Exxon Mobil's massive $19 billion LNG project in Papua New Guinea, begun in 2010, has shipped gas ahead of schedule. It is a complex project because of the physical and engineering connections among resources in the Southern highlands and underwater transmission and pipeline infrastructure, ending in an export terminal, with the first output going to a Tokyo power utility.
PNG's government has always had a complicated relationship with the Australian government, multinational corporations, and with its own citizenry's various special interests. The nominal, lifetime production volumes of this first project are 9 trillion cubic feet of natural gas over the 30 year project life. An economic impact study of the project was commissioned and published.
Without second level, or multiplier, effects the project is estimated to produce 3-6 billion kina of annual net benefits to Papua New Guinea over the project life. These benefits are the government's take from public and private taxes, royalties, development levies and charges, and return on equity form a 19% stake in the project, which was funded by a controversial loan from UBS. The costs are the additional expenditure for providing public services to the project environs and residents, both local and expat. 7,500 jobs will be created, of which 20% will be filled by local citizens.
The idea of putting the net cash flows into the creation of a sovereign wealth fund, on the Norwegian model, has been discussed ad nauseum. Were the government able to pull this off, without letting the surplus evaporate or be spent foolishly, this would be a great example for other developing countries looking for a new model for commercializing their natural resources. Other projects linked to this one are waiting in the wings. A new energy exporter has been born! Let's hope it turns out really well.
Showing posts with label Law of the Sea. Show all posts
Showing posts with label Law of the Sea. Show all posts
Monday, May 26, 2014
Monday, July 16, 2012
Two Senators Torpedo Law of the Sea Treaty
Republican Senators Bob Portman (R-Ohio) and Kelly Ayotte (R-NH) torpedoed any chances of the Law of the Sea Treaty being ratified this year by sending a rambling and somewhat incoherent letter to Senate Majority Leader Harry Reid.
The Treaty is criticized for being long, cited as being 320 articles and 200 pages long. The treaty's principles and articles are intended to cover all economic uses of the oceans beyond national jurisdiction: a pretty tall order. The Dodd-Frank bill was over 3,200 pages long, and it didn't even contain the actual rules and regulations, whereas the LOS Treaty describes the regulatory framework of the International Seabed Authority. By comparison then, the Law of the Sea Treaty is like a Cliff's Notes for the oceans!
The Senators want assurances that the treaty will be "enforced impartially and in a manner consistent with U.S. interests." This is an example of incoherence.. The requirement that all disputes be resolved in a manner consistent with U.S. interests wouldn't be acceptable even if the treaty were signed only by the U.S. and the six biggest naval powers in the world. Provisions of the dispute resolution process have been negotiated by multiple Administrations over decades. Like any treaty, they represent trade-offs our representatives felt acceptable because we gained what we wanted in other areas, such as international shipping and access to deep ocean resources for U.S. companies.
The authors make a big deal out of this Article: "Article 207 decrees that “[s]tates shall adopt laws and regulations to prevent, reduce and control pollution of the marine environment from land-based sources … taking into account internationally agreed rules.”
Realistically, I'm not sure that there are any internationally agreed rules governing ocean pollution from land based sources, so Article 207 could be disputed longer than patent claims between Microsoft and Apple. Also, the U.S. is active in UNEP and GESAMP (Group of Experts on the Scientific Aspects of Marine Pollution). Both these bodies would have something to say in the actual implementation of Article 207, if and when it came to that point. A fear about this article is not reasonable in the prevailing institutional practice.
To take the other side of this argument,decades long overfishing of deep ocean stocks by former Taiwanese and Korean industrial trawlers and the subsequent pollution from processing-at-sea was something that all nations, including the U.S, wanted stopped. Without enforceable treaties, this economic abuse couldn't be addressed at all.
The two Senators make an unfounded claim that usual and customary practice in international law and bilateral negotiations are sufficient to maintain peace and defend our national interests. The evolution of usual and customary practice relating to the 200 mile limit was made possible by the same multinational, consultative approach with they now decry. In fact, I believe that Chile and Peru were first to claim sovereignty over that limit, and U.S. declarations followed theirs as international law evolved. What happens when Exclusive Economic Zones overlap? If resolutions are always bilateral, what if the dispute, let's say, is between a nation like China and a nation like Vietnam? Isn't it worthwhile to have an internationally accepted framework which governs the delineation of zones and disputes?
We are headed to more and more of these situations. as pictured below:
I'm not saying by any means that having a treaty in place would create an oceanic Eden. The current patchwork quilt of customary practice, bilateral treaties, military pacts, and aggressive assertions by Russia and China is inherently unstable. Our military leaders recognize this.
In fact, as the Journal writes,
The Treaty is criticized for being long, cited as being 320 articles and 200 pages long. The treaty's principles and articles are intended to cover all economic uses of the oceans beyond national jurisdiction: a pretty tall order. The Dodd-Frank bill was over 3,200 pages long, and it didn't even contain the actual rules and regulations, whereas the LOS Treaty describes the regulatory framework of the International Seabed Authority. By comparison then, the Law of the Sea Treaty is like a Cliff's Notes for the oceans!
The Senators want assurances that the treaty will be "enforced impartially and in a manner consistent with U.S. interests." This is an example of incoherence.. The requirement that all disputes be resolved in a manner consistent with U.S. interests wouldn't be acceptable even if the treaty were signed only by the U.S. and the six biggest naval powers in the world. Provisions of the dispute resolution process have been negotiated by multiple Administrations over decades. Like any treaty, they represent trade-offs our representatives felt acceptable because we gained what we wanted in other areas, such as international shipping and access to deep ocean resources for U.S. companies.
The authors make a big deal out of this Article: "Article 207 decrees that “[s]tates shall adopt laws and regulations to prevent, reduce and control pollution of the marine environment from land-based sources … taking into account internationally agreed rules.”
Realistically, I'm not sure that there are any internationally agreed rules governing ocean pollution from land based sources, so Article 207 could be disputed longer than patent claims between Microsoft and Apple. Also, the U.S. is active in UNEP and GESAMP (Group of Experts on the Scientific Aspects of Marine Pollution). Both these bodies would have something to say in the actual implementation of Article 207, if and when it came to that point. A fear about this article is not reasonable in the prevailing institutional practice.
To take the other side of this argument,decades long overfishing of deep ocean stocks by former Taiwanese and Korean industrial trawlers and the subsequent pollution from processing-at-sea was something that all nations, including the U.S, wanted stopped. Without enforceable treaties, this economic abuse couldn't be addressed at all.
The two Senators make an unfounded claim that usual and customary practice in international law and bilateral negotiations are sufficient to maintain peace and defend our national interests. The evolution of usual and customary practice relating to the 200 mile limit was made possible by the same multinational, consultative approach with they now decry. In fact, I believe that Chile and Peru were first to claim sovereignty over that limit, and U.S. declarations followed theirs as international law evolved. What happens when Exclusive Economic Zones overlap? If resolutions are always bilateral, what if the dispute, let's say, is between a nation like China and a nation like Vietnam? Isn't it worthwhile to have an internationally accepted framework which governs the delineation of zones and disputes?
We are headed to more and more of these situations. as pictured below:
Xinhua News Agency (China)
The picture, released to the Associated Press, shows a Japanese coast guard vessel (left) encountering a Chinese patrol boat near disputed islands in the East China Sea.
I'm not saying by any means that having a treaty in place would create an oceanic Eden. The current patchwork quilt of customary practice, bilateral treaties, military pacts, and aggressive assertions by Russia and China is inherently unstable. Our military leaders recognize this.
In fact, as the Journal writes,
"One of the enduring mysteries of the treaty is how it has failed to even come up for a ratification vote given the breadth of support it enjoys from widely disparate groups. Former secretaries of State, both Republicans and Democrats, top civilian and uniformed Pentagon officials, the U.S. Chamber of Commerce, environmentalists, and former presidents George W. Bush and Bill Clinton have all been vocal supporters"It's always better to throw some papers around in an international court disputing a boundary than it is to be firing rounds from a naval vessel in a far off sea.
Thursday, June 14, 2012
Rumsfeld's Unfortunate Rhetoric on LOS Treaty
Donald Rumsfeld was Secretary of Defense from 1975-1977. I was working at the United Nations at the time, and my team was part of a much larger group working for the Third United Nations Conference on the Law of the Sea. My team was focused on technical issues in creating an economic regime for exploiting subsea mineral resources beyond national jurisdiction, what was to be called the "Area." At the time, the interest was on deep ocean manganese nodules, and there was a lot of excellent work being done by international research groups at Scripps Institution of Oceanography, CNEXO (Fr,) among many other research groups. I recruited an researcher from Scripps to build own my team's technical expertise. The promise of an orderly international legal and economic framework to develop these resources peacefully, was really an exhilarating prospect.
Our foreign policy regarding the economic regime for the deep seabed was handed over to a narrow cabal of corporate interests, led by executives from Kennecott Copper, which today is an operation within Rio Tinto. The rhetoric in all the speeches, official and unofficial communications talked about redistribution of wealth, socialism, paralyzing regulation, abdication of national sovereignty and so on. It's absolutely laughable to see this same language being resurrected today in a Wall Street Journal editorial from former Secretary Rumsfeld on June 13th. Reading this editorial, it's as if Secretary Rumsfeld has just emerged from a time capsule that he entered in 1977. Lots of things have changed since then, largely to the detriment of our strategic options in the future.
The rise of China as a global superpower with economic, military and strategic goals distinct from our own is something that was not on our policy radar at the time. We have written about China's claims in the South China Sea causing problems for some of our prospective partners and allies in the region. Much as we rightfully celebrated the fall of Communism, Russia sees itself as a global economic power with grand visions.. Russia has aggressively used the international vacuum on marine territorial issues to stake problematic claims in the Arctic Circle.
The U.S. military brass, as opposed to our politicians, have been paying attention. Admiral Samuel J. Locklear III, head of the U.S. Pacific Command told the Senate Foreign Relations Committee, "Competing claims in the maritime domain by some coastal states are becoming more numerous and contentious. Some of these claims, if left unchallenged, would put at risk our operational rights and freedoms in key areas of the Asia-Pacific,"
Our future budgetary realities, especially factoring in a health care time bomb in the wings, are dictating a smaller, more agile military, aided by a lot of technology like drones and robots. We're contemplating the next Afghanistan. Instead, what is going to be required in the Pacific and in the Arctic may be something quite different. Operations in these areas will be budget busters.
Failing to ratify the LOS treaty has left us without any avenue for internationalizing a discussion about maritime boundaries. China and Russia don't have any incentives to abide by any such international framework either. Our only option is to somehow project our military power over a huge, dispersed, and territorially complex theater that includes land, sea, the sea bed and ice. Our Navy will face shortages of both human capital, leadership and ships.
Even former Secretary Rumsfeld isn't blind enough not to acknowledge this reality, "The most persuasive argument for the treaty is the U.S. Navy's desire to shore up international navigation rights. It is true that the treaty might produce some benefits, clarifying some principles and perhaps making it easier to resolve certain disputes. But our Navy has done quite well without this treaty for the past 200 years, relying often on centuries-old, well-established customary international law to assert navigational rights. Ultimately, it is our naval power that protects international freedom of navigation. This treaty would not make a large enough additional contribution to counterbalance the problems it would create." I don't believe that our military leadership would agree with the former Defense Secretary's position. His cost-benefit analysis is also suspect.
There's no doubt that being involved in a truly global international treaty framework like the LOS will be messy, irritating, highly political and inefficient. Business as usual may be far worse. The bottom line is that we can't solve our future strategic geopolitical problems solely through a projection of our military power. To assume so would be irrational and naive. As the late President Reagan said, "Don't be afraid to see what you see."
Our foreign policy regarding the economic regime for the deep seabed was handed over to a narrow cabal of corporate interests, led by executives from Kennecott Copper, which today is an operation within Rio Tinto. The rhetoric in all the speeches, official and unofficial communications talked about redistribution of wealth, socialism, paralyzing regulation, abdication of national sovereignty and so on. It's absolutely laughable to see this same language being resurrected today in a Wall Street Journal editorial from former Secretary Rumsfeld on June 13th. Reading this editorial, it's as if Secretary Rumsfeld has just emerged from a time capsule that he entered in 1977. Lots of things have changed since then, largely to the detriment of our strategic options in the future.
The rise of China as a global superpower with economic, military and strategic goals distinct from our own is something that was not on our policy radar at the time. We have written about China's claims in the South China Sea causing problems for some of our prospective partners and allies in the region. Much as we rightfully celebrated the fall of Communism, Russia sees itself as a global economic power with grand visions.. Russia has aggressively used the international vacuum on marine territorial issues to stake problematic claims in the Arctic Circle.
The U.S. military brass, as opposed to our politicians, have been paying attention. Admiral Samuel J. Locklear III, head of the U.S. Pacific Command told the Senate Foreign Relations Committee, "Competing claims in the maritime domain by some coastal states are becoming more numerous and contentious. Some of these claims, if left unchallenged, would put at risk our operational rights and freedoms in key areas of the Asia-Pacific,"
Our future budgetary realities, especially factoring in a health care time bomb in the wings, are dictating a smaller, more agile military, aided by a lot of technology like drones and robots. We're contemplating the next Afghanistan. Instead, what is going to be required in the Pacific and in the Arctic may be something quite different. Operations in these areas will be budget busters.
Failing to ratify the LOS treaty has left us without any avenue for internationalizing a discussion about maritime boundaries. China and Russia don't have any incentives to abide by any such international framework either. Our only option is to somehow project our military power over a huge, dispersed, and territorially complex theater that includes land, sea, the sea bed and ice. Our Navy will face shortages of both human capital, leadership and ships.
Even former Secretary Rumsfeld isn't blind enough not to acknowledge this reality, "The most persuasive argument for the treaty is the U.S. Navy's desire to shore up international navigation rights. It is true that the treaty might produce some benefits, clarifying some principles and perhaps making it easier to resolve certain disputes. But our Navy has done quite well without this treaty for the past 200 years, relying often on centuries-old, well-established customary international law to assert navigational rights. Ultimately, it is our naval power that protects international freedom of navigation. This treaty would not make a large enough additional contribution to counterbalance the problems it would create." I don't believe that our military leadership would agree with the former Defense Secretary's position. His cost-benefit analysis is also suspect.
There's no doubt that being involved in a truly global international treaty framework like the LOS will be messy, irritating, highly political and inefficient. Business as usual may be far worse. The bottom line is that we can't solve our future strategic geopolitical problems solely through a projection of our military power. To assume so would be irrational and naive. As the late President Reagan said, "Don't be afraid to see what you see."
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