After assessing public fear of an Arctic repetition of the Gulf of Mexico drilling disaster, the National Energy Board (NEB) is circulating a reminder that northern Canada has a different regulatory regime than the southern United States.
The action follows observations -- by the Canadian Senate's energy, environment and natural resources committee as well as industry agencies -- that much widespread alarm over planned exploration programs arises from lack of knowledge about long-standing rules for natural gas and oil exploration in the Beaufort Sea offshore the Mackenzie Delta.
The NEB has issued its paper as an attempt to clear away some of the fear and attract focused, realistic contributions with a second call for submissions to its year-old inquiry into potential added or changed regulations for proposed industry forays into deep Beaufort waters with a new generation of drilling ships and equipment. Initiated as a quiet technical review of a board policy requiring capability to stop a spill quickly by drilling a relief well in the same season that any blowout occurs, the inquiry widened into a noisy forum for views on lessons that Canada should learn from the explosion, 11 deaths and oil spill last April at BP's Macondo well offshore Louisiana.
"The reaction in Canada was immediate and in some cases extreme," the Ottawa Senate committee observed in a report after collecting a political version of the outcry piled high in the NEB's Arctic regulatory file. Environmental groups, aboriginal communities and opposition political parties demanded a moratorium or outright ban against Arctic offshore drilling.
"Not only was there concern that the 'Black Tide' (from the Macondo well), propelled by ocean currents, might find its way to Canadian shores, but also Canadian wildlife proponents worried about the fate of Canada's migratory birds, including the legendary loon, which make their way south to winter and nest in the marshes of Louisiana and other Gulf Coast wetlands."
After a cursory review of the northern Canadian regulatory regime the Senate committee rejected the pleas for prohibition, with a warning against being stampeded into hasty actions by "the often conflicting media and other reports and the propensity of citizens and governments to rush to judgment after major disasters." The Canadian government, while making no official response to the Senate recommendation, in practice accepted it by leaving the issue up to the NEB to resolve.
While calling for a second round of submissions by April 1, the NEB fleshed out the Senate committee's findings by issuing a detailed reality check as a just-the-facts backgrounder on governance of northern Canadian offshore drilling.
The regime is a legacy that developed during a 1970s exploration wave of about 130 Beaufort, Arctic Islands and Eastern Arctic wells that also ignited great public concern.
Among the rules, oil and gas hunters must obtain operating licenses and operations authorizations for every type of work done and separate approvals for every well. The process includes mandatory environmental impact assessments -- not only for the NEB, but also up to standards enforced by a federal Environmental Impact Screening Committee and agencies of aboriginal nations that have northern land claim settlements that include offshore territory: the Inuvialuit Environmental Impact Review Board for the Mackenzie Delta region and the Nunavut Impact Review Board for the Eastern Arctic. The requirements include consultations with all agencies, communities, groups and individuals affected by industrial activity and reports on the results.
If permits are granted, the NEB conducts site inspections and performance audits throughout all projects' -- including exploration wells' -- life cycles including design, construction, operation and abandonment. The board has power to suspend operations and order companies to take actions. The supervision also includes mandatory reporting -- on a daily basis, or more frequently depending on conditions -- on repairs, modifications or deterioration of industrial equipment, the commencement of drilling into gas- and oil-bearing formations, production tests, movements of potential ice hazards and equipment failures.
Arctic operational rules include drilling and production regulations that require companies to have a management system that includes training for all workers, co-ordination among well or project owners and field contractors, reports of all near-misses as well as hazardous incidents, and accessible records of the experience, training and qualifications of all personnel.
As additional backup, all companies operating in the Canadian Arctic must demonstrate that they can cover a minimum of $40 million in no-fault accident costs for any or all mishaps regardless of who or what causes them, plus an additional $20 million for any spills that spread into U.S. waters of the Beaufort. In cases where fault or negligence by the drilling operation is proven, Canada sets no upper limit on liability for loss or damage.
The Canadian Association of Petroleum Producers, while accepting the NEB's April 1 information deadline, has cautioned the board that going into great detail on Arctic drilling methods involves practical matters that can only be addressed by applications for wells that incorporate special features required for particular targets in variable regional conditions. All exploration projects remain suspended for the duration of the inquiry, and it "creates a level of uncertainty within industry" that limits spending on fully developed and engineered drilling plans.
Imperial Oil, Chevron Canada, Shell Canada, ConocoPhillips Canada and BP plc hold extensive and active Canadian Arctic offshore exploration licenses. At least one major deepwater drilling plan is waiting in the wings. Imperial, supported by majority shareholder ExxonMobil Corp., triggered the original NEB technical inquiry with a plan to probe an offshore lease called Ajurak, about 110 miles offshore Tuktoyaktuk, with new ice-strengthened equipment capable of operating in its water depth of 650 meters (2,145 feet). The plan calls the old same-season relief well capability rule into question and has led to new blowout prevention technology being reviewed as part of the NEB inquiry because the companies expect to need up to three spring-to-fall drilling seasons to drill down to their geological target 5,300 meters (17,500 feet) beneath the seabed.
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