From Peterborough, Ontario, to CEO of RIM & Blackberry, to helping Canada’s right to Sovereignty over the Northwest Passage.

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How a 19th Century Shipwreck Could Give Canada Control of the Arctic

Monte Reel…2 days ago

This image released by Parks Canada, on Tuesday, Sept. 9, 2014, shows a side-scan sonar image of the HMS Erebus on the sea floor in northern Canada.

(Bloomberg Business) -- Jim Balsillie toes the frozen lip of a 5-foot triangular hole cut through 5 feet of ice. He’s wearing nothing but boxer- briefs. It’s mid-April, and it’s –5F outside of a tent that covers the opening. The water in the hole is so cold that, if left unstirred, the surface refreezes in minutes. About a dozen people, mostly officers from the Royal Canadian navy, are waiting to see if Balsillie, the former co-chief executive officer of Research In Motion, the company behind the BlackBerry, will actually go through with it. Someone stands by with a defibrillator. A couple of people have cameras. He jumps.

Submerging in the frigid waters of the Arctic is a rite of passage for visitors here in the Queen Maud Gulf, 69 degrees north latitude, in the Nunavut territory. Later, Balsillie says he believes rituals are scenes we perform so our lives might take the shape we need them to take. It’s a symbolic act, and symbols matter to him.

Directly beneath the hole in the ice, visible on the seafloor, is the biggest symbol of all: the HMS Erebus, one of two British navy ships lost during Sir John Franklin’s doomed 1845 quest to find the Northwest Passage through the Arctic. The whereabouts of the Erebus frustrated hundreds of searchers for more than 150 years, costing several their lives. Balsillie helped finance and coordinate the successful hunt for the ship, rediscovered in September 2014. On a personal level, the search for the Erebus was a way for him to take more control over his life after his unceremonious exit from RIM, which left him angry, drained, and disoriented. But it’s much more than an archeological artifact. It represents an opportunity for Canada to take more control of the Arctic.

Canada wants jurisdiction over the waters of the passage and, importantly, the ships that traverse it

Exploring the Erebus, Balsillie hopes, will draw the collective attention of Canadians northward to a neglected region with billions in potential resources. And by conducting a complex operation in the waters, Canadian military and civilian officials say they are demonstrating their sovereignty over the Northwest Passage.

© Illustrated London News/Getty Images 1845: The ships HMS Erebus and HMS Terror used in Sir John Franklin's ill-fated attempt to discover the Northwest passage. The Queen Maud Gulf, where the Erebus sits, is part of the southern branch of the Northwest Passage. The route is a fabled link between the Atlantic and Pacific that for centuries proved a dangerous magnet for seekers of knowledge, fortune, and glory. Since 2007, as a result of climate change, the passage has become navigable by smaller ships for a couple of months during most summers.

An open route can cut thousands of miles off of trips between the west coast of the Americas and Europe. The two alternative routes are the Panama Canal and the Northern Sea Route, which runs from the Bering Strait and over the Russian Arctic. In 2013 the MS Nordic Orion, a Norwegian freighter, made the first cargo transit of the Northwest Passage. That trip, which carried coal from Vancouver to Norway, hasn’t been repeated. But it raised an unanswered question in maritime law: Who really controls the waters of the route and the rest of Canada’s Arctic archipelago, which consists of more than 30,000 islands?

That depends on whether the waters are considered “internal” to Canada or an “international strait.” The U.S. is among the countries that argue for the latter. The dispute between the U.S. and Canada has been simmering for decades, and it has as much to do with the geopolitics of the Middle East as it does with the Arctic. The U.S. believes that if the Northwest Passage is considered a waterway of local control, then other routes might be subject to similar interpretations. Particularly of interest to the U.S. is the Strait of Hormuz, a slender waterway that leads into the Persian Gulf and the region’s vast oil supplies. Iran, which borders the strait, considers the waters under its control.

Canada wants jurisdiction over the waters of the Northwest Passage and, importantly, the ships that traverse it. “It’s becoming more accessible, and that access is changing everything,” says Robert Huebert, a professor in the political science department at the University of Calgary who specializes in Arctic issues. “It means the Arctic has a connection to the international system that it has never had before.”

That’s where the Erebus comes in. Never mind that it predates Canada as a nation. The ship, as well as the unsuccessful expeditions to find it in the 19th century, established England’s historical ties to Arctic waters, and Canada believes it inherited those ties when it inherited the islands from the British crown.

“We think every bit of weight we can put behind our case for sovereignty is important,” announced Foreign Affairs Minister John Baird in 2008. “Adding history to that equation can only enhance that case.”

Balsillie took that idea to heart. “The discovery of the Erebus wasn’t the end of a story,” says Balsillie. “I knew it was the beginning.”

The son of an electrician, Balsillie, 54, grew up in Peterborough, Ontario. When he was 12, he got his hands on a copy of The Canadian Establishment, a book that profiled Canada’s wealthiest business executives. The book stated that “no influence is more cohesive, no bond more lasting, than the time spent at the private schools.” So Balsillie earned a spot into Trinity College at the University of Toronto. The book also said a master’s degree from Harvard Business School could bestow upon graduates “the imprimatur they need to move into contention for Establishment consideration.” So he got a Harvard MBA. In 1992 he took a second mortgage on his house to invest $250,000 in a struggling tech startup. That earned him a one-third stake in RIM. He was named chairman and co-CEO.

Within a decade, the company was among the fastest-growing in the world. By 2008 a BlackBerry could be found in the hands of everyone from Kim Kardashian to Barack Obama, and RIM had become Canada’s most-valuable company with a market value of $83.4 billion. Balsillie’s personal shares were valued at an estimated $4.83 billion.

That was the year he first visited the Arctic, falling under its spell. He entered this unfamiliar territory just as he had approached the business world: with ambitious goals. He cultivated Arctic experts as friends. He immersed himself in the region’s history. Each year, he returned.

The Franklin expedition helped give the High Arctic a lasting reputation as a graveyard for dreamers, but climate change was altering that. For parts of September 2007, the Northwest Passage was ice-free for the first time. Oil and mining companies began exploratory surveys. Russia planted a flag at the North Pole. China started a two-year research program to evaluate the High Arctic’s development potential. In 2008 the U.S. Geological Survey estimated the areas north of the Arctic Circle held 90 billion barrels of undiscovered oil.

In 2009, Balsillie traversed the Northwest Passage as part of a weeklong cruise with policymakers and academics. The group spotted a Russian icebreaker ship among the floes, and Balsillie suspected that it was dragging a sonar device—a “towfish”—in hopes of locating one of the lost Franklin ships. The following year, several independent amateurs, including Microsoft co- founder Paul Allen, were spotted poking around the passage, rumored to be joining the hunt. To Balsillie, it felt like a violation—“like somebody came into our house and was trying to take our girl,” he says.

When he flew back south, he promptly founded the Arctic Research Foundation, a nonprofit that aimed to reinvigorate Canada’s search. He arranged meetings with officials from Parks Canada, the country’s national parks service, who told him their yearly expeditions hadn’t been as productive as they’d hoped because their access to a coast guard icebreaker, which served as their search platform, was limited to just a couple of weeks each summer.

So Balsillie bought them a 64-foot fishing trawler, rigging it with sonar and reinforcing it for the ice. He lobbied officials in Prime Minister Stephen Harper’s office for more support. In 2011 he invited officials from government agencies, including Canada’s space agency and its hydrographic service, to a three-day retreat at his home to hammer out a strategic search plan. About a year later, at a gala in Ottawa, Balsillie made sure he was seated next to Navy Rear Admiral John Newton, who coordinates Canada’s military operations in the Arctic. Newton says Balsillie convinced him that participating in the search could improve the military’s capabilities there. Before dinner was over, he says, he had decided the military would join in the hunt.

Support for the chase, however, was far from universal. “You could hear grumblings. ‘Why is the government of Canada involved in this? Why is it important?’ ” says John Geiger, CEO of the Royal Canadian Geographical Society and the co-author of a book about the Franklin expedition. “But I think the results of last year’s expedition speak for themselves. It’s so important to our sovereignty in the Arctic and to our culture.”

At the same time Balsillie began marshaling support for the shipwreck quest, RIM was in deep trouble. In 2011 its stock price lost 75 percent of its value. Apple’s iPhone had significantly eroded its share of the smartphone market, and some stockholders blamed Balsillie and his co-CEO, Mike Lazaridis, for failing to recognize that threat. Under mounting pressure, Balsillie resigned in early 2012 and sold all his shares. Canada’s National Post said Balsillie had fallen from “hero to zero.”

For about a year, he struggled to process it all. “You wonder if you’ve lost it,” he says. “You wonder if they’re right and you’re wrong. … I couldn’t make sense of the world.” And then last September, after six seasons trolling around Arctic waters, finding no trace of the Franklin ships, members of the search team saw a dense cluster of pixels on a radar screen.

Decades before his name became associated with a disastrous shipwreck, John Franklin was the toast of England. As a young man he led an overland expedition to chart the north coast of mainland Canada, and his never-say-die reputation earned him a knighthood and, then, a job as lieutenant governor of what is now Tasmania. But in 1843, two years before his final expedition, Franklin, then in his 50s, was pushed out of that job. Later, some speculated that he undertook the quest for the passage to redeem his reputation.

Things couldn’t have gone worse: ice-bound ships, scurvy, frostbite, starvation, cannibalism, the deaths of all 129 men. Five search-and-rescue expeditions were launched in the 11 years after the disappearance. A note found in a cairn on King William Island—the only direct communication from the ships ever found—revealed that 105 crew members remained alive as of April 1848, almost three years after the Erebus left England and about a year and a half after it got stuck in ice. Franklin, the note said, had died in June 1847.

Much of Britain’s knowledge about the Arctic and its potential shipping routes came from those unsuccessful searches, which mapped many of the islands in the region. “That’s the foundation of Canada’s sovereignty over thousands of those islands in the Arctic archipelago,” says Michael Byers, a professor of global politics and international law at the University of British Columbia. “So the Franklin expedition was significant, in part, because it failed.”

But now, with the discovery of the Erebus, some are speculating there’s more to the story.

Back at the dive site, two divers—one from Parks Canada, the other from the Canadian navy—lower themselves into the hole. Braided umbilical lines attached to their backs lead up to the dive tent, connecting them to oxygen tanks and an intercom system.

Evan Beaton, the navy diver, has a camera attached to his head. It beams an image up to the tent: the port-side hull of the Erebus fuzzed by coral, anemones, and mussels. There’s an upended cannon muzzle. A piece of L-shaped wood, a table leg, is still attached to its skirt plank. The archeologists in the tent recognize the leg from an illustration of Franklin’s quarters that appeared in the Illustrated London News in 1845.

The Erebus is largely intact. But near the stern, the upper, middle, and lower decks have collapsed. Franklin’s cabin is sandwiched somewhere in the middle. Marc-André Bernier, the Parks Canada archeologist who is monitoring the divers’ video feeds, considers this a blessing: Many of the cabin’s artifacts might be better preserved than those in parts of the ship that are more exposed.

The divers don’t rush into the ship’s interior decks. They’ll return for a longer dive session in August. They have years to explore the wreck, if necessary.

Finding the ship’s logs, which in the 19th century were sometimes stored in wax-sealed canisters, could fill in details about the crew’s fate. If the divers find credible evidence that the Erebus was manned and actively piloted to the spot where it sank (written records or, perhaps, a steam propeller positioned for use), then it’s possible to argue that the Franklin expedition “completed” the Northwest Passage. Of course, Franklin himself would have been dead by then.

The spot where the Erebus rests almost connects to a point on the Adelaide Peninsula of the mainland of Canada, which Franklin had charted—and had proven was connected by navigable waters to the Pacific—during his earlier expeditions.

The area of the Erebus wreck has already been declared a National Historic Site, and many involved in the search believe that if they can prove the ship discovered the passage, Canadians will be driven to embrace the region as part of their heritage. Prime Minister Harper, who visited the site when it was found last fall, has used the shipwreck to appeal to a nationalistic strain of Arctic pride. “There is a narrative in Canadian history and the public consciousness here that he has recognized,” Byers says, “and he has quite deliberately tapped into that.”

“I think the results of last year's expedition speak for themselves. It's so important to our sovereignty in the Arctic”

About 1,400 people live in Cambridge Bay, which is Balsillie’s Arctic home base, and roughly 80 percent are Inuit. In the back of the local library, four Inuit community elders sit at a table snacking on crackers and grapes. Mary Avalak, 68, holds a grape and gives it a sour look. “We don’t really care for this at all,” she says.

The women, all of them widows, agree they’d rather be eating polar bear. Or narwhal. Or musk ox. Or any of the other proteins they subsisted on as kids, when they lived out “on the land.” But time has marched on. Too many people have moved to town, they say. There’s too much drinking, too many drugs. The hunting and fishing aren’t what they used to be. The groceries are too expensive. Good jobs are hard to find.

A commonly prescribed remedy for these ills is a return to Inuit traditions, and the day after his plunge into the ice, Balsillie throws Cambridge Bay a free dinner celebrating the local culture. All four widows, plus about 200 more people, dig into a traditional buffet of Arctic char and musk ox. Local performers demonstrate throat-singing and dancing. In the background, photographs from the Erebus dive site flash across a big screen. Balsillie and Rear Admiral Newton, who accompanies him on this trip, mingle and talk about Canadian sovereignty. They say the Franklin discovery is already strengthening the government’s presence in the Arctic.

Canadian sovereignty, economic development, and Inuit culture are a volatile mix. In the 1950s the government relocated hundreds of Inuit to the northern Arctic to establish the continent’s most northerly permanent settlements. The relocated families struggled to survive. The government justified the move by saying it was done to protect Inuit traditions. In a lawsuit filed against the government, the Inuit described the relocation as an attempt by Canada, at the height of the Cold War, “to assert its sovereignty over the Arctic islands and surrounding area.”

Balsillie believes sovereignty—and the economic development that he hopes will result from it—can benefit the Inuit, if the projects that come are developed with them in mind. He talks about the promise of sustainable technologies. Gasification machines that recycle garbage into fuel could help them reduce their dependence on hard-to-get diesel, he says. Local greenhouses could help reduce the premium prices charged for flown-in produce.

But the projects Balsillie has in mind aren’t limited to the hyperlocal and uncontroversial. The day after the community dinner, he flies to Baffin Island, near the eastern entry to the Northwest Passage. There he and Newton tour the Baffinland iron mine, the most ambitious commercial undertaking to date in the Canadian Arctic. Back in 2011, when global iron ore prices surged amid a Chinese building boom, Luxembourg-based ArcelorMittal, the world’s largest steelmaking company, announced it would spend more than $4 billion on the mine.

Local officials estimated the project would add $5 billion in tax revenue to the region and triple its annual gross domestic product growth.

Balsillie points to the mine, which became operational last year, as an example of the kind of development that his brand of nation building can encourage. But it also represents some of the ways history can work against it. Tom Paddon, the president and CEO of the mine, told Balsillie he hopes to increase production from 3.5 million tons a year to more than 20 million tons. To do that, Baffinland would need to use icebreaker ships to haul loads out of its port for 10 months of the year, not just during the ice-free summer months.

The Nunavut Planning Commission, made up of members of the Inuit-majority local communities, rejected that proposal in early April. The same justification the Canadian government had given to the relocated Inuit in the 1950s was thrown back at the mine: The request was denied to preserve traditions threatened by development.

Balsillie thinks there’s still room for compromise. “I’m just bringing people together,” he says. “Then they can work things out among themselves.” That was the philosophy he followed when he brought all the different agencies together for the Erebus search, he says. Maybe someday the approach will pay off on a larger scale across the Arctic.

To contact the author on this story: Monte Reel at mreel2@bloomberg.net