Interior issues new rules for Arctic drilling

Interior Department officials announced final regulations on July 7 for future exploratory drilling in U.S. Arctic waters, prompting words of caution from environmentalists, and criticism from the oil industry.

The Arctic-specific regulations announced by Interior officials focus solely on Outer Continental Shelf exploratory drilling operations from floating vessels within the Beaufort and Chukchi seas. They require oil companies to ensure proper internal controls and planning for oil spill prevention, containment and responses, all issues identified by previous Interior reports regarding Shell’s 2012 exploration activities in the Arctic.

These regulations codify and further develop current Arctic-specific operational standards to ensure that operators take necessary steps to plan through all phases of OCS exploration, including mobilization, maritime transport and emergency response, and conduct of safe drilling operations, Interior officials said.

These regulations support the Obama Administration’s balanced approach to any oil and gas exploration in the Arctic region, said Janice Schneider, Interior’s Assistant Secretary for Land and Minerals Management, in a teleconference announcing the new regulations.

“The rules help ensure that any exploratory drilling operations in this highly challenging environment will be conducted in a safe and environmentally responsible manner, while protecting the marine, coastal, and human environments, and Alaska Natives’ cultural traditions and access to subsistence resources,” Schneider said.

“The unique Arctic environment raises substantial operational challenges,” said Abigail Ross Hopper, director of the Bureau of Ocean Energy Management. “These new regulations are carefully tailored to ensure that any future exploration activities will be conducted in a way that respects and protects this incredible ecosystem and the Alaska Native subsistence activities that depend on its preservation.”

“This rulemaking seeks to ensure that operators prepare for and conduct these operations in a manner that drives down risks and protects both offshore personnel and the pristine Arctic environment,” said Brian Salerna, director of the Bureau of Safety and Environmental Enforcement.

The new regulations are online at http://www.bsee.gov/arcticrule/

Gov. Bill Walker said the state would look carefully at the new regulations to understand its implications for companies interested in exploring in the Arctic. “One risk profile does not fit all projects,” Walker said. “Flexibility is necessary to accommodate different types of programs.”

Interior’s announcement won kudos from environmental entities, while raising concerns from Alaska’s congressional delegation and the oil industry.

The new regulations “are both necessary and long overdue,” said Michael LeVine, Pacific senior counsel for Oceana, an international advocate for ocean conservation. “They do not, however, ensure safe and responsible operations or address all of the deficiencies in the government decisions about offshore oil and gas activities in the Arctic Ocean. There is no proven way to respond to a spill in icy Arctic waters and, as Shell unfortunately demonstrated in 2012, companies simply are not ready to operate safely in the Arctic Ocean.”

“There is no compelling reason to sell more leases now, and the government should remove proposed Arctic Ocean sales from the 2017-2022 five-year program,” LeVine said.
“Drilling in the Arctic Ocean is far riskier than in the Gulf of Mexico, which is why BSEE (Bureau of Safety and Environmental Enforcement) recognized the need for these new requirements,” said Lois Epstein, Arctic program director for The Wilderness Society. “The Arctic Ocean is a vital, near pristine habitat for polar bears, whales, seals and fish, and provides important subsistence resources for Alaska Native communities.

“If exploratory drilling is to occur, it must be done with the best technologies and procedures to percent blowouts and spills that would be impossible to clean up completely,” she said. “These Arctic-specific exploratory drilling requirements are technically reasonable, not overly costly, and essential to protect the Arctic Ocean from the devastating effects of a major spill.”

“While claiming to increase safety and environmental standards, Interior’s rule appears more likely to reduce investment and harm energy production in the region,” said Sen. Lisa Murkowski, R-Alaska, chair of the Senate Energy and Natural Resources Committee.

“This rule should be a positive sign for the administration’s willingness to offer new leases in the offshore Arctic, but instead it continues to hint toward an even more uncertain future for the regulatory regime in this region,” she said.

Sen. Dan Sullivan, R-Alaska, said he was still reviewing specifics of the rule, but by the Obama Administration’s own estimate this regulation will add more than $2 billion in compliance costs over 10 years to Arctic outer continental shelf exploration, casting further uncertainty on the future of oil production in Alaska.

Rep. Don Young, R-Alaska, criticized the new rule, saying these rules “eliminate the opportunity to carefully and methodically introduce new technologies. Bottom line, these rules are overly prescriptive and make it nearly impossible for development to move forward in the future.”

Kara Moriarty, president and chief executive officer of the Alaska Oil and Gas Association, said the new drilling rules would only make it more difficult to invest in Alaska’s offshore resources.

Moriarty called the new regulations “cumbersome,” and said the federal government would cause the U.S. to lag behind other nations moving ahead with Arctic development. “These same regulations will not encourage investment or protect the environment,” she said. “Instead they will only make it more difficult to entice companies back to the Arctic when oil prices rebound.”

The final rule requires operators to develop an integrated operations plan that addresses all phases of a proposed Arctic OCS exploration program and submit it to the Bureau of Ocean Energy Management in advance of filing an exploration plan. The regulations require companies to have access to and ability to promptly deploy source control and containment equipment, including capping stacks and containment domes, while drilling below or working below the surface casing.

The regulations also require operators to have access to a separate relief rig able to drill a timely relief well under conditions expected at the site in the event of loss of well control. Operators also must have the capability to predict, track, report and respond to ice conditions and adverse weather, effectively manage and oversee contractors, and develop and implement an oil spill response plan for Arctic conditions, supported by necessary equipment, training and personnel for oil spill response in the Arctic OCS.