cruise operators, principally in the Norwegian Arctic.
300.In August 2010 the MV Clipper Adventurer cruise ship, carrying 128 passengers and 69 crew, ran aground in the Canadian Arctic. The Canadian coastguard took two days to reach the vessel.439 We heard that, currently, rescue capability in the Arctic is insufficient for the number of passengers carried on typical cruise ships.440 Lloyd’s Register told us that recent media coverage had highlighted the prospect of larger cruise ships (with 1,000 or more passengers) operating closer to ice or attempting sailings through the Northwest Passage.441
301.Growing destination-based shipping and cruise traffic in the Arctic could pose a number of environmental and safety challenges. We heard that environmental concerns centred upon the use and carriage of heavy grade fuel oil,442 airborne emissions from vessels (including black carbon) and the discharge of ballast water from ships.443
302.Black carbon was identified as a particular threat throughout the evidence we received.444 In particular, the potential for black carbon to contaminate Arctic snow cover, reducing its reflectivity and leading to increased surface heat absorption, was highlighted as a significant environmental concern.445
303.Ballast water in ships is known to transport non-native species from one ocean to another, with the potential to endanger native species through competition for resources. The Ballast Water Convention was agreed by the International Maritime Organisation in 2005, but has not yet entered into force.
304.The use of heavy grade fuel oil has been prohibited in the Antarctic since 2011, with cargo ships and passenger vessels required to switch to lower density fuel when transiting in Antarctic waters. There is, currently, no general prohibition in the use of such fuels in Arctic seas, although restrictions were introduced in the waters around Svalbard at the beginning of 2015.
305.There are, additionally, a number of safety and security concerns regarding Arctic shipping. Many parts of the Arctic are remote, and infrastructure to support disaster recovery and search and rescue can be lacking. In addition, the harsh environmental conditions including the presence of sea ice, prolonged darkness and low temperatures introduce additional demands for vessels operating in the region. Dr Goodman summarised the safety concerns that needed to be addressed in planning Arctic shipping operations:
“A cruise ship operator intending to visit Ilulissat … in Greenland knows that tourists would like to go there to see the icebergs calving into the bay but has to decide whether the design of the ship can cope with sea ice in the bay, a collision with an iceberg … and whether the charts are sufficiently accurate to avoid grounding. The operator also has to judge whether the remote location, limited search and rescue support and lack of ocean going tug capacity, port of refuge and supply facilities are too great a risk for vessel operation”.446
306.Of particular concern is the extent to which Arctic waterways have been accurately and appropriately charted. Manson Oceanographic Consultancy suggested that there was “a dire shortage” of up-to-date, accurate charts for the Arctic region and that “the gathering of such information will be costly and time-consuming”.447
307.The UK’s National Hydrographer, Rear Admiral Tom Karsten, explained that currently accessible charts were of variable quality and relied on relatively old data, while other parts of the Arctic were not particularly well charted at all. The technical standards applied in producing some current charts were also lacking; we were told that depth anomalies may exist, as well as horizontal inaccuracies with, for example, “the point of a rock being as much as 500 metres or half a mile out of position”.448
308.In addition, communications infrastructure can also be limited by Arctic conditions. The accuracy of GPS systems becomes limited in high northern latitudes,449 and satellite systems can also be disturbed due to the effects of the ionosphere and the sun.450 We were told that “Polar navigation is not for the inexperienced; it is an art form”.451
309.The Arctic Council member states, in 2011, signed an agreement on search and rescue in the region.452 The agreement delimits the area of search and rescue (SAR) responsibility of each state party.
310.While this treaty is a welcome development, we heard concerns that a fundamental lack of SAR infrastructure throughout the Arctic would continue to be an issue.453 Rod Johnson, former Chief Coastguard, told us that any major SAR operation in the Arctic would need to be an international operation:
“The Arctic Council’s search and rescue agreement was ratified last year and has been [artificially] tested twice. I have looked at the output report from the last exercise in 2013, which was SAREX Greenland Sea. It was very interesting. It has identified that any SAR operation up there would of necessity be an international effort. No one nation has enough resources to do the sort of operation you were contemplating for a large number of tourists”.454
311.A range of international conventions currently apply to shipping throughout the world, including the Arctic. These include SOLAS455 and MARPOL456, negotiated and agreed under the auspices of the London-based International Maritime Organisation (IMO), a UN body. Agreement was recently reached on new mandatory standards for polar shipping, known as the Polar Code.
312.The IMO told us that the main goal of the Polar Code457 is “to provide for safe ship operation and the protection of the polar environment by addressing risks present in polar waters and not adequately mitigated by other IMO instruments”.458 The Code will be made mandatory through amendments to the existing SOLAS and MARPOL regulations.
313.The Code has two parts, dealing separately with safety measures and pollution prevention measures. The safety measures of the Code were adopted in November 2014; the pollution prevention measures are expected to be adopted in May 2015.459 Provisions within the Code will only apply to passenger and cargo ships above a certain size;460 there is anticipation that a future ‘second phase’ of Polar Code development will extend provisions to other ships, including fishing vessels. Enforcement will be undertaken by flag states where the ships are registered, or on their behalf by recognised organisations such as classification societies.461 We were told that the Polar Code should be entering into force on or around 1 January 2017.462
314.Progress towards agreement and adoption of the Code is to be welcomed. We were told that the Code would introduce additional restrictions concerning the discharge of waste products in ice-affected waters.463 The safety elements of the Code set out three different categories464 of ship which may operate in polar waters. Ships intending to operate in these waters must apply for a Polar Ship Certificate, defining which of the three categories the vessel belongs to. These requirements were welcomed in the evidence that we received.465
315.Concerns were expressed, however, regarding the extent of the environmental provisions of the Code. Greenpeace noted that:
“Whilst the Polar Code will phase in a ban on all discharges of oil and oil mixture, it will still allow ships to carry and use the most dangerous and polluting type of oil (heavy fuel oil) when transiting through the fragile Arctic environment”.466
316.WWF were of the view that, despite clear original intentions to develop a comprehensive Code addressing all aspects of shipping safety and environmental protection, the environmental protection provisions of the Polar Code had slipped. They suggested that the Government “should champion robust environmental protection measures in Phase Two of the Polar Code”.467
317.Lloyd’s Register, however, told us that “the Polar Code text is now complete”.468 The Marine Environment Protection Committee of the IMO, in the report of its 67th meeting,469 noted the concerns expressed regarding environmental provisions but concluded that any measures to further modify the Code would need to be initiated as a new programme of work:
“The Committee noted the concerns expressed and stressed that any future amendments to the Polar Code to introduce additional or new environment-related requirements would need the approval of the Committee as a new output, in accordance with the Committees’ guidelines”.470
318.The UK is the host country of the IMO, and is a major centre for the shipping insurance and finance markets. In addition, the UK is home to certifying authorities, including Lloyd’s Register, who provide a classification service to independently review designs and an inspection service to operators intending to supply ships or other offshore facilities in the Arctic region. The UK can, therefore, play a role in ensuring that future Arctic shipping operates in a safe and environmentally sensitive manner and in full conformity with the Polar Code once it enters into force.
319.Concerns have been expressed regarding the adequacy of the environmental provisions contained within the Polar Code. Black carbon, heavy fuel oils and discharged ballast water all pose a threat to the Arctic environment and ecosystems; these threats should be addressed as the regulatory regime concerning Arctic shipping continues to evolve. In any future discussions regarding the development or expansion of the Polar Code all Government departments should promote actively the inclusion of additional robust environmental measures.
320.Full and rigorous implementation of the Polar Code is vital. The UK is home to a range of maritime regulation and standards interests, including the IMO, insurance and finance providers and classification societies, which will make an important contribution. We urge the Government, and all relevant UK interests, to pursue full implementation of the Code as a matter of urgency and, also, to consider ways in which its implementation could be monitored.
321.In view of the rapid rise of tourism in the Arctic and particularly the prospect of large passenger ships sailing in Arctic waters, there is an urgent need to develop co-ordinated search and rescue facilities in the region. This is an immense task but it is a necessary one. While we recognise that work is being done on this, we emphasise that those involved must not wait for a major incident before developing a comprehensive strategy towards Arctic search and rescue.
322.We heard that Denmark would value a contribution of resources from the UK to Arctic search and rescue efforts, and that Iceland wanted the UK to make a stronger contribution in this area, as the UK “has great capacity and experience to contribute to that work.”471 The UK has contributed its expertise in recent years through training officers from Finland, Iceland and Canada and participating in fora such as the North Atlantic Coast Guards Forum.472
325.The previous chapter referred to the movements in fish stocks that have been seen as some marine species respond to climate change. Should commercially valuable fish stocks move further north, in response to warming temperatures and changing oceanic conditions, it is likely that the fishing industry will pursue them; we were told that there was evidence to suggest that this was already happening.473
326.In many parts of the oceans, Regional Fisheries Management Organisations (RFMOs) have been established between coastal and fishing states in order to manage fisheries in international waters.474 Whilst some RFMOs (such as the North East Atlantic Fisheries Commission, or NEAFC) extend to waters adjoining the Arctic, there is as yet no such body covering the international high seas that lie in the central Arctic Ocean.475 The European Union supports an extension of NEAFC into the Arctic, but both Russia and Norway are opposed to this proposal.476
327.There is, therefore, no current legal provision to prevent the over-fishing of fish stocks in the central Arctic Ocean, if or when fishing there becomes possible and profitable. Professor Robin Churchill from the University of Dundee told us:
“As for fishing, within 200 miles477 that would be regulated by coastal states, but if in several decades the central Arctic [Ocean] becomes ice-free and open to fish—and, indeed, if there are fish there—there is still no regime beyond the general obligations of the Law of the Sea Convention to co-operate. The general view is that some sort of regime ought to be developed fairly quickly in a precautionary way to prevent the same kind of destruction of high-seas fisheries as has happened elsewhere”.478
328.The lack of knowledge of Arctic marine ecosystems is particularly important here. The 2013 Arctic Biodiversity Assessment designated 63 marine fish species as ‘Arctic’. Due to a lack of data, 95 per cent of these species have yet to be evaluated for threat status according to IUCN criteria.479 Greenpeace highlighted the vital role that fish play in Arctic marine food chains, along with the current lack of data, stating that the “scientific uncertainty of what is happening there means that we need to take a very cautious approach to expanding the fisheries”.480
329.Greenpeace have proposed a moratorium on fishing in the central Arctic Ocean, as part of their wider proposal for an Arctic sanctuary.481 The United States and Canada have already introduced fishing moratoria and limitations in waters lying off their northern coastlines in the Beaufort Sea.482
330.The FCO Polar Regions Department was of the view that a future international agreement concerning fisheries in the high seas area of the central Arctic Ocean would be required.483 Jane Rumble explained the UK approach:
“Our general view is that, where the science suggests that it would be useful and there is a scientific basis for it, protection should be given. The science for the Arctic is not yet there, so we very much support the idea that there should be more science activity. I think that we would be sympathetic towards a moratorium, but we have yet to see the exact detail, which we understand the five Arctic [coastal] states are working up between themselves”.484
331.Ambassadors from Arctic states acknowledged that discussions between the five littoral states were ongoing on this matter485; Iceland had also sought to join these discussions, but had thus far been unable to do so.486 Given that these discussions concern international waters, it is essential that all nations and regional organisations with a legitimate interest (such as the EU) are allowed to play an active role in developing regulatory solutions to avert a ‘tragedy of the commons’ situation. We were told that the UK Government had “made those representations to the Arctic littorals” and that the Arctic littoral states “well understand that they could not control this area on their own. The idea is that they want to show leadership”.487
332.The central Arctic Ocean is, under the provisions of UNCLOS, designated as international waters and the discussion of future ways to sustainably manage fish stocks in this area is, therefore, an international issue. We recommend that the Government seeks to promote and to play an active role in such discussions. The Government should push for real international consultation and progress on this issue well before any fishing begins. That consultation should include nearby RFMOs, which might have a part to play.
333.Given the current lack of understanding of Arctic marine ecosystems and their responses to climate change, we recommend that a moratorium on fishing in the high seas area of the Arctic Ocean is required, at least until a recognised management regime for the area is agreed. We recommend that the UK Government should pursue a precautionary approach in any negotiations on this matter. The Government should advocate for any future management regime to be based upon sound and responsive science. We also recommend that any future Arctic fisheries management organisation, once established, should be granted observer status on the Arctic Council.
334.The Arctic is part of many global networks and an increasingly global economy. The prospects for development of many of the resources described in this chapter, including hydrocarbons, minerals and the potential for transit shipping, depend in part upon situations and changes elsewhere in the world. Dr Mazo, commenting upon the prospects for Arctic shipping, told us:
“In the timeframe that we are looking at, whether the Arctic is a better alternative than the Cape, for example, even though that would be much further, depends on a huge range of economic variables, the most important of which is the cost of fuel. In a scenario where the Middle East goes down and the cost of fuel rises significantly, that saving in the Arctic will be significant”.488
335.Likewise, we were told that a proposal to develop an iron ore mine in Greenland would not, under the current global pricing climate for iron ore, be viable, but that this would change if alternate supplies of ore from elsewhere in the world were restricted.489 It is important to stress, therefore, that the potential for development of Arctic resources and routes may change if the availability of resources and routes elsewhere in the globe is restricted or enhanced. Geopolitical instability elsewhere in the world may also impact upon the degree to which the Arctic is viewed by external investors as an attractive space for further business and industry development.
336.The commercial opportunities that could arise in the Arctic are significant. However, the volatility of global markets for resources, and the changing degree to which resource sources and shipping routes in other parts of the world compete with opportunities in the Arctic, suggest there will be long-term uncertainty about the extent to which Arctic potentials will be realised. At the same time, the local effects of climate change may help economic development in the Arctic, but they may also hinder it. There is therefore no straightforward correlation between climate change and the creation of real economic opportunities in the Arctic.
337.These uncertainties reinforce the need for the UK to be fully engaged with the region, so that it can maximise any opportunities that arise, and also be vigilant about potential challenges and risks.
338.These uncertainties also, however, provide one particularly important opportunity: for international knowledge and understanding of the vulnerable Arctic environment to get ahead of further substantial human interventions. Any substantial interventions must be informed by that knowledge, so that any harm they might cause can be judged and minimised.
357 (Prof Frances Wall)
358 See paragraphs 309–18.
359 (HE Nicola Clase)
360 Written evidence from Greenpeace UK () and WWF-UK ()
361 Written evidence from WWF-UK ()
362 (Nathalie Rey)
363 (Vincent Rigby)
364 (Dr Martin Sommerkorn)
365 Written evidence from Dr Dimitriy S. Tulupov ()
366 Written evidence from Dr Ilan Kelman ()
367 Written evidence from Michael Kingston (), Dr Ilan Kelman (), UCL Institute for Risk Management (), Hugh Mackay (), OGP (), (HE Nicola Clase, HE Pekka Huhtaniemi and Alan Kessel), (Terry Audla)
368 (Claude Perras)
369 (Runar Myrnes Balto)
370 (Terry Audla)
371 Written evidence from the Natural Environment Research Council (NERC) (). Resources include the Extended Ellet Line, which measures ocean properties in the north east Atlantic where waters flow into and out from the Arctic region and MASOX (Monitoring Arctic Seafloor—Ocean Exchange) where NERC and the National Oceanography Centre provide instrumentation for a deep sea sustained observatory to monitor methane outputs.
372 Written evidence from the Canadian Polar Commission ()
373 Written evidence from the Ministry of Defence ()
374 Written evidence from WWF-UK ()
375 Le Mière and Mazo, Arctic Opening: Insecurity and opportunity, 2013
378 Foreign and Commonwealth Office, Adapting to Change: UK policy towards the Arctic (2013)
379 Written evidence from Daniel Kochis ()
380 See Shell ‘How we operate in the Arctic’: [accessed 19 February 2015]
381 Chatham House and Lloyd’s, ‘Arctic Opening: Opportunity and Risk in the High North’, (2012): [accessed 19 February 2015]: Cost estimate is up to 2011.
382 Written evidence from Hugh Mackay ()
383 See Infield Offshore Arctic Oil & Gas Market Report To 2018: [accessed 19 February 2015]
384 (Rúni M Hansen)
385 (Rúni M Hansen)
386 (Dr Jan-Gunnar Winther)
387 Written evidence from OGP ()
388 Written evidence from Greenpeace UK ()
389 Written evidence from OGP ()
390 (Dr John Campbell)
391 (Ben Ayliffe)
392 (Dr John Campbell)
394 (Rod Johnson)
395 (Dr Jeffrey Mazo)
396 Rystad Energy, cited by Reuters: [accessed 19 February 2015]
397 See ‘Oil prices fall to fresh lows’, Wall Street Journal, 12 January 2015: [accessed 19 February 2015]
398 See ‘RPT-Statoil hands back three Greenland exploration licences’, Reuters (14 January 2015): [accessed 19 February 2015]
399 (Dr Michael Engell-Jensen)
400 (Prof Mike Bradshaw)
401 (Charlie Kronick)
402 Written evidence from The Geological Society ()
403 Written evidence from Dr Dougal Goodman () and Dr Dimitriy S. Tulupov ()
404 (Prof Frances Wall)
405 Chatham House and Lloyd’s, ‘Arctic Opening: Opportunity and Risk in the High North’ (2012): [accessed 19 February 2015]
407 (Dr Richard Powell)
408 Written evidence from Prof Frances Wall ()
409 See Anglo American, Anglo American and Sakatti project: [accessed 19 February 2015]
410 See Beowulf Mining homepage: [accessed 19 February 2015]
411 See Baffinland Iron Mines Corporation, Baffinland Iron Mines Mary River Project (27 September 2011): [accessed 19 February 2015]
412 (Prof Frances Wall)
413 Written evidence from London Mining ()
414 (Prof Frances Wall) and (Claude Perras)
415 (Richard Morgan)
416 (Richard Morgan)
417 (Claude Perras)
418 (Richard Morgan, Claude Perras)
419 Written evidence from Prof Frances Wall ()
420 Arctic Council, Arctic Marine Shipping Assessment, (2009). See: [accessed 19 February 2015]
421 A third potential route, travelling directly over the North Pole, has been identified, but we received no evidence to suggest that this would become viable in the foreseeable future.
422 Written evidence from Lloyd’s Register ()
423 See The Jamestown Foundation, ‘Moscow Sees Northern Sea Route Vitiating Great Silk Road’: [accessed 19 February 2015]
424 Written evidence from Lloyd’s Register ()
425 Written evidence from Dr Dougal Goodman ()
426 See Northern Sea Route Information Office: [accessed 19 February 2015]
427 Lloyd’s and Chatham House, Arctic Opening: Opportunity and Risk in the High North (2012)
428 See Arctic Bulk, NSR Transits: [accessed 19 February 2015]
429 (Lord Fairfax of Cameron)
431 Written evidence from Dr Dougal Goodman ()
432 (Tom Paterson)
433 (Tom Paterson, Lord Fairfax of Cameron)
434 (Lord Fairfax of Cameron)
435 Foreign and Commonwealth Office, Adapting to Change: UK policy towards the Arctic (2013)
436 Written evidence from Dr Dougal Goodman ()
437 Written evidence from Lloyd’s Register ()
438 (Jane Rumble)
439 See Transportation Safety Board of Canada, ‘Marine Investigation Report M10H0006’: [accessed 19 February 2015]
440 Written evidence from Prof Terry V. Callaghan ()
441 Written evidence from Lloyd’s Register ()
442 Written evidence from Greenpeace UK () and WWF-UK ()
443 Written evidence from the National Oceanography Centre () and WWF-UK ()
444 This evidence principally concerned emissions from ships; it is, however, also important to note that aviation can be another cause of black carbon emissions.
445 Written evidence from the UCL Institute for Risk and Disaster Reduction (), and the National Centre for Atmospheric Science ()
446 Written evidence from Dr Dougal Goodman ()
447 Written evidence from Manson Oceanographic Consultancy ()
448 (Rr Admiral Tom Karsten). See also (Prof Julian Dowdeswell)
449 (Colin Manson), (Rod Johnson)
450 (Rod Johnson)
452 Formally entitled ‘Agreement on Co-operation on Aeronautical and Maritime Search and Rescue in the Arctic’.
453 Written evidence from Greenpeace UK ()
454 (Rod Johnson)
455 International Convention for the Safety of Life at Sea, 1974 as modified by the 1988 SOLAS Protocol
456 International Convention for the Prevention of Pollution from Ships, 1973/1978
457 Formally entitled ‘The International Code for Ships Operating in Polar Waters’.
458 Written evidence from the International Maritime Organisation ()
460 All passenger ships and all cargo ships over 500 gross tonnes that are engaged on international voyages.
461 (Rob Hindley)
462 Written evidence from Lloyd’s Register ()
463 Written evidence from Manson Oceanographic Consultancy ()
464 Categories are defined according to the presence and amount of ice in the waters that the ship intends to navigate.
465 Written evidence from Michael Kingston ()
466 Written evidence from Greenpeace UK ()
467 Written evidence from WWF-UK ()
468 Written evidence from Lloyd’s Register ()
469 Held in October 2014.
470 International Maritime Organisation, Report of the Marine Environment Protection Committee on its sixty-seventh session, October 2014
471 (HE Claus Grube), (HE Thórdur Aegir Óskarsson)
472 (Rod Johnson)
473 (Nathalie Rey)
474 Established under the auspices of UNCLOS, as well as the UN Code of Conduct for Responsible Fisheries and the United Nations Agreement on the Conservation and Management of Straddling Fish Stocks and Highly Migratory Fish Stocks, both of which were established in 1995.
475 The Convention for the Protection of the Marine Environment of the North East Atlantic (commonly known as OSPAR) covers a triangular area extending up to the North Pole from the North Atlantic. Programmes and measures relating to fisheries management cannot, however, be adopted under the Convention.
476 (Matthew King)
477 200 nautical miles of the coast or, in other words, within the Exclusive Economic Zone of the coastal state.
478 (Prof Robin Churchill)
479 Conservation of Arctic Flora and Fauna Working Group, Arctic Biodiversity Assessment, (2013). See: . ‘IUCN’ is the International Union for Conservation of Nature.
480 (Nathalie Rey)
481 Written evidence from Greenpeace UK ()
482 (Nathalie Rey)
483 (Jane Rumble)
485 (HE Claus Grube), (HE Thórdur Aegir Óskarsson)
486 (HE Thórdur Aegir Óskarsson)
487 (Jane Rumble)
488 (Dr Jeffrey Mazo)
489 (Claude Perras)