Sun May 4, 2014
Climate Change Warming Up Business In The Arctic
Originally published on Sun May 4, 2014 6:19 pm
ARUN RATH, HOST:
And if you're just joining us, this is ALL THINGS CONSIDERED from NPR West. I'm Arun Rath. Climate change is melting polar ice at an alarming rate. While this terrifies many people, especially those living near sea level, some businesses are seeing an opportunity, a big opportunity. According to the National Snow and Ice Data Center, the year-round ice cover in the Arctic is now half the size it was in the 1980s. And previously inaccessible natural resources are now there for the taking.
Isaac Arnsdorf writes about energy and commodities for Bloomberg News. He says it starts with oil.
ISAAC ARNSDORF: The Arctic is estimated to have about a quarter of the world's undiscovered oil and gas, but it's not just that. There's diamonds and gold and zinc and copper and just about all the natural resources you can imagine. Some investors are describing it as if a whole new continent was discovered.
RATH: What are investors putting into this to try to get those riches out?
ARNSDORF: Companies are expected to spend $100 billion in the next decade. There's been mining and drilling for oil in the Arctic for decades but this is really an unprecedented level of investment that's expected to come on in the next few years because of the pace of climate change.
RATH: And what are they going to be doing with that $100 billion investment?
ARNSDORF: Well, there's not much there to begin with so there's a lot of basic infrastructure that you need to start with if in order to have that kind of industrial development. There's just one highway connecting the northern slope of Alaska with the rest of North America. So, you know, no matter what kinds of minerals you plan on extracting, getting those to market present a lot of logistical challenges. And then there's the actual development costs of drilling oil wells or digging mines.
RATH: And what about the issues around who has the rights to all the vast and valuable resources?
ARNSDORF: Well, the Arctic is split among the countries with territory in the area; so the U.S., Canada, Denmark because of Greenland, Norway, Iceland and Russia. There are some disputes on their maritime borders. Another layer on top of that is about four million people who live in the region, many of them indigenous people whose heritage dates back thousands of years.
RATH: Now not everybody is wanting to jump headfirst into this opportunity. In fact, you quote some fairly skeptical investors. What's holding them back?
ARNSDORF: Well, many people still regard this as a very frontier place. You know, even as investors are calling it an emerging market or a frontier market, it still sounds pretty farfetched to a lot of people who are very aware of the difficulties of operating in that environment. While the climate is changing and the ice is receding, standard industrial practices that are used all over the world haven't been tried in that environment. And in some cases they think they couldn't succeed in that environment.
That makes a lot of investors concerned about potential losses if these projects don't work out or if there's an accident, if there's a catastrophe like the Exxon Valdez. And environmentalists are warning, how can you plan to operate in an area where you don't have a contingency plan?
RATH: And speaking of the environment, obviously people are just lining up to point out the irony...
ARNSDORF: Of course.
RATH: ...that ice that's been cleared by climate change allowing companies to dig for more fossil fuels. Do any of the companies have anything to say about that?
ARNSDORF: Absolutely. It's a tremendous irony. And the companies that have been at the front of the pack in terms of developing the Arctic have been careful about emphasizing their sustainable practices and working with the people who live in the areas, about trying to minimize the environmental damage.
But absolutely, and it's especially a concern for the people who live there who are trying to balance the potential income and what they have to gain from the extraction of those resources with the risks that it could pose to their traditional ways of life.
RATH: That's Isaac Arnsdorf. He reports on energy and commodities for Bloomberg. Isaac, thank you.
ARNSDORF: Thank you.
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