OUTER CONTINENTAL SHELF LEASES— The map shows active industry leases in the Chukchi and Beaufort Seas.

Interior issues first ever Arctic-specific exploration regulations

Last Thursday, the Dept. of Interior announced regulations that aim to raise safety and environmental standards in future exploratory drilling in the Arctic.
These regulations are the first rules that exclusively apply to exploratory drilling from floating vessels in the U.S. Arctic, namely leases in the Beaufort and Chukchi Seas.
The executive summary of the 349-page regulation document states that “although there is currently a comprehensive OCS oil and gas regulatory program, there is a need for new and revised Arctic-specific regulatory measures for exploratory drilling conducted by floating drilling vessels and “jack-up rigs” (collectively known as mobile offshore drilling units, or MODU, in the Beaufort Sea and Chukchi Sea.”
The summary says that the U.S. Arctic region is known for its oil and gas resource potential, its vibrant ecosystems, and the Alaska Native communities, which rely on the Arctic’s resources for subsistence use and cultural traditions. It also states that the region is characterized by extreme environmental conditions, geographic remoteness, and a relative lack of fixed infrastructure and existing operations.
“These are key factors in considering the feasibility, practicality, and safety of conducting offshore oil and gas activities on the Arctic OCS. This final rule will help to ensure that Arctic OCS exploratory drilling operations are conducted in a safe and responsible manner while taking into account the unique conditions of Arctic OCS drilling activities and Alaska Natives’ cultural traditions and access to subsistence resources,” the summary reads.
“With the United States as Chair of the Arctic Council, we are committed to demonstrating our leadership in governance and activities in the Arctic Region,” said Assistant Secretary of the Dept. of Interior Janice Schneider.
sIt is also a political statement as in a recent meeting President Barack Obama and Canada’s Prime Minister Justin Trudeau have issued a joint pledge to ensure commercial activities in the Arctic can only occur when the highest environmental standards are met.
The rules require oil companies to have proper internal controls and planning for oil spill prevention, containment and responses. These rules came in direct responses to lessons learned during Royal Dutch Shell’s recent mishap-ridden exploration efforts in the Chukchi and Beaufort Seas.
Some conditions that were written into permits for Shell are now codified in the new rule. Among them are conditions to stop working and leaving the area before the sea ice arrives.
Also the rule requires operators to develop an integrated operations plan, which addresses all phases of a proposed Arctic exploration program in the outer continental shelf. It needs to be submitted to BOEM ahead of filing an exploration plan. Companies are required to be able to promptly deploy source control and containment equipment, including capping stacks and containment domes.
Furthermore, operators are supposed to have access to a separate relief rig that is able to drill a relief well in the event of a loss of well control; have the capability to predict, track, report and respond to ice conditions and adverse weather events; effectively manage and oversee contractors – also a lesson learned from Shell – and to develop and implement an oil spill response plan designed for the unique Arctic OCS environment. The plan also must be supported with the necessary equipment, training and personnel for oil spill response.
According to a Bloomberg report, industry leaders lobbied against the regulations and said the mandates will discourage development in the U.S. Arctic.
In response to the new regulations, Austin Ahmasuk, marine advocate at Kawerak’s Marine program was pleased. “The DOI’s final regulations complement concerns from local communities related to oil exploration in the arctic over these past few years and are a great first step,” Ahmasuk commented.
He said that Arctic oil exploration is complex and has many challenges. “The Bureau of Safety and Environmental Enforcement issued a final rule with key assurances to safeguard local communities and subsistence resources.”
Ahmasuk pointed to a portion in the new rule that requires all mud cuttings to be captured, which came as a result of subsistence users’ concern for cleaner environments. “The new rule is complex and lengthy and is associated with other well control regulations, but with the new rule BSEE is pledging to take some great steps to safeguard the environment and ensure there is communication and outreach with local communities when oil exploration and other activities are considered,” he stated.
Ahmasuk said he was also pleased to read many references to and awareness of local subsistence activities in the regulations.
It is estimated that Arctic waters harbor 24 billion barrels of oil and 132 billion cubic feet of natural gas. However, after Shell’s 2012 and 2015 unsatisfactory and expensive exploration seasons, oil prices taking a nosedive and cheaply available natural gas, several oil companies have relinquished their drilling rights in Arctic leases.
Shell had reportedly spent $8 billion on their Arctic exploration campaign and suspended the campaign at the Burger J well for the foreseeable future, although the lease is still considered active.
According to Bloomberg, which reviewed Dept. of Interior records obtained by the conservation group Oceana, ConocoPhillips relinquished 61 Chukchi Sea leases; Norwegian company Statoil let go of 16 Chukchi Sea leases and its interest in 50 other leases; Iona Energy gave up one lease, Italy’s Eni SpA relinquished four leases in the Chukchi Sea. Shell kept the Burger J lease in the Chukchi Sea.
A tentative sale for oil and gas leases in the Beaufort and Chukchi Seas is still scheduled.
In March, a proposed offshore leasing program outlined oil and gas leases in the Arctic and Cook Inlet, with ten auctions scheduled from 2017 to 2022.

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