Who Owns Rights to Melting Arctic?

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The idea for "Who Owns Rights to Melting Arctic?" came from Douglass Nelson, a BusinessWeek reader for more than 30 years. A Navy veteran, he lives in Colorado Springs and works for Lockheed Martin.

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It's partially a military question. Submarines are required under international law to surface before traversing internal waterways but can remain submerged in international waters. And U.S. and Russian submarines have long been active in the area. For Canada, there's also an enormous environmental motivation. "If there's ever an oil spill, it's a disaster," Huebert says. "There's no technology that can remove heavy [oil] from under the ice. Canada tends to be hypersensitive about that." But sovereignty over shipping lanes that may or may not open up in the coming decades is only part of the ever-widening strategic game taking place in the Great White North.

Awaiting New Technology

A 2008 report by the U.S. Geological Survey, which took four years of study, estimated that as much as 20% of the world's undiscovered oil and natural gas may lie beneath the Arctic sea floor. The region may hold as much as 90 billion barrels of oil—believed to be about 13% of the world's undiscovered oil—and some 1.7 trillion cubic feet of natural gas reserves, roughly equivalent to the gas reserves in Russia, the world's leading supplier.

These findings made the question over sovereignty far more strategic—and contentious. Canada, Denmark, Russia, and the U.S. all assert territorial claims in the Arctic. And if oil prices ever rebound to the levels seen during the summer of 2008, topping $147 per barrel, less ice could help make fossil fuel recovery more cost-effective, if not exactly easy. "To get to the exploitation phase, you have to wait for the technology to advance," says Peter Zeihan, an analyst with Stratfor, a strategic consulting firm in Austin, Tex. But with the ice cap disappearing at a rate of more than 20,000 square miles per year, the technical challenges are expected to dwindle over time.

And that's where drawing the map of borders in the Arctic Ocean becomes paramount—and complicated. In August 2007, a Russian submersible descended through a hole in the ice to plant a Russian flag on the sea floor at the North Pole. It was a provocative stunt that caused some hand-wringing around the globe, especially in light of Russia's increasingly aggressive military stance. Countries are allowed to consider waters out to 12 miles from their coasts as their own territory. For countries that have signed the U.N. Convention on the Law of the Sea, which the U.S. has not but may do so soon, waters that go out 200 miles over a country's continental shelf are considered "exclusive economic zones." But if signatory countries can prove that their continental shelf extends beyond that 200-mile line, they have rights to oil, gas, and minerals beneath the seabed. Thus the scramble over competing claims of sovereignty.

Russia claims its shelf runs some 1,200 miles from Siberia—almost to Ellesmere Island, Canada's northernmost point, although Russia claims only the portion of the shelf on its side of the North Pole. Even so, if there is as much natural gas there as the U.S. Geological Survey thinks, and much of it is concentrated in areas Russia claims for itself, then it could conceivably solidify Russia's already dominant hold on the world's natural gas market—and thus raise the stakes in a strategic scramble now heating up at the top of the world.

Hesseldahl is a reporter for BusinessWeek.com.