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US Department of the Interior mulls issue with Hilcorp's Liberty project spill plan

Anchorage, Alaska — Federal agencies are in the final stages of the regulatory approvals for Liberty, an Alaskan Beaufort Sea offshore project planned by Hilcorp Energy, but a wrinkle has developed for the oil spill contingency plan for the project, according to US Department of the Interior officials.

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Liberty is about five miles offshore and about 20 miles east of the large Prudhoe Bay field on the North Slope, which is onshore. Hilcorp plans to build an artificial gravel island and produce about 70,000 b/d of light oil through a subsea pipeline built to shore, which will then connect with onshore pipelines.

In its plan, the Houston-based independent's proposal is to ignite spilled oil to remove it quickly from the ocean surface, but current US Interior Department regulations require mechanical cleanup, with skimmers, as the primary response.

"The oil spill response plan is the last piece needed [in approvals for Hilcorp] and some aspects of the plan are requiring a hard look," Interior Assistant Secretary Joe Balash told an Alaska business group.

The option for ignition as primary response is currently not allowed in the Arctic area Outer Continental Shelf plan, Balash said Monday in a follow-up email.

"We are working with them to make improvements in the plan," he said.

The company has been asked to do further risk analysis, said another Interior official, who asked to speak on background.

How to best contain and clean up an offshore Arctic oil spill is a problem that has confronted federal regulators and industry for years.

Containment and oil recovery is problematic at best even in open ocean like the US Gulf of Mexico, as the 2010 Macondo blowout demonstrated, but problems are compounded in the Arctic by the presence of ocean ice during much of the year. Ice presents operational challenges for oil skimmer vessels and the deployment of conventional containment booms, which are the accepted industry practices.

Companies have long argued that the most effective way of removing spilled oil on water is to burn it. Once ignited, the burning oil can be contained in fire-proof booms. The efficiency of this has been demonstrated in demonstration burns in Canada's far north and in Norway.

However, the ignition must be done fairly quickly while the oil contains enough flammable volatiles to catch fire, and before it emulsifies and disperses in currents and winds. This essentially means companies must have pre-approvals from federal and state agencies to use the technique, because even if it is an accepted alternative to conventional mechanical recovery the time needed to get the approvals from regulators may delay the ignition to the point it is ineffective.

Precisely this happened in the 1989 Exxon Valdez spill in Prince William Sound in Alaska when regulators waited until it was too late for ignition and weather intervened to disperse the oil slick.

There has also been pushback from the public, however, including from coastal Arctic communities where residents worry about air pollution from smoke and other hazards. This has caused agencies to hesitate to allow burning as a first option.

These problems proved to be regulatory headaches for Shell's 2013 exploration in the Chukchi Sea, which resulted in the company building a specialized oil spill recovery barge.

Balash said Hilcorp may also have to mobilize additional spill response equipment for Liberty if the issues with ignition cannot be resolved soon enough.

Liberty is almost a twin with an existing Beaufort Sea producing project, Northstar, which is also Hilcorp-operated and west of Liberty. It is six miles offshore and utilizes a sub-sea pipeline.

Northstar is exposed to more difficult ocean ice than Liberty would be and has been producing since 2001 without an operational incident, but the 2010 Macondo spill changed the federal regulatory environment for offshore projects.

Liberty is estimated to hold about 150 million barrels of recoverable oil, according to the Bureau of Offshore Energy Management, which administers federal Outer Continental Shelf leases, where the project is located.

-- Tim Bradner, newsdesk@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com