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No economic interest in offshore oil drilling in Western Canadian Arctic, say experts

Moratorium or not, experts and government officials agree the chances of another Western Arctic Oil boom are effectively zero.
A 2017 shot of Spy Island, an artificial island in the Alaskan Beaufort Sea which the Trump administration attempted to open up for widespread oil and gas exploration. Energy Analysts and policy makers tell the Inuvik Drum offshore oil drilling in the Western Arctic Ocean is highly unlikely for both environmental and economic reasons. Guy Hayes/Bureau of Safety and Environmental Enforcement via AP

Moratorium or not, experts and government officials agree the chances of another Western Arctic Oil boom are effectively zero.

On Jan. 12, Inuvaluit Regional Corporation President Duane Ningaqsiq Smith issued a condemnation of Canada’s extension of the moratorium on drilling for oil and natural gas in the Western Arctic Ocean. In the statement he said the federal government decision had undermined Inuvialuit “efforts to enhance sovereignty and security in our region.”

“On behalf of the Inuvialuit, we are discouraged by the federal government’s arbitrary decision to extend the moratorium on oil and gas development in Canada’s Arctic waters, without meaningful consultation,” he stated. “This is a setback to the Inuvialuit Settlement Region, who are in need of new economic opportunities. Our livelihoods are impacted, and it is unacceptable this decision has been made without exploring alternative ways to bring jobs, growth and energy security to Canada’s North. This decision undermines ongoing efforts to enhance sovereignty and security in our region and will have a lasting impact on the strides Inuvialuit have made in these key areas.

“For thousands of years the Inuvialuit have been conscientious and sustainable stewards of our land and water. If the federal government truly respects Indigenous sovereignty and self-determination, they would explore opportunities along with us that are mutually beneficial.”

The Inuvik Drum sent a number of questions to Smith and the IRC to clarify their position but did not receive a response.

Last drilling rig already built?

Energy analyst Doug Matthews described the likelihood of the price of oil staying high enough for a long enough period of time to justify the high costs of offshore drilling in the Arctic as slim to none.

“The issue isn’t just the price of oil but how long it will stay at the hoped-for price,” he said. “Offshore exploration projects can take more than 15 years to reach production so the important number is the best estimate of oil prices in 15 years, not today.

“Depending on your source, oil demand is expected to decline from today’s average of 100 million barrels per day to half that by 2035 (International Energy Agency) or 2050 (Saudi Aramco). The date may change but the direction appears set to lower demand.”

A spokesperson with the Canadian Energy Regulator echoed Matthews’ data, saying out of the numerous scenarios the government has on hand, the most likely projection — called the Evolving Policies scenario — has Canadian oil demand peaking by 2032 and tapering off from there.

“The vast majority of oil sands production in 2050 is from oil sands facilities already producing,” said communications officer Karen Ryhorchuk, who noted the federal government’s projections may in fact be too optimistic for oil futures. “Recent global net-zero scenarios, such as the IEA’s “Net Zero by 2050” report, show rapidly declining global oil demand, which could lead to significantly lower Canadian production levels compared to our Evolving Policies Scenario. Future global climate policy and its effect on global crude oil demand and prices will have direct impacts on Canadian oil production.”

Matthews noted with the global marketplace rapidly shifting away from fossil fuels in an effort to stave off runaway climate change, high-risk projects will have an extremely difficult time generating interest among oil producers going forward. Even if the federal government made a dramatic shift back to fossil fuel development, the chances of that development actually happening is nil.

“Government may change policy and support offshore drilling, such as the National Energy Program of the late 1970s-80s, but governments don’t drill — companies do. And if there is no commercial interest there will be no drilling,” he said. “As we transit from fossil fuels to renewables, the most distant from market, most costly, most environmentally challenging projects will be the first to fall off the table. The Arctic offshore would be one of the first to go, while oil sands can continue to chug along for many years.”

Moratorium based on IRC’s data, say feds

A spokesperson for Crown-Indigenous Relations and Northern Affairs (CIRNAC) said the decision to continue the moratorium was based on both findings of a recent review of the Eastern Arctic in conjunction with the Nunavut government and Nunavut Tunngavik Inc., as well as the Arctic Review Final Reports, which were co-developed by CIRNAC, the GNWT and Yukon governments and the IRC.

“Oil and gas activities in the offshore do not meet minimum safety and environmental standards, nor contribute to Canada’s climate goals at this time,” said Vincent Gauthier. “The government continues to collaborate closely with the Inuvialuit Regional Corporation, and other northern partners at the Western Arctic Review Committee, co-developing the Western Arctic Review and completing the Final Report. The findings in the Final Report are key to informing the government’s decision to maintain the indefinite moratorium.”

He said the IRC and federal government collaborate closely on a number of Arctic Ocean related issues, including developing five-year Arctic Reviews. He noted the federal government had committed to preserving the unique ecosystem of Arctic Oceans and the lifestyles that depend on them.

In addition, Gauthier said the federal government has committed $2.5 million to support the IRC in participating in the implementation of the Western Arctic – Tariuq (Offshore) Accord.

A spokesperson for Natural Resources Canada said legislation to support retraining efforts for a low-carbon economy was in the works.

“Government of Canada plans to bring forward proposed legislation on sustainable jobs this year, which will lay the foundation for effective federal action to ensure all Canadians can benefit from the unprecedented opportunities of a low-carbon future,” said media relations officer Anthony Ertl. “Putting people and communities at the centre of our actions and investments is key to Canada’s approach to an inclusive clean energy transition and sustainable economic growth. To do so, the legislation will create a governance, accountability and engagement framework.”

About the Author: Eric Bowling

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