The federal energy regulator is easing a controversial regulation that oil companies say would prevent exploration in the ice-plagued Arctic offshore, but is promising to impose a high bar for environmental protection before it permits drilling.
After an 18-month review the National Energy Board said it would maintain its controversial relief-well regulation, but would give companies a de facto exemption if they can demonstrate they have alternative methods to quickly kill a blowout.
The Canadian board undertook its review after BP PLC’s catastrophic spill in the Gulf of Mexico raised new questions about the safety of offshore drilling, particularly given the short drilling season and extreme conditions in the North.
Several international oil companies have leases in large sections of the Beaufort Sea for exploration, and committed to invest billions of dollars to determine whether there are commercial quantities of crude oil deep under the frigid waters.
After consulting with northern residents, companies and environmentalists, the board concluded there was no reason to ban offshore drilling in the Beaufort, saying it has the necessary tools to protect the Arctic environment and its people.
Among the most contentious issues has been the NEB’s same-season relief well rule, which requires that, in order to get a drilling permit, companies must demonstrate that they would be able to complete a relief well and cap a blowout in the same season.
Exxon Mobil Corp. – which is partnering with BP in the deep water of the Beaufort Sea – has complained that it is virtually impossible to provide assurances that an operator could complete a relief well if a blow out were to occur late in the short drilling season. Exxon argued the regulation essentially represented a ban on deep-water drilling.
In its report issued Thursday, the NEB said it was maintaining the same-season relief well rule but will allow companies “depart from it” by showing they use other means that would “meet or exceed the intended outcome of the policy.” It will be up to NEB panels hearing specific applications to determine whether a company has met that test.
“The problem with the report is that it is not clear what they will accept as a fallback from the same-season relief well,” said Trevor Taylor, policy adviser at the Pew Centre’s Oceans North Canada group, which participated in NEB roundtables over the past year.
“The door is definitely ajar and therein lies the problem … It’s still not clear what you need to do in order to drill in the Arctic.”
The board does suggest that companies will not be able to rely on enhanced prevention equipment as a means of avoiding the relief-well rule. Chevron Corp., for example, has been developing an enhanced blow-put preventer that it says would make same-season relief well capability unnecessary.
However, in its report, the board said prevention alone will not suffice. Companies must demonstrate that they would be able to kill a blowout during the same drilling season.
The regulatory threshold may soon be tested, though there is currently no drilling or application for drilling permits in the offshore Arctic. Companies like Exxon, BP and Chevron have won leasing bids by promising to invest billions of dollars there, and would be expected to drill within the next three to four years.
Exxon was eager to file for a drilling application in early 2012, but a spokesman said the company will have to review the NEB report before determining how it will affect exploration plans.
“It truly will take some time for us to understand the recommendations in the report – the stipulations – as to how they can or will impact our future exploration plans,” Imperial’s Pius Rolheiser said.