Arctic Energy Development Will Bolster Shipping Infrastructure

January 28, 2016 in Blog

The Arctic region is an area of strategic importance to countries around the globe. Shipping routes and regional infrastructure are critically important to global commerce. Due to a reduction of ice in summer months, more and more countries are attempting to take advantage of newly-available trade routes.  The intersection of tomorrow’s global trade and expanding infrastructure development will certainly reside in the Arctic.

Examples of rapid change are evident.  In the past, cargo traveling from Korea to New York would have to take a 12,000 km route and pass through the Panama Canal. Now, in summer months, the cargo can chart through the Arctic, cutting the journey down to 5,000 km. This is a massive difference in cost and travel time, and companies are eager to begin taking advantage of such gains. In addition to business and commerce, these new shipping routes could also positively impact relationships between nations wishing to utilize these more efficient routes.

The financial services firm, Guggenheim Partners, recently published research on how much global investment the Arctic needs in order for the region to become fully integrated into the global economy. The firm estimated that a grand total of $1 trillion will be needed to boost infrastructure throughout the Arctic. While that number is massive, it is achievable if the investment effort is global and spans across all industries – including the oil and gas industry.

Currently, only 47 Arctic energy projects are underway globally.  Out of necessity, the energy industry has historically created a significant part of the current Arctic infrastructure. However, in order for the oil and gas industry to invest in the years ahead, it must be permitted to operate and invest.  Guggenheim has valued the Arctic energy industry at $192.7 billion, more than any other industry in the Arctic.  This is at a time when Arctic energy development has slowed considerably thanks to unreasonable and economically harmful regulations.

The oil and gas industry contributes to infrastructure in a variety of ways, particularly in the support and maintenance of ports in the area. These ports provide jobs to local communities, and create more efficiency among new and old Arctic shipping routes alike. Local communities have long been hoping for the creation of these ports, and oil and gas companies can bring them to life if they are allowed to explore and develop local resources. Unfortunately, a proposed study on the potential creation of a deep water port by the Corps of Engineers was suspended this fall after the energy industry announced they were pausing projects in the area.

Arctic investment in all forms is needed to incorporate the region into the global economy. One of America’s most prominent infrastructure needs is more icebreakers. Recently, many leaders around the country have joined the growing chorus calling for more icebreakers. The United States falls far behind in comparison to some of the world’s superpowers when it comes to owning and maintaining these critical ships. The federal government can contribute its share of Arctic investment by allocating funds to the Coast Guard to ensure our icebreaker fleet is bolstered.

Alaska’s Native communities want and need the Arctic investment that both the federal government and the energy industry can provide. When companies invest in the Arctic, a multitude of benefits arise for Native communities. These benefits allow them to maintain their cultural traditions, while also enjoying modern technology and education systems. According to a recent piece in the National Journal:

“Many Alaska Natives also see oil and gas as important to help them maintain their subsistence traditions, including buying fuel for the boats that they use whaling, and allowing them to continue living in remote villages where there are few other industries or jobs.”

It is well understood how Alaskans can benefit from the Arctic infrastructure that energy projects provide, but the entire world can also benefit from this infrastructure from new shipping opportunities and commerce. The Center for International Maritime Security summed up some of the shipping advances taking place, along with the need for more investment saying:

“Arctic shipping is also becoming viable – that much was made clear when MV Yong Sheng became the first container-transporting vessel to transit from its home port in China along the Northern Sea Route, Russia’s Arctic waterways, to reach Rotterdam, Netherlands in August 2013. It is this increased opportunity for business in the region which presents new challenges for the U.S. Coast Guard and Navy.”

These new shipping developments present countless opportunities for companies around the globe to interact and conduct business with one another.  Clearly we need better infrastructure across the entire Arctic. We must push for regulations that encourage safe, efficient energy development, instead of scaring away businesses with ridiculous and unnecessary red tape.