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Walruses rest on ice floating in Lancaster Sound, a broad channel off the coast of Baffin Island. The region is home to a rich marine ecosystem crucial to the Inuit communities in the area.

Mario Cyr/Parks Canada

A vast and ecologically sensitive swath of Canada's Arctic waters is one step closer to being designated for special protection after a voluntary surrender of permits to conduct oil and gas exploration there.

On Wednesday, Shell Canada revealed it has handed over its offshore rights to more than 8,600 square kilometres of seafloor at the entrance to Lancaster Sound, a broad channel off the north coast of Baffin Island that is home to a rich marine ecosystem and is a crucial resource for the Inuit communities that dot its shores.

The permits, located just outside the boundaries of a federally proposed marine protected area, have a contentious history and are currently the focus of a lawsuit challenging their validity. Their surrender by Shell clears the way for a push to expand the proposed zone of protection to include more than 100,000 square kilometres of ocean.

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"What this does is remove any reason why there can't be an open conversation about an expanded area and a move toward establishing that," said John Lounds, president of the Nature Conservancy Canada. The organization received the permits as a donation from Shell and has released them to the federal government to facilitate the establishment of a marine protected area.

Shell has owned the permits since 1971 but the company ceased exploration activities in Lancaster Sound after an environmental review in 1978 prompted a moratorium on drilling. In April of this year, World Wildlife Fund Canada launched a suit against both Shell and the federal government, arguing that the permits have expired. David Miller, president of WWF-Canada, praised the company's decision to give up the permits voluntarily.

"It's exactly the kind of result we hoped for when we instigated the lawsuit," he said. "Shell's done the right thing."

Mr. Miller added that his organization would be reviewing the details of the announcement but that he expected there would be no further need to proceed with legal action on the permits.

Louis Fortier, head of the research consortium ArcticNet and a professor of marine biology at Laval University in Quebec City, said that Lancaster Sound lies at a meeting point of eastern and western marine ecosystems and that it serves as "an oasis for marine mammals and sea birds" because ocean currents tend to keep portions of it ice-free year round.

He added that the sound was an "excellent choice" for a marine protected area.

Canada is committed to setting aside 10 per cent of its ocean territory for protection by 2020 under the United Nations Convention on Biodiversity. Shell's handover comes just as Ottawa is accelerating efforts to meet that target after years of lagging behind other countries.

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Shell Canada president Michael Crothers said the decision was in keeping with other donations the company has previously made to the Nature Conservancy, including offshore rights it contributed to the creation of the Gwaii Haanas National Marine Conservation Area, established in 2010 off the coast of British Columbia.

"It's really an opportunity to do something that we think is quite meaningful," Mr. Crothers said.

The move is a significant development in the long running tug of war between Ottawa, industry, conservation groups and territorial governments all centred around Lancaster Sound.

In August, 2010, the Nunavut Court of Justice blocked the federal Ministry of Natural Resources from conducting seismic tests there. Later that year, the Harper government announced it had begun the process of designating the Lancaster Sound National Marine Conservation Area. But the boundaries of the proposed marine park conspicuously avoided infringing on the Shell permits, and ignored the ecological continuity of the sound. The Qikiqtani Inuit Association, which administers land claims in the Baffin region, has pushed for a much larger protected area that would encompass the Shell permits.

Shell faced numerous obstacles that likely made its decision easier, including the ecological sensitivity of the region, the mounting opposition to development there, the hazards to operations posed by ice and currents and the low probability that the moratorium on drilling would be lifted.

"My sense is that when Shell took a good hard look at their interest in the region, they came to the conclusion that this area is not developable from an oil and gas perspective and that there are better places to direct resources," said Christopher Debicki, Nunavut projects director for the conservation group Oceans North Canada.

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