Natural Resource Developments on the Arctic Continental Shelf

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1 SPECIAL ISSUE 2 Introduction Wylie Spicer Q.C., Norton Rose Fulbright LLP This paper describes the natural resources available for exploration and exploitation on the Arctic continental shelf. The extent of the continental shelf is defined so as to differentiate it from the territorial areas of the Arctic coastal states. The ownership characteristics of the continental shelf are discussed. The provisions of the United Nations Convention on the Law of the Sea(UNCLOS) dealing with applications to extend the coastal state continental shelf beyond 200 miles are explained. All of the above is important to give a full understanding of the ownership of the natural resources on the Arctic continental shelf. Discussion of ownership issues in the context of the Arctic continental shelf is somewhat complicated because the Arctic ocean is small and there are numerous littoral States bordering the Arctic. The Arctic is important to many of the littoral states. To put it in perspective, Canada, one of the world's largest countries has a coast line of approx 243,000 kms, 162,000 of which border the Arctic. Of Canada's land mass 40% is within the Arctic Circle Autumn. Vol. 24

2 SPECIAL ISSUE 2 What are the Resources The resources of the are many. It is estimated that 30% of the undiscovered natural gas remaining in the world is in the Arctic and that 18% of the undiscovered oil is also there. 84% of these resources are offshore, either in territorial waters or on the Continental Shelf. Methane Hydrate regions in the Arctic occur on the Arctic Continental Shelf Ocean slope and in deep water. Japan has recently successfully extracted Methane Hydrate from 1300 meters below sea level. This is an important development for a country with very little natural resources. There is also evidence that Manganese Nodules occur on the Arctic sea bottom. These nodules are layers of iron and manganese hydroxides of quite high grade. They are currently the subject of considerable exploration activity on the floor of the Pacific Ocean. It is not clear whether there is sufficient manganese nodules presence in the Arctic Ocean to warrant exploration. These resources are located on the, on the seabed of International waters, and also the seabed beyond National jurisdiction (the Area). What is the Continental Shelf There is a definitional exercise that must be made in order to distinguish between the Continental Shelf and the Exclusive Economic Zone (EEZ). These phrases are both defined in the UNCLOS as delineating the waters and seabed areas adjacent to coastal states. 38 Dokdo Research Journal Part V of the UNCLOS describes the EEZ as being adjacent to the territorial sea but not extending beyond 200 nautical miles from the

3 commencement of the territorial sea of the coastal state. Part V deals in large part with the conservation of the living resources of the EEZ. Article 56 (3) of Part V directs that consideration of the rights concerning the seabed and subsoil be considered in accordance with Part VI. SPECIAL ISSUE 2 Article 76 (1) of Part VI describes the Continental Shelf as: "the Continental Shelf of a coastal State comprises the seabed and subsoil of the submarine areas that extend beyond its territorial sea throughout the natural prolongation of its land territory to the outer edge of the continental margin, or to a distance of 200 nautical miles form the baselines from which the breadth of the territorial sea is measured where the outer edge of the continental margin does not extend up to that distance." Article 76 provides that a coastal state may apply to the Commission on the Limitation of the Continental Shelf (CLCS) seeking a recommendation that its Continental Shelf be determined to be greater than 200 nautical miles. Article 76 (8) provides that the CLCS will make recommendations based on the material provided to it as to the establishment of the outer limits of a Continental Shelf. The final determination of that shelf is then established by the coastal state on the basis of these recommendations. In summary, the "Continental Shelf" of any state is at least 200 nautical miles in extent and may be greater depending upon the recommendation of the CLCS. In the Arctic a number of the littoral states are making claims that their Continental Shelves extend beyond 200 miles. Russia is arguing that the Lomonosov Ridge is a natural prolongation of its land mass. This ridge has the potential to extend the Continental Shelf of Russia well beyond 200 miles. Canada has also been conducting research for the purpose of Autumn. Vol. 24

4 SPECIAL ISSUE 2 making submissions to the CLCS in areas known as the Canada Basin, the Alpha Ridge and the Lomonosov Ridge all of which lie beyond 200 nautical miles. Although the United States is not a party to the UNCLOS it has nevertheless been carrying out research in areas North West of Alaska in the Chukchi Sea. There is a ridge known as the Chukchi Shelf which could extend the Continental Shelf of the United States well beyond 200 nautical miles. The structure of the UNCLOS gives the coastal state the right to exploit the natural resources found on its continental shelf to the exclusion of others. Who Owns the Resources? The natural resources found on the continental shelf of a coastal state may only be exploited by that coastal state. Article 77 outlines the rights of the coastal state over the Continental Shelf: 1. The coastal State exercises over the continental shelf sovereign rights for the purpose of exploring it and exploiting its natural resources. 2. The rights referred to in paragraph 1 are exclusive in the sense that if the coastal State does not explore the continental shelf or exploit its natural resources, no one may undertake these activities without the express consent of the coastal State. There is an important qualification to the nature of these exploitation rights 40 Dokdo Research Journal in respect of natural resources exploited on a continental shelf beyond 200 miles. In that case, Article 82 of the UNCLOS requires that the coastal

5 state make payments through the International Seabed Authority(ISA) which is then under an obligation to distribute these payments to State Parties to the UNCLOS. Article 82 grew out of a compromise negotiated during the UNCLOS SPECIAL ISSUE 2 conference meetings. This compromise recognized the fact that the areas of the sea bed beyond national jurisdiction are considered by the UNCLOS to be for the common benefit of mankind (the Area). While it was agreed that a 200 mile continental shelf was acceptable and did not form part of the Area this was not the case for areas of a continental shelf beyond 200 miles which would otherwise have been part of the Area. It was felt that if a coastal state secured a continental shelf broader than 200 miles, that portion beyond 200 miles (which would otherwise have been part to the common heritage of mankind) must contribute to the common heritage of mankind if a coastal state exploited the natural resources of that shelf. Article 82 reflects this compromise in requiring payments for production on any area of the continental shelf beyond 200 miles. This requirement is regardless of whether the coastal state has applied to the CLCS for an extension of its shelf beyond 200 miles. The benefit of the CLCS recommendation for an extended continental shelf is to confirm internationally that the coastal state has the exclusive rights of exploitation beyond 200 miles. Some coastal states have legislated beyond 200 miles in any event, based on the clarification of continental shelf in the UNCLOS. Canada is one such country, its legislation tracks the UNCLOS wording. The Article 76 procedure for applying to the CLCS to confirm a continental shelf beyond 200 nautical miles was part of the compromise and combined with Article 82 confirms that the resources beyond 200 nautical miles are effectively owned by "mankind as a whole" (Article 137 (2)). If a Autumn. Vol. 24

6 SPECIAL ISSUE 2 continental shelf does not extend beyond 200 nautical miles it is part of the Area and the rights to its resources are administered by the ISA on behalf of mankind as a whole (Article 137 (2)). If a shelf extends beyond 200 miles, a portion of production revenues accrue for the benefit of mankind (Article 82). The ISA is currently fulfilling its responsibilities in the Area through its activities concerning the developing industry of seabed mining in the Area. The ISA grants leases for mining exploration in the Area and in the none too distant future will put in place a final regime for exploitation of the minerals in the seabed of the Area. The Article 76 and 82 compromise is important for the Arctic. As noted earlier, numerous of the littoral states are making Article 76 submissions to the CLCS. A number of these states, and their seabed claimed in Article 76 extensions, are either opposite or adjacent to each other. The CLCS has no jurisdiction to consider these issues(article 83), which are to be decided by agreement or referral to the settlement dispute provisions in the UNCLOS (Part XV). In the meantime states are encouraged to enter into interim agreements (Article 83 (3)). As there are great quantities of seabed resources in the Arctic, resolution of these competing claims is important to the states involved. 42 Dokdo Research Journal

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