Pew Offers Recommendations for US Arctic Drilling Regulations

U.S. regulations should ensure that drilling rigs , oil spill equipment and other infrastructure be in place to withstand Arctic conditions and ensure quick response to an oil spill, according to a recent report by The Pew Charitable Trusts.

Pew conducted the study, “Arctic Standards: Recommendations on Oil Spill Prevention, Response, and Safety in the U.S. Arctic Ocean”, to assist the U.S. Department of interior’s (DOI) public process, which began in June, to solicit input on improved Arctic technology and equipment standards. DOI initiated the process the update its regulations following its review of Royal Dutch Shell plc’s 2012 Alaska offshore oil and gas exploration program. In its review, DOI concluded that the federal government needed to recognize and account for the Arctic region’s unique challenges.

DOI aims to propose new regulations for Arctic oil and gas exploration and production programs next year; the agency plans to have a draft of new Arctic regulations by the end of 2013.

Following the 2010 Deepwater Horizon incident, the United States and other Arctic countries began to examine whether regulatory standards were sufficient to prevent an Arctic oil spill. The Ocean Energy Safety Advisory Committee in August 2012 concluded that U.S. regulations needed to be modernized to include Arctic-specific standards to prevent and contain spills and respond to spills quickly and effectively, Pew noted in the report.

Diminishing sea ice in the Arctic Ocean is opening Arctic waters to oil and gas exploration and other industrial activities such as shipping. But working in the Arctic poses a new set of challenges and a larger set of risks. The region’s harsh winters, with eight to nine months of ice cover and nearly complete darkness, and high seas, wind, freezing temperatures, dense fog and floating ice hazards in the summer create some of the harshest operating conditions on the planet.

Pew noted that current technology has not been proved to effectively clean up oil when mixed with ice or trapped under ice. An oil spill would have a profoundly adverse impact on the Arctic ecosystems, which includes blowhead, beluga and gray whales; walruses, polar bears, other marine animals and millions of migratory birds.

Very little exists in the regulations now regarding operating standards for the Arctic Ocean, Marilyn Heiman, director of Pew’s U.S. Arctic program, told Rigzone. Most of the standards are written for temperature waters and originate from the 1980s and 1990s, although some subsections have been updated since that time.

Pew is not opposed to offshore drilling. However, a balance must be achieved between responsible energy development and protection of the environment.

“It is essential that appropriate standards be in place for safety and for oil spill prevention and response in this extreme, remote, and vulnerable ecosystem,” Pew noted in the study.

PEW’s recommendations include:

• Vessels, drilling rigs and facilities should be constructed to withstand maximum ice forces and sea states that may be encountered
• Oil spill control equipment, such as relief rigs and well-control containment systems, should be designed for and located in Alaska’s Arctic for ready deployment
• Redundant systems – including blowout preventers, double-walled pipelines, double-walled pipelines, double-bottom tanks, and remotely operated controls – should be installed because equipment and logistical access is unavailable for large parts of the year due to harsh weather or ice cover
• Arctic offshore drilling operations into hydrocarbon-bearing zones should be limited to times when the rig and its associated spill response system are capable of working and cleaning up a spill in Arctic conditions

Investment in Safety, Infrastructure Needed for Arctic E&P

“We believe that companies that decide to drill in the extreme, remote and vulnerable Arctic Ocean need to make a substantial investment in safety and prevention,” said Heiman. “This includes have both a containment system and relief rig that are 'Arctic ready' and located in the Arctic to be deployed without delay if any loss of well control should occur.”

“We anticipate that the well capping and containment system costs will be only slightly higher than the cost of the Gulf of Mexico system that was built last year, taking into account the additional Arctic upgrade requirements,” said Heiman, noting that Shell has already invested in capping and containment.

Lack of infrastructure such as highways, airports or sea ports means oil and gas companies working in the Arctic must operate under remote conditions, Pew noted. The area from the Aleutians to the Canadian border has a tremendous lack of basic infrastructure for vessel traffic reporting and monitoring, search and rescue and spill response. There is no rescue tug for vessels in distress north of the Aleutians, which just got tug capability this week, Heiman said.  

A local shipyard would ben economic and logistical asset to Alaska, and a benefit to the fishing and transportation industries as well but should be addressed after response capability is made a priority, Heiman said in reference to the Kulluk incident last year, in which the Shell-operated Kulluk drilling rig ran aground while being towed from Alaska for repairs.

“Absent a shipyard, we recommended detailed mobilization and demobilization plans be required to ensure safe transit to and from shipyards and other drilling locations.”

To meet updated regulations, investment in drilling rigs purpose built for Arctic conditions is needed, especially the number of Arctic rigs  that were purpose-built for the Beaufort Sea that have been purchases for long-term service in Russia. According to Pew’s report, Arctic Outer Continental Shelf standards need to be set for drilling rigs. While some purpose-built Arctic drilling rigs have been move to another country or taken out of service, new rigs are available, under construction or could be built if DOI’s minimum Arctic drilling rig performance standards are codified clarifying the minimum requirement.

“There will not be an economic incentive to build Arctic drilling rigs if operators are allowed to use less robust rigs as an alternative,” Pew noted in the report.

Heiman also sees the need for further investment by the vessel industry into vessels capable of operating in the Arctic. DOI currently does not have Arctic vessel standards for drilling in the Arctic Ocean.

“Any vessels transiting through the Bering Sea to the Arctic need to have ice strengthened hulls or an ice breaker if they are going any other time than the short summer months,” Heiman said. 

Vessels must navigate risks such as waves, fog, icing conditions and ice, even in the summer months. Vessel design and operation must account for sea ice, strong currents and lack of infrastructure, meaning that vessels must be able to handle a broader range of tasks, such as firefighting, oil recovery, towing and supply.

DOI regulations currently do not specifically include Arctic seasonal drilling limits; the lack of standard has resulted in seasonal drilling limits have not been consistently applied to Arctic drilling programs.  DOI effectively applied seasonal drilling limits to Shell’s 2012 Chukchi Sea OCS drilling project, but did not apply seasonal drilling limits to Shell’s Beaufort Sea project that year, even though ice sets in earlier in the Beaufort Sea and is thicker, stronger and more dangerous multi-year ice.

Pew recommended that Arctic OCS drilling should be limited to approximately 46 days during a 106-day open water season because oil spill response techniques are more successful in the summer. Drilling an exploration well in the near shore Beaufort Sea OCS area may be possible in the landfast winter ice period.

Pew’s other recommendations include for DOI to use encounter rate computations. DOI uses an effective daily recovery capacity calculation, which is how much an operator estimates it skimmers could remove from the environment. However, Pew believes that ERDC, which was put into place after the Exxon Valdez oil spill in the early 1990s, is not adequate.

Additionally, Pew recommends DOI add standards for Arctic expertise, experience, capacity, competencies and qualifications.

“Companies wanting to obtain Arctic experience would be required to partner with companies that have Arctic experience or hire trained and qualified Arctic experts that can meet these standards,” Heiman noted.

Pew would like to see regulations preventing the discharge of toxic drilling muds in the Arctic Ocean, Heiman noted. Historical discharge has left heavy metals such as mercury and cadmium in seabed sediments and sediment deposition has caused concern about localized benthic smothering on the seabed floor, among other impacts. Heiman pointed out that numerous scientific assessments of these impacts have been conducted by the U.S. Environmental Protection Agency, the North Slope Borough and the local Alaskan government.

EPA’s pollution discharge standards for offshore drilling date from the 1980s, and allow a high level of pollution discharge.

“The local government has requested voluntary compliance by operators as good neighbors,” Heiman commented.

The number of oil spill removal organizations that exist to serve the Arctic Outer Continental Shelf is not as important as the size and capacity of the organization, the number of people in an organization, its equipment, and the training and experienced of the personnel who work in Arctic conditions.

“We recommended substantial improvement in the existing OSRO equipment fleets to upgrade and add Arctic-grade equipment that have been field tested and proven in the Arctic,” Heiman said.

Currently, very little transparency on compliance and enforcement exists for the public to access data on Arctic exploration and production activity. The public can submit a Freedom of Information Act to DOI, but the process is very slow and cumbersome, especially for the general public, Heiman noted.

“Optimally, DOI could develop a single website where a person could search for a company on a project name, although there may be other options that are equally efficient,” Heiman said.

Joint Industry Product Model One Method for Improving Technology

Heiman believes that more research is needed on source control and response, and that clearly, drilling technology has far outpaced technology to contain and control an oil spill.

“However, I think this research should be more transparent and open to the public for review in the future,” Heiman noted.

The joint industry product model is one method for improving technology.

“We recommend that DOI establish clear regulatory standards, which will fuel private company investment to development equipment and technology to meet the standards, which will fuel private company investment to develop equipment and technology to meet to standards.”

Heiman added that Pew has heard from many private companies that they have new, better technologies developed, or could develop them if there was a market for the technology.

“Absent a regulatory requirement to purchase this equipment, private companies are not incentivized to invest in developing or manufacturing new technology without a guaranteed market.”

In conclusion, Pew believes decisions about whether, when and how exploration and production activity is conducted in the U.S. Arctic Ocean should be based “on sound scientific information, thorough planning, the best available technology, and full involvement of the communities most affected.”