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US Interior unveils Arctic oil, gas drilling regulations

Washington — The Obama administration Friday issued proposed Arctic-specific drilling regulations that will apply to potential exploration operations in the Beaufort and Chukchi seas.

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The regulations include new requirements for operators to submit "region-specific" response plans for oil spills, have "prompt access" to source control and containment equipment, and have a separate relief rig available in case well control is lost, the Department of Interior said.

"If there were to be an uncontrolled well event, we want to make sure that the well can be secured within the drilling season," Brian Salerno, director of Interior's Bureau of Safety and Environmental Enforcement, said during a conference call.

That requirement was quickly criticized by industry.


"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," said Eric Milito, the American Petroleum Institute's upstream director. "For this reason, it is unnecessarily burdensome to effectively require two rigs to drill a single well."

The regulations also call for an "integrated operations plan" in which companies will need to demonstrate that they have considered factors such as mobilization, drilling, marine transportation and emergency response before exploration begins.

The Arctic-specific drilling regulations, developed jointly by Interior's BSEE and Bureau of Ocean Energy Management, recognizes the difficulties of drilling in a "unique frontier environment," BOEM Director Abigail Ross Hopper said.

"The Arctic Outer Continental Shelf isn't like the Gulf of Mexico where generally mild weather conditions and an established industry presence have created extensive infrastructure and logistical support that allow for nearly year-round operations," said Hopper.

"Energy exploration in the Arctic is unique," said Salerno. "It's conducted in a very sensitive and challenging environment where extreme weather, frigid waters and sea ice are common and where supporting infrastructure and logistical support capabilities are lacking."

In a statement, Interior Secretary Sally Jewell said the regulations "are designed to ensure that offshore exploratory activities will continue to be subject to the highest safety standards."

Hopper said federal waters in the Beaufort and Chukchi are estimated to have reserves of 21.5 billion barrels of oil and 93.4 Tcf of gas.

The proposed regulations, which will be subject to a 60-day public comment period before a final rule is developed, "draws heavily" from requirements Shell needed to meet ahead of its 2012 exploratory operations offshore Alaska, Salerno said.

The regulations would not be finalized by this summer, when Shell plans to return to drill for oil in the Arctic.

Shell, along with ConocoPhillips, had lobbied against the new Arctic rules, saying they would increase production costs by billions of dollars without improving safety.

Shell spokesman Curtis Smith said in a statement the company was reviewing the proposed regulations. Smith said Shell was working with federal, state and local officials "to develop a 2015 drilling program that achieves the highest technical, operational, safety and environmental standards."

Environmentalists largely applauded the proposed regulations, while stressing they were needed due to Shell's missteps during the 2012 drilling season.

Susan Murray, a deputy vice president with Oceana, said while the rules are needed, they cannot guarantee safe drilling operations in the Arctic.

"There is no proven way to respond to a spill in icy Arctic waters and, as Shell unfortunately demonstrated, companies simply are not ready for the Arctic Ocean," Murray said in a statement.

--Brian Scheid, brian.scheid@platts.com
--Edited by Kevin Saville, kevin.saville@platts.com