Arctic drilling regulations set off new battle

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Industry groups are blasting the Obama administration’s plan to crack down offshore oil and gas drilling in the Arctic Ocean, arguing that the proposal includes costly and unnecessary restrictions.

The fight — the latest in a series of spats between regulators and drillers — centers on requirements that companies keep backup rigs on hand to dig relief wells in case of a spill.

The provision is the most expensive piece of the $1.2 billion rule proposed by the Interior Department’s Bureau of Safety and Environmental Enforcement and Bureau of Ocean Energy Management Friday.

Oil and gas drillers say that the $55 million the federal government estimates it would cost annually to keep backup rigs in the Arctic and ready to go would largely be a waste, and other, more cost-effective options exist to mitigate well blowouts during the drilling process.

“Other equipment and methods, such as a capping stack, can be used to achieve the same season relief with equal or higher levels of safety and environmental protection,” Erik Milito, upstream director for the American Petroleum Institute, said in a statement.

“For this reason, it is unnecessarily burdensome to effectively require two rigs to drill a single well.”

The proposal, unveiled Friday, included other measures designed for the abnormally remote, icy and treacherous drilling conditions in the Beaufort and Chukchi seas, the two Arctic areas north of Alaska that are within the United States’ jurisdiction.

These include detailed management and emergency response plans written specifically for the Arctic, access to spill control equipment and limits on the time of year when drilling could take place.

An analysis that Royal Dutch Shell prepared last year for the Interior Department predicted that the backup rig mandate would cost a company $3.2 billion during a 20-year exploration and appraisal process for a well, with only $791 million in benefits.

“The relatively minor benefits associated with a [rig] requirement are due in part to the low probability of a well blowout in the shallow exploration and appraisal wells being pursued in the U.S. Arctic,” the analysis said.

Environ International Corp., which prepared the analysis, said that since 1971, no well blowout has been solved by a relief well — even the 87-day oil spill at BP’s Deepwater Horizon rig in 2010 in the Gulf of Mexico.

Even though it found that the benefits of its rules “are difficult to quantify,” Interior defended the relief rig mandate, saying the Arctic is very different from other offshore drilling sites.

Brian Salerno, director of Interior’s offshore enforcement office, said Friday that he knew the rig provision would be controversial.

“From our perspective, that sets a level of protection for the Arctic that is necessary,” Salerno told reporters. “If there were to be an uncontrolled well event, we’d want to make sure that a well can be secured within the drilling season, and this provides a level of assurance that that outcome could be achieved.”

Abigail Hopper, director of the offshore energy office, said the unique circumstances of the Arctic require unique safety rules, like a backup rig mandate. Without nearby emergency response mechanisms like drillers have in the Gulf of Mexico, rigs in the Arctic could have to wait weeks or longer for relief wells.

“The Arctic outer continental shelf isn’t like the Gulf of Mexico, where generally mild weather conditions and established industry presence have created extensive infrastructure and logistical support that allow for nearly year-round operations,” she said.

“Instead, the Beaufort Sea and Chukchi Sea planning areas are incredibly remote, vastly undeveloped and subject to extreme geophysical conditions.”

Other than a failed exploration well drilled by Shell in 2012, there has been no oil or gas drilling in the United States’ Arctic in decades.

Environmental groups said that, while the relief rig provisions would go a long way toward improving the safety of potential drilling, it can never be completely safe.

“There is no such thing as safe Arctic drilling,” Tim Donaghy, a research specialist at Greenpeace, said in a statement.

“If a spill occurs towards the end of Shell’s drilling window, the sea ice won’t wait for the company to drill a relief well,” he said. “These proposed regulations would only give a false sense of security and do nothing to protect the Arctic from catastrophe.”

“We applaud the government for recognizing that existing oil and gas regulations are not adequate,” said Susan Murray, a deputy vice president at Oceana.
“The new rules clearly are needed and are an improvement, but they do not ensure safe and responsible operations in the Arctic Ocean.”