More than two years after Shell's Kulluk drill rig grounded in the Gulf of Alaska, a disaster that capped a troubled drill season, the U.S. Interior Department has issued new Arctic-specific standards for all companies seeking to extract oil from the icy Chukchi and Beaufort seas.
The proposed standards would require companies drilling in U.S. Arctic waters to secure a backup rig that would be available to quickly drill a relief well to quell any blowout. Companies would also have to prepare oil-spill plans specific to the Arctic geography and conditions and have quick access to spill-control systems.
They also would have to predict and cope with variable ice conditions, use special measures to reduce day-to-day discharges of drilling muds and other wastes, and file an integrated operations plan detailing all phases of exploration programs, including transport to and from the Arctic.
The new industry standards are patterned in large part on requirements already applied to Shell, the only company that has drilled in federal Arctic waters recently and the only company with plans to drill there this year.
They are "intended to provide for a very cautious and coordinated approach to offshore operations," said Brian Salerno, director of the Bureau of Safety and Environmental Enforcement, one of the Interior agencies that drafted the standards.
"Energy exploration in the Arctic is unique. 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," Salerno said at a telephone news conference Friday.
Abigail Ross Hopper, director of Interior's Bureau of Ocean Energy Management, said the administration is committed to Arctic offshore oil development, but that standards must be different from those applied to the Gulf of Mexico, where most U.S. offshore oil is pumped.
"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," said Hopper, whose agency co-wrote the new standards.
Shell would not be subject to the new standards this year if it is allowed to drill.
Though the Arctic standards are based on Shell's experiences, including an evaluation of the mishap-laden 2012 season, they could not become final before this summer, too late to apply to the 2015 season, Salerno said.
The proposed standards, in a 209-page document, are subject to a 60-day public comment period and other review, and they could be modified, Salerno said.
Shell moves ahead with drilling plans
In August, Shell submitted a revised exploration plan that envisions two rigs drilling simultaneously in the Chukchi. That plan is already being reviewed by BOEM.
Shell also submitted an integrated operations plan detailing its entire exploration program, but that 2013 document applied to a now-outdated Chukchi drilling proposal.
Shell issued a statement saying it is already addressing Arctic-specific challenges but is reviewing the new standards.
"Of paramount concern in all of our operations is safety and environmental protection. We support regulations that further these imperatives in the Arctic, provided they are clear, consistent and well-reasoned," the statement said.
Shell has spent about $6 billion on its Alaska offshore program but has yet to sink a drill bit into any oil-bearing rock. The company in 2008 spent $2.1 billion on Chukchi leases, adding to Beaufort leases acquired in 2005 and 2007, but a series of adverse court rulings delayed work.
Once Shell got permission to drill in 2012, the company encountered other obstacles -- delayed approval for a required oil-spill barge because the U.S. Coast Guard found problems with the vessel; the near-grounding in Unalaska of its other drill ship, the Noble Discoverer; criminal environmental and maritime safety convictions for drill-ship operations, mostly aboard the Discoverer; civil air-quality violations on both drill ships; and difficulties with drifting sea ice in the Chukchi.
The New Year's Eve grounding of the Kulluk was the final blow of the season, forcing Shell to retire the damaged ship and postpone follow-up drilling planned for 2013.
A January 2014 appeals court ruling that threw the entire 2008 Chukchi lease sale in doubt forced postponement of drilling planned last year.
Shell now plans to have both the Discoverer and the Polar Pioneer, a replacement ship, operating at the same time in the Chukchi this year, with each available as the other rig's backup if needed for a blowout.
But the two-rig requirement has been bitterly opposed by the oil industry.
Erik Milito, upstream director for the American Petroleum Institute, said standby rigs are not needed.
"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. For this reason, it is unnecessarily burdensome to effectively require two rigs to drill a single well," he said in a statement.
Canadian regulators have, since the 1970s, imposed a similar same-season backup-rig requirement for offshore Arctic drilling. Oil companies last spring asked Canada's National Energy Board to relax that rule for exploration projects in the Canadian Beaufort. But one of the companies, Chevron, withdrew that request in December after it shelved its Beaufort drilling plans because of deteriorating economics.
Salerno of the Bureau of Safety and Environmental Enforcement acknowledged that the same-season relief-rig requirement "is somewhat controversial."
"From our perspective, that sets a level of protection for the Arctic that is necessary. If there were to be an uncontrolled-well event, we want to make sure that the well can be secured within the drilling season," he said.
The proposed standards include tight deadlines for blowout response.
The cap-and-stack system would have to be in place within 24 hours of loss of well control, and a containment system would have to be in place within seven days. Drilling into oil-bearing zones would have to end each season before winter ice starts to form and move in, providing time for designated backup rigs to travel and drill a relief well if needed. The rules propose a 45-day maximum to complete relief-well operations, and blowout preventers would have to be tested every seven days.
Mixed response to proposed rules
Some environmentalists welcomed the new standards..
They are a "vast improvement" over Gulf of Mexico-oriented rules, said Marilyn Heiman, U.S. Arctic project director for the Pew Charitable Trust.
The requirements for quick deployment of oil capping and containment systems and availability of a standby rig are appropriate for the remote Arctic, Heiman said. "We're pleased to see the requirements for all three of these, because you can't just move equipment in," she said.
PEW has been monitoring offshore Arctic oil development and in 2013 issued its own recommendations for Arctic standards. The organization does not oppose oil development in the region, but has argued for better protections.
Greenpeace, which does oppose offshore development, was dismissive of the new standards.
"There is no such thing as safe Arctic drilling," Tim Donaghy, senior 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. These proposed regulations would only give a false sense of security and do nothing to protect the Arctic from catastrophe."
Sen. Lisa Murkowski, who last week claimed President Obama is trying to force the shutdown and dismantling of the trans-Alaska oil pipeline, was critical for different reasons.
"Given the opposition this administration has shown so far to responsible resource development, I'm reserving judgment until it's demonstrated that these regulations will not unnecessarily block investment," Murkowski said in a statement. "If this administration is truly committed to developing our Arctic resources, then it's imperative that the Interior Department provide clear direction to Shell and the other leaseholders in the region on how they can proceed."
Hopper of BOEM said at Friday's telephone news conference, the Obama administration wants Arctic offshore development to succeed. "Alaska is a critical component of our nation's energy portfolio," she said.
One obstacle to Shell's 2015 drilling ambitions was cleared when BOEM last week affirmed the 2008 Chukchi lease sale in a final version of the court-ordered supplemental environmental impact statement. That analysis was the second remedial study required after court decisions found that presale environmental studies were inadequate.