Shawn McCarthy logo.
Prime Minister Stephen Harper has invested considerable political capital in northern development and, as in the past, will travel to the North this summer to underscore his government's commitment to the vast region.
But a key plank in that economic development plan – the production of offshore oil and gas – now rests in the hands of the National Energy Board.
The regulatory agency is set to review whether international oil companies can use alternative technology to bypass a policy that would make it impossible to drill in the deep water of the Beaufort Sea.
At issue is the NEB's requirement that companies drilling in the Arctic offshore have the capability of completing a second well – a relief well – in the same season to kill a possible blowout, of the type that spewed millions of barrels of crude into the Gulf of Mexico after BP's 2010 Macondo disaster.
Companies argue the policy essentially blocks development in the deep water because it can take up to three years to drill wells at the target depths where they expect to strike oil, given the short drilling season caused by the prevalence of sea ice. In a 2011 review, the energy board modified its policy, saying companies could be exempted if they can "meet or exceed the intended outcome" through other means.
Imperial Oil Ltd. and Chevron Corp. have both asked for such a ruling, arguing modern well control technology makes the same-season relief well redundant and unnecessary. But northern native groups and environmentalists argue the capability to drill a relief well is the final fail-safe mechanism that would ensure crude does not gush from a blowout while the companies are unable to respond due to ice conditions.
The board faces a decision that would challenge Solomon.
The need for a relief well is only one aspect of the broader environmental, economic and social questions that surround offshore oil production in the Arctic. But it has become the de facto crux – so long as the board imposes a strict test on its relief-well policy, companies will not be able to drill.
By granting the exemption, the board would open the Canada's northern seas to the global energy industry that is hunting in ever-more dangerous conditions for reserves. Ottawa has raised the stakes by increasing the cap on liability in the event of an accident to $1-billion from $40-million, though BP has written off $37-billion (U.S.) in damage costs in the Macondo accident.
(In fact, BP did not require a relief well to kill its blowout which it finally managed to cap after more than three months. It completed a relief well to permanently seal the Macondo well.)
The Harper government is clearly eager to develop the offshore potential. Even as the NEB undertook a review of the Macondo accident, the government continued to lease offshore acreage for exploration. Environment Minister Leona Aglukkaq has used her chairmanship of the multi-national Arctic Council to press for development.
In its 2011 review, the NEB panel spent considerable time consulting with coastal Inuit people who depend on the sea for their livelihood and to sustain their culture. Local residents worried that "if there was a drilling accident in the Arctic offshore, life in the North could change irrevocably," the panel reported.
But the people also want development. The Inuvialuit Regional Corporation is a partner in some energy development, and Imperial Oil project will also be reviewed by the Inuvialuit Environmental Review Board.
Assuming Imperial Oil and Chevron pass the first gate – the same-season relief well policy – the Inuit organizations and territorial governments will provide vital input into whether the benefits of Arctic oil development justify the risks. At the Arctic Council, Ottawa has promised – and urged others – to consult closely with local populations on development. But it has not offered a veto.
Shawn McCarthy reports on energy from Ottawa.