US Interior rolls out arctic drilling proposal

OREANDA-NEWS. The US Interior Department today proposed a new rule to govern oil and gas exploration in the arctic offshore.

Interior's proposed rule would require companies operating in the Chukchi and Beaufort to submit region-specific oil response plans, have quick access to well control and containment equipment and to deploy a separate rig that could be used to drill a relief well in the event of a blowout.

"This proposed rule is designed to ensure safe energy exploration is unforgiving arctic conditions," Interior's Bureau of Safety and Environmental Enforcement director Brian Salerno.

Pivoting from the troubles Shell encountered during its mishap-plagued program to explore in the Chukchi and Beaufort seas off Alaska in 2012, Interior is moving to codify the requirements regulators insisted Shell implement before trying to return to the arctic.

Shell has said it hopes to resume exploration off Alaska this summer, focusing on its leases in the Chukchi.

The proposed rule will not apply to Shell's exploration plans this summer, since it will not be finalized before summer. But Salerno said there is a "lot of commonality" between the proposed rules and the stipulations imposed on Shell.

The proposal rule would require that operators leave enough time – up to 45 days – to drill a relief well during the same season in the event of a blowout. That cuts into an already short drilling season of only three to four months. Salerno said an operator would be allowed to complete tasks other than tapping hydrocarbon bearing zones, such as doing preparatory work for the next drilling season.

Industry trade group the American Petroleum Industry upstream director Erik Milito argued that requiring a second drilling rig be kept on standby in case of a well control problem is "unnecessarily burdensome." Other equipment, such as a capping stack, could achieve the same result, he said.

The rule would allow an operator to propose an alternative solution, if the company could demonstrate that that option would provide at least the same level of safety and environmental protection. Shell said that kind of flexibility is critical. "It will encourage the development of new innovative technologies for arctic operations that are both economic and environmentally sound," Shell said.

Shell said it supports regulations that improve safety and environmental protection "provided they are clear, consistent and well-reasoned."

The proposed rule also would require than operator submit an integrated operational plan to explain how it expects to approach a drilling season or permit request. This plan "is not something that actually gets approved," Salerno said. "It is mean to stimulate early discussions so we do not get to an 11th hour problem."

Interior's arctic rule-making process is colored by Shell's checkered experience operating in the Chukchi and Beaufort in 2012.

A containment dome on the Arctic Challenger was damaged during testing. The Noble Discoverer dragged its anchor and nearly ran aground on the Alaska coast later that month, raising concerns about its ability to operate in harsh arctic conditions. Shell opted to move its Kulluk drilling rig through the Gulf of Alaska in December, only to have it run aground on Sitkalidak island after breaking free from its towing vessel during stormy weather.

Shell managed to begin preliminary work on one well in the Chukchi and a second in the Beaufort, but the company ran out of time and was unable to tap into hydrocarbon-bearing zones.

The Interior Department subsequently conducted a high-level review of Shell's drilling program, faulting the company for failing to oversee key contractors adequately.

The public will have 60 days to comment on the proposed rule after it is published in the Federal Register.

National Ocean Industries Association president Randall Luthi, who served as director of BSEE's predecessor agency the Minerals Management Service under then-president George Bush, said the proposal provides at least some certainty, consistency and reliability for offshore oil and gas production in the resource-rich arctic region."

Senate Energy and Natural Resources Committee chairman Lisa Murkowksi (R-Alaska) said she is reserving judgment on the proposed rule "until it is demonstrated that these regulations will not unnecessarily block investment."

The proposal's release comes less than a month after Interior rolled out a draft 2017-2022 offshore leasing plan that would wall off portions of the Chukchi and Beaufort seas to offshore drilling.

Much of those areas already had been excluding under the existing 2012-17 leasing plan, as well as by former president George Bush's administration. Whaling areas in the Beaufort sea near Barrow, Alaska, and Kaktovik, Alaska, will be off limits, along with a 25-mile coastal buffer and the Hanna Shoal area in the Chukchi.

But Interior will hold a lease sale for acreage in the Beaufort in 2020 and one in the Chukchi in 2022.