Feds propose regs for Arctic offshore drilling

Federal regulators laid out a plan Friday to set new standards for offshore oil and natural gas drilling in the icy, treacherous waters of the Arctic Ocean.

The rules proposed Friday by two Interior Department agencies would, for the first time, codify standards specific to drilling in the Beaufort and Chukchi seas north of Alaska, where there has been almost no drilling in decades.

{mosads}“These proposed regulations issued today extend the administration’s thoughtful approach to balanced oil and gas exploration in the Arctic, and are designed to ensure that offshore exploratory activities will continue to be subject to the highest safety standards,” Interior Secretary Sally Jewell said in a statement.

The standards from the Bureau of Ocean Energy Management and the BSEE are aimed at ensuring that oil and gas drillers are properly prepared for the entire drilling process, including exploration, planning and operations.

Specifically, the agencies want drillers to have backup rigs ready nearby to drill relief wells in the case of blowouts or other emergencies.

Drillers would also need response plans specific to the Arctic region, have prompt access to control and containment equipment for spills and be able to contain spills completely through mechanical means, without using dispersants or burning the oil.

Companies would be limited to drilling during the time of year when the sea is not icy.

The rules largely codify existing conditions that officials have put on recent drilling rights leases the agencies have sold, they said.

“In turn, these rules would facilitate exploration planning efforts and provide regulatory certainty, while ensuring that the U.S. maintains its leadership position in overseeing safe exploration operations that protect this unique and sensitive environment,” Janice Schneider, the Interior Department’s assistant secretary for minerals management, said in the statement.

The results were disastrous, leading to accusations that both Shell and the federal regulators were completely unprepared to start Arctic drilling. The company’s spill containment dome was damaged before it made it to Alaska, the main drilling rig ran aground and another rig was damaged in a storm after a tug boat cut its towing line.

Salerno said the agency incorporated many lessons from the 2012 incident into its new regulations. Although the rules may not be finalized by the time Shell drills, officials plan to hold Shell to many of the standards anyway.

Drilling companies started lobbying against the rules long before they were proposed, based on what they thought could be in them.

In an October meeting with Obama administration officials, Shell warned that the regulations could add billions of dollars of costs to their operations with little environmental or safety benefit.

The rig relief mandate would cost $3.2 billion, the seasonal limitations would cost $6.8 billion and the mechanical recovery requirements would cost $119 million, according to an analysis commissioned by Shell. Each rule’s benefits would not exceed $1 billion, the firm said.

By contrast, the agencies said their regulations’ total costs would add up to only $1.2 billion.

Oil companies haven’t drilled in the United States’ portion of the Arctic Ocean in decades, largely due to the rough conditions and high cost of exploration there.

But when oil prices started rise dramatically at the end of the last decade, interest spiked among oil companies.

The U.S. Geological Survey believes the Arctic could hold 13 percent of the world’s undiscovered oil reserves and 30 percent of its undiscovered gas, or up to 160 billion barrels of oil.

Just the Beaufort and Chukchi seas, which are the areas the Interior Department could make available for exploration, are estimated to have more than 23 billion barrels of oil and 104 trillion cubic feet of gas.

This story was last updated at 3:20 p.m.