Ottawa is considering lifting its moratorium on offshore oil and gas exploration in the Western Arctic, throwing into question a decade-old policy intended to protect the region's marine ecosystem. The signal came in the federal government's fall budget, which set aside new funding to examine ending the ban.

Marie-France Faucher, the lead spokesperson for Finance Canada, said the budget's increased funding for Arctic offshore oil and gas governance will in part be used for "consideration of potentially lifting the current moratorium on Arctic offshore oil and gas exploration in the Western Arctic." The budget earmarked $1 million in 2027-28 for oversight of fossil fuel exploration in the region, rising to $3 million the following year.

A ban in place since 2016

The moratorium was imposed in 2016 by then prime minister Justin Trudeau and then US president Barack Obama, who said it was needed to protect fragile northern ecosystems from the risk of oil spills. It is reviewed by Ottawa every five years, with the current ban set to expire in 2028.

The United States has since reversed course under both Trump administrations, reopening parts of the Arctic to oil and gas drilling and further easing regulations governing the sector in August. In Canada, Prime Minister Mark Carney has moved away from his predecessor's climate-related commitments since taking office last year, including by championing a new oil pipeline to the West Coast and ending the consumer carbon tax. He has described the previous climate strategy as "divisive" and "too expensive", although the shift towards natural resources development has made a minority in his Liberal caucus uneasy.

Northern leaders press for control

The Northwest Territories has been urging Ottawa to revisit the policy for years as it pushes to regain control over decisions about its land and waters, with Nunavut more recently joining the call. Northwest Territories Deputy Premier Caroline Wawzonek called the budget line "the biggest update I've had in a while", while cautioning that it would be premature to read the funding as a decision to lift the ban. She said lifting it would not "necessarily equate to immediate development", but would signal that Ottawa is willing to honour a long-standing commitment on self-governance of natural resources in the north.

Nunavut Premier John Main also hopes the Carney government will end the moratorium, which he views as unfairly imposed on his territory a decade ago. "What it's done is it's taken decisions out of our hands," he said. Nunavut is preparing for a devolution transfer on 1 April 2027, when Ottawa will hand over responsibilities for public lands, fresh water and natural resources to the territorial government. Offshore oil and gas are not part of that transfer, however, so the moratorium will continue to restrict Nunavut's ability to develop the resource, and the territory will have to negotiate its own governance and revenue-sharing framework with Ottawa afterwards.

What development could bring

The Northwest Territories, Yukon and the Inuvialuit Regional Corporation, which represents Inuit communities in the Western Arctic, have spent several years preparing for a possible return of offshore development. In 2023 they signed the Western Arctic-Tariuq Accord with Ottawa, setting out a co-management and revenue-sharing regime for the sector that would come into force if the moratorium is lifted.

A six-member committee representing the federal, Northwest Territories, Yukon and Inuvialuit governments published a report in 2024 as part of a review of the moratorium. It projected that offshore development in the Beaufort Sea region would generate $148 million in GDP and create nearly 900 full-time jobs. It also found that fish, marine mammals, polar bears and barren-ground caribou would experience habitat loss and face increased mortality risks under development scenarios, while concluding that the likelihood of a major oil spill was low.

According to Natural Resources Canada, the Beaufort-Mackenzie Basin has a high potential for large oil or gas resources, and the fall budget also committed funding for the Mackenzie Valley Highway, which would open up road transport to the Arctic Ocean and the Beaufort Sea and enable more exploration. No decision to lift the ban has been taken, and any change would still have to weigh the economic case from northern governments against the environmental risks the moratorium was created to guard against.