Legislature(2013 - 2014)BARNES 124
02/20/2014 11:15 AM House ECON. DEV., TRADE & TOURISM
| Audio | Topic |
|---|---|
| Start | |
| Presentation(s): Center of International Governance Innovation; Carleton University | |
| Presentation: Marine Exchange of Alaska | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, TRADE, AND
TOURISM
February 20, 2014
11:19 a.m.
MEMBERS PRESENT
Representative Shelley Hughes, Chair
Representative Bob Herron
Representative Pete Higgins
Representative Lance Pruitt
Representative Geran Tarr
MEMBERS ABSENT
Representative Lynn Gattis
Representative Craig Johnson
Representative Kurt Olson
Representative Harriet Drummond
COMMITTEE CALENDAR
PRESENTATION: CENTER OF INTERNATIONAL GOVERNANCE INNOVATION~
CARLETON UNIVERSITY~ OTTAWA~ CANADA
- HEARD
PRESENTATION: MARINE EXCHANGE OF ALASKA
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
JOHN HIGGINBOTHAM, Senior Distinguished Fellow
Carleton University
Ottawa, Ontario, Canada;
Senior Fellow, Centre for International Governance Innovation
Waterloo, Ontario, Canada
POSITION STATEMENT: Provided a presentation on North America
and the Arctic region.
PAUL FUHS, President
Board of Directors
Marine Exchange of Alaska
Juneau, Alaska
POSITION STATEMENT: Provided an overview of the Marine Exchange
of Alaska.
ACTION NARRATIVE
11:19:12 AM
CHAIR SHELLEY HUGHES called the House Special Committee on
Economic Development, Trade, and Tourism meeting to order at
11:19 a.m. Representatives Herron, Higgins, and Hughes were
present at the call to order. Representatives Pruitt and Tarr
arrived as the meeting was in progress.
^PRESENTATION(S): CENTER OF INTERNATIONAL GOVERNANCE
INNOVATION; CARLETON UNIVERSITY
PRESENTATION(S): CENTER OF INTERNATIONAL GOVERNANCE
INNOVATION; CARLETON UNIVERSITY
11:20:02 AM
CHAIR HUGHES announced that the first order of business would be
a presentation by John Higginbotham of Carleton University,
Ottawa, Ontario, Canada, and the Centre for International
Governance Innovation, Waterloo, Ontario, Canada.
11:20:09 AM
JOHN HIGGINBOTHAM, Senior Distinguished Fellow, Carleton
University, and Senior Fellow, Centre for International
Governance Innovation, gave a brief history of his background.
Mr. Higginbotham stated that he brings to Arctic issues a sense
of urgency, which is based on 30 years of diplomatic and other
experiences. This sense of urgency is related to the gap
between international pressures and [the lack of] regional and
federal resources applied to the future of the Arctic. Mr.
Higginbotham directed attention to the PowerPoint presentation
entitled, "North America and the New Arctic." He and others are
drawn to this issue by the dramatic melting of the Arctic ice
cap that has taken place over the past 30 years. This
phenomenon is not well understood, but it is evident that the
ice is melting in the Arctic and having an effect on permafrost,
on communities, and on geopolitical issues and economic
activities. He said he would not explore the causes of global
warming, but there is a dramatic trend, and individuals and
governments must think about the near future. The projected
reduction in the size of the summer ice cap over the next 50
years is important for Canada and Alaska with respect to: the
accessibility of communities; fisherman; tourists; resource
exploration; and shipping routes throughout the world [slide 1].
11:25:43 AM
REPRESENTATIVE HIGGINS referred to the map on slide 1 and asked
for clarification.
MR. HIGGINBOTHAM explained that the red area on the map marked
"2007" is an indication of the ice coverage in the summer. In
further response to Representative Higgins, he confirmed that
the Northwest Passage (NWP) is only open for two months per year
- and a short time longer with the use of icebreakers - although
"some people are suggesting" that the center of the Arctic Ocean
will be ice-free in September and October. Slide 2 was a rough
chart of the extensive petrochemical and mineral resources in
the Arctic Ocean that have not been exploited because doing so
is dark, cold, dangerous, and very expensive. He acknowledged
that the Arctic remains an attractive place to invest without
regard to its constraints. Slide 3 entitled, "Arctic Boundaries
Claims" illustrated the legal claims by different countries over
the Arctic Ocean; this is an important issue as uncertainties
over boundaries have caused centuries of war. For the moment,
the United Nations Convention on the Law of the Sea (UNCLOS),
Commission on the Limits of the Continental Shelf process has
the issue under control between the various Arctic coastal
states; in fact, there is an agreement by the Arctic coastal
states to reach bilateral agreements where there are territorial
disputes. For example, the Russians and the Norwegians have
unexpectedly reached a territorial agreement in the Barents Sea.
Mr. Higginbotham characterized this commitment to come to a
peaceful settlement of boundary issues as "quite promising." On
the other hand, there is an ongoing Canada/U.S. dispute over a
portion of the Beaufort Sea, the U.S. has not ratified UNCLOS,
and there are questions on the issue of innocent passage through
the waters of the Canadian Arctic Archipelago.
11:31:51 AM
MR. HIGGINBOTHAM continued to slide 4 entitled, "Arctic Shipping
Routes." He said his interest in shipping routes was inspired
by the search for NWP, and the relative lack of attention to its
development by Canada. There is a long history of maritime
commerce through NWP, most of a destinational nature for the
purpose of servicing communities. Four routes were shown on
slide 4: the Canadian NWP; the central Transpolar Sea Route
(TSR), which can be used in the summer with the assistance of a
large icebreaker; the Russian Northern Sea Route (NSR); and the
Arctic Bridge Route (ABR). He advised that Russia is the
commercial leader in the Arctic because it has invested billions
of dollars in fleets of nuclear icebreakers, has developed
offshore oil and gas facilities, and has created a NSR
administration to encourage paying traffic from Europe to Asia,
as this is a much shorter route compared to transit through the
Panama Canal.
11:35:11 AM
CHAIR HUGHES asked whether the increase in activity along NSR is
because of retreating ice, or because Russia is active in
encouraging its use. Also, how do shipping opportunities
compare between NSR and NWP.
11:36:00 AM
MR. HIGGINBOTHAM said it is a combination of both factors.
Geographically, NSR is more ice-free in July, August, or
September because the straits in NWP clog up with moving ice.
Also, the Russians have developed a system of icebreakers,
convoys, and ice pilots; for example, just one ship went through
NWP from Vancouver to Finland without icebreaker assistance last
summer. In contrast, hundreds of ships went through NSR and
there were between twenty-five and sixty international transits
of major ships. Russia has made the "return to the Russian
Arctic" a major priority in order to serve energy projects and
transit traffic. The development of Russian deep-water ports is
broadly integrated with defense and security efforts as well,
although this aspect is tempered by its need for international
capital to develop oil and gas resources in Siberia and along
the Arctic coast. Mr. Higgenbotham opined Canada and the U.S.
are the least developed, with respect to Arctic maritime
development, of all of the Arctic states. He directed attention
to slide 5 entitled, "Icebreakers of the World (Source: USCG)"
which illustrated the investment that has been made by Russia in
state-owned equipment and infrastructure to promote economic
development in the Arctic. Norway is also very advanced - it is
probably the world leader in Arctic oil and gas development -
and all of the Scandinavian countries cooperate with Russia
through the Barents Euro-Arctic Council.
11:41:47 AM
MR. HIGGINBOTHAM turned to slide 6 entitled, "Northern Sea
Route." He pointed out there are search and rescue stations all
along the route, and Russia maintains a high level of mapping
and control in the area, charging countries fees for transiting.
Access is limited and ships are monitored by electronics and by
Russia's fleet of icebreakers. The traffic is now a fraction of
world trade compared to that of the Suez Canal, which has 18,000
transits per year, but it is the beginning of an important trend
in light of the changing ice and the coming of global commerce.
Mr. Higginbotham cautioned that granting the Russians a
commercial monopoly over transpolar travel and marine transport
in the Arctic is a mistake for North America.
REPRESENTATIVE HIGGINS asked whether transit through NSR is
restricted to summer use.
MR. HIGGINBOTHAM estimated that it is open to use for
approximately four months. In further response to
Representative Higgins, Mr. Higginbotham said it is possible for
the ice to return but that is unknown. The evidence of the last
30-40 years shows the retreating ice is a steady trend, although
there are many different explanations for climate patterns.
11:46:43 AM
CHAIR HUGHES asked how many transits are attributed to the
Panama Canal.
MR. HIGGINBOTHAM responded about 10,000 per year. In further
response to Chair Hughes, he said passage through the Arctic
saves about a week of sailing time for ships from Japan or Korea
that would otherwise travel through the Suez Canal. He then
turned to Canada's "Northern Strategy," which is a document
outlining Canada's unique concern about sovereignty, its concern
about economic and social development, and its attention to the
environment. Regarding governance, Canada has seen the
devolution of federal powers to the northern territories; for
example, Yukon has a level of governance not far from that of a
Canadian province. Recently the federal government and the
Northwest Territories have reached agreement on the control of
natural resources. Nunavut, a large area populated mostly by
Inuit, is the least developed area and is governed by a
combination of territorial government and a quasi-government
formed by the Inuit population. However, all three territories
remain largely dependent on the federal government for the
funding of education and health systems [slide 7]. He opined
the Canadian government has not carried its full responsibility
for national development in the Arctic to the degree it has in
the South. Slide 8 displayed "Canada's Arctic Council
Priorities 2013-2015." He noted that Canada is currently chair
of the Arctic Council, which influences peaceful development and
cooperation in the region. As chair, Canada has set the
following priorities: Resource development in the Arctic to
meet the interests of Northerners; safe Arctic shipping, which
is a deviation from previous priorities directed toward the
environment and science; and sustainable circumpolar
communities. Slide 9 was a map entitled, "Northern
Transportation System and Northern Projects Management Office
Projects." Mr. Higginbotham pointed out there is a lot of
traffic from Montreal and Baffin Island; there is an Arctic port
at Churchill; there is a route from Alberta down the Mackenzie
River; and Yukon has access to Skagway and south. The Canadian
Arctic is in acute need of greater attention to small and large
ports, aids to navigation, charting, and better communications;
in fact, the Canadian Coast Guard and Transport Canada are
considering a policy framework for marine corridors. Slide 10
was a map of the Nordic Orion's profitable voyage from Vancouver
to Norway through NWP. Finally, he displayed slide 11 entitled,
"The North American Arctic Marine Highway." Mr. Higginbotham
said his years of experience in Washington D.C. leads him to say
sufficient dialogue between Canada and the U.S. on Arctic issues
"is not really happening."
11:57:21 AM
REPRESENTATIVE HERRON inquired as to on what the U.S. should
concentrate during its chairmanship of the Arctic Council.
MR. HIGGINBOTHAM expressed his belief that the Arctic Council
"tries to do everything," and needs to turn away from research
and stewardship - [although they] are important - and put more
focus on marine transportation and closer cooperation among the
coastal Arctic states. Also, he urged for an examination of how
working groups are constituted, and especially important for
Canada and the U.S., are how regional governments are
represented, because Canadian territories and Alaska should have
their own voice outside of federal authority. He observed work
should focus on bilateral relations between Canada and the U.S.
and on triangular cooperation between Russia, Canada, and the
U.S.
REPRESENTATIVE HERRON said he would contact Mr. Higginbotham
directly with other questions and share his responses with the
committee.
CHAIR HUGHES urged for proactive work on Arctic issues.
12:00:57 PM
^PRESENTATION: MARINE EXCHANGE OF ALASKA
PRESENTATION: MARINE EXCHANGE OF ALASKA
12:01:46 PM
CHAIR HUGHES announced that the final order of business would be
a presentation by the Marine Exchange of Alaska.
12:01:56 PM
PAUL FUHS, President, Board of Directors, Marine Exchange of
Alaska (Exchange), informed the committee the Exchange is a non-
profit organization that set up a vessel tracking and emergency
response system. The Exchange has also been working on the
Northern Sea Route (NSR) for about 20 years. He observed that
global warming has accelerated [Arctic shipping], but regardless
of the changing climate, the Arctic "is open." He displayed a
map of four Arctic shipping routes and advised that there has
been an increase in transpolar shipping [slide 3]. Although
there is less ice, the ice moves around and still creates a
challenge to shipping. In 2013, about 400 vessels transited
through the Bering Strait - of which 71 were transpolar
shipments across NSR -, 17,000 vessels transited through the
Suez Canal, and 14,000 vessels transited through the Panama
Canal [slide 4]. Vessel traffic [through the Arctic] is
increasing by 50 percent per year and estimates are by 2030
there will be about 2,000 vessels per year. Mr. Fuhs explained
his data comes from automated identification systems (AIS)
stations around the Arctic. Vessels over a certain size are
required to indicate their destination; AIS stations pick up
their signals every six seconds that are accurate to three
meters [slide 5]. Also recorded is the name of the vessel, its
owner, the cargo, and fuel type. He advised that almost all of
the shipping through NSR has been bulk ore and petroleum;
however, a great amount of container shipping travels the Great
Circle Route between Asia and the U.S., and with icebreakers,
container ships on NSR can connect at Adak or Dutch Harbor with
the container ships on their way to the U.S [slide 6]. Slide 7
depicted vessel traffic on the Great Circle Route on 1/22/14,
and Mr. Fuhs noted that this route carries about 80 percent of
its capacity of container vessels.
12:05:43 PM
REPRESENTATIVE HERRON suggested that anticipated new Canadian
shipping may double the existing traffic through Unimak Pass
within 10-15 years.
MR. FUHS agreed and added that the aforementioned new shipping
would consist of tanker cargoes of crude oil, increasing concern
about environmental issues. He noted that further information
on this matter can be found in the draft Aleutian Islands Risk
Assessment, and recommended that a similar assessment is needed
of the Bering Strait. Slide 8 showed NSR, the Great Circle
Route, and shipping routes through the Panama and Suez Canals.
Use of NSR from the U.S. West Coast saves about ten days when
compared to the route through the Panama Canal, and saves about
twenty days when compared to the route through the Suez Canal.
Although an icebreaker is needed for transit through NSR, the
cost of a Russian icebreaker is a little less than the cost of
the anti-piracy insurance required to ship around Cape Horn and
along the coast of Africa. Thus, shipping on NSR is not more
expensive, from an administrative view. In response to Chair
Hughes, Mr. Fuhs further explained that if a shipper owns the
vessel, and the cost of anti-piracy insurance equals the cost of
icebreaker fees, all of the cost of the fuel used for ten or
twenty extra days of sailing is saved. Slide 9 illustrated a
South Korean design for an icebreaking containership, powered by
liquefied natural gas [LNG], and dedicated to run on NSR and
connect to other ships on the Great Circle Route. Black carbon
[emission] is an issue of debate in the Arctic, and an LNG-
powered vessel avoids that issue. In response to Chair Hughes,
he said the South Korean ship is in the design stage. Slide 10
illustrated different Russian diesel- and nuclear-powered
icebreakers. Icebreakers with a shaft power of 25 megawatts
(MW) are in existence today. Three Russian icebreakers with a
shaft power of 60 MW will be built by 2020, and two more by
2030. He compared the power of one 60 MW ship to that of the
power of Bradley Lake Hydro, which produces 45 MW. These
icebreakers will extend the shipping window on NSR from about
five months to about seven months out of the year. A future
Russian icebreaker of 110-130 MW will be operational year-round,
and will travel at 12 knots through 3.5 meters of ice [slide
11]. He said, "This ship has not been built yet, but this
changes everything right here."
12:11:08 PM
REPRESENTATIVE PRUITT asked for further details.
12:11:19 PM
MR. FUHS said the icebreakers do not hold cargo, but lead the
cargo ships in a convoy. Slide 12 was an illustration of an
icebreaker with shaft power of 110 MW, length of 600 feet, width
of 100 feet, and draft of 11-13 meters. He pointed out that
vessels of this size require about 35 feet of depth in port,
thus Arctic ports need to be designed at this depth to
accommodate icebreakers and U.S. Coast Guard (USCG) ships. Two
potential deep-water ports that can achieve this depth are Nome
and Port Clarence. Slide 13 was an illustration of a South
Korean LNG vessel that is 900 feet long and travels through the
Suez Canal to Asia for seven months of the year, and through NSR
for five months of the year. Two of these vessels have been
built and fourteen more are under construction. Slide 14
illustrated the route taken by the Chinese icebreaker Xue
through U.S. waters. Because the U.S. has not ratified the
United Nations Convention on the Law of the Sea (UNCLOS), U. S.
sovereignty has not been established. Mr. Fuhs advised that
there is potential opportunity and risk associated with the
opening of NSR. Some of the risk is presented by crude oil
tankers. Slide 16 pictured a crude oil tanker transiting the
Bering Strait, and he noted that the total cargo through the
Bering Strait in 2013 was 1.3 million tons, 800,000 tons of
which were petroleum products. He cautioned that the U.S. is
unprepared for an incident in that area because the circulation
patterns in the Arctic indicate that if there is an incident in
Bering Strait, the spill will come straight to the west coast of
Alaska [slide 17]. He stressed that Alaska needs Arctic ports
to establish response capability. Slide 18 identified all of
the Arctic oil developments leased by Russia, Iceland, Canada,
and Greenland [slide 18]. He expressed his frustration in that
U.S. offshore development has been "shut down" in U.S. waters,
but oil development continues in the Arctic, therefore Alaska
holds "... zero percent of the opportunity and almost 100
percent of the risk." The Exchange and USCG are trying to
determine the response capabilities of ports along NSR [slide
19]. There are some joint response agreements with Russia;
however, the responses need to be drilled and exercised to
determine prevention and response capabilities. Mr. Fuhs
restated the importance of establishing ports and response
centers at Nome and Port Clarence. Although USCG and the
Department of Defense (DoD) have "weighed-in now," there has not
been concrete federal action or investment. Mr. Fuhs closed,
saying the Arctic is a high-risk area and a U.S. presence is
needed to ensure actions taken there are right each and every
time. He thanked Representative Herron for his leadership and
urged for the passage of legislation on the development of
Arctic infrastructure.
12:18:02 PM
REPRESENTATIVE HERRON added that the Bering Strait is a sieve
and pressure from the warm water going north and the cold water
going south brings the current to Alaska's coastline from above
or below the strait, making Alaska a victim by its geography.
CHAIR HUGHES observed that Russia is ahead of the U.S. in Arctic
activity and asked whether Russia is taking liability for [the
Arctic's] protection.
MR. FUHS said no. He recalled at a recent international
conference in Norway the chain of liability was discussed, but
the answer remains unknown. He expressed his hope that working
with the Russians on a local level may be effective, as was done
in the resolution of the Barents Sea dispute between Russia and
Norway.
CHAIR HUGHES asked whether the Arctic Council is the best venue
for working on an agreement.
MR. FUHS acknowledged that at some of the Arctic Council
meetings the Russians seemed interested in establishing real
criteria and policies. Part of the problem is that the U.S. has
been a defender of worldwide innocent passage because it does
not want any restrictions on its vessels. Therefore, the U.S.
has little ability to regulate vessels transiting in
international trade because of the U.S. Department of State and
DoD policies. However, if following these policies, Mr. Fuhs
warned the federal government needs to provide assets to protect
its coastline such as icebreakers, a deep-water Arctic port, and
clean-up facilities. He opined Alaska's Congressional
Delegation does not have sufficient "traction" to influence
federal policy.
REPRESENTATIVE HERRON advised the Barents Regional [Council] is
a good model, as is the Pacific Northwest Economic Region
(PNWER) Arctic Caucus. He advised that Alaska needs to reach
out to Canada and Russia in a grassroots effort to develop
subnational agreements that are then presented to national
governments. There will be more success with multinational
negotiations if subnational governments have worked out regional
projects in subnational jurisdictions; for example, Alaska,
Yukon, and Northwest Territories have the Beaufort Sea as a
common denominator.
12:23:25 PM
MR. FUHS related the Exchange approached the Canadian national
government and offered to install receiving stations in two
villages and share the resulting information, but the offer was
refused pending a new Canadian administration. He opined
international politics interfered, even in the issue of marine
domain awareness; however, a commercial path using the
protections required by insurance companies may force the issue.
REPRESENTATIVE PRUITT asked for the impact the proposed canal
through Nicaragua - funded by China - will have on the shipping
traffic through NWP, especially if China steers its shipping
traffic through Nicaragua because of its investment therein.
MR. FUHS said he met with Chinese delegates at the international
conference in Tromso, Norway, and they were very aggressive on
NSR regardless of the Panama Canal. The expansion of the Panama
Canal is so larger vessels can transit at the same cost, which
allows individual companies an advantage. However, it is more
of an advantage to save shipping time, depending on whether the
cargo is perishable. He said the Chinese have done a lot of
economic analysis on shipping from China to Europe.
12:27:14 PM
REPRESENTATIVE PRUITT restated his observation about China's
investment in Nicaragua.
MR. FUHS referred to the map and pointed out that even with
passage through Nicaragua, "that's a lot of distance to make
up."
REPRESENTATIVE TARR inquired as to whether cost overruns on the
Panama Canal expansion affect the attractiveness of the canal
route.
MR. FUHS explained that the expansion of the Panama Canal has
about a $1.6 billion cost overrun which must be built into its
economic model. Although larger ships will be able to pass
through, it will not be any cheaper.
(Indisc.)
12:28:38 PM
CHAIR HUGHES noted the canal in Nicaragua may have environmental
impacts.
MR. FUHS assured the committee that the Exchange will continue
monitoring, and has the diagnostic tools to track every ship.
Because of federal regulations regarding non-tank vessels within
50 miles of shore, the Exchange has established additional
emergency and oil spill response capability to provide an
additional 1,000 vessels in response. However, about one-half
of the vessels in innocent passage on the Great Circle Route are
still missed. In addition, the Exchange seeks to partner with
other oil spill response organizations in order to cover
Alaska's 30,000 miles of coastline. Mr. Fuhs cautioned that
there are limitations on response vessels due to policy and
ownership issues that affect contingency plans, and there remain
several overlapping jurisdictions on spill response that need to
be addressed. Oil spill response coverage is funded by a toll
paid by each vessel, except for those transiting in innocent
passage.
12:31:22 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Economic Development, Trade, and Tourism
meeting was adjourned at [12:31] p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| JH Alaska House Feb20-2014.pdf |
HEDT 2/20/2014 11:15:00 AM |
|
| arctic encounter 2.pdf |
HEDT 2/20/2014 11:15:00 AM |
Arctic policy |