Royal Dutch Shell Plc (NYSE: RDS-A, RDS-B) and any oil drilling company that prospects in the Arctic Ocean must boost safety practices to prevent spills in the frigid and often hostile waters or mitigate the impact, U.S. regulators proposed Feb. 20.
The Interior Department’s first Arctic-specific drilling rules respond to mishaps that plagued Shell as it sought oil north of Alaska three years ago. As the White House considered the plan, Shell said the requirements might make it too expensive to invest in the isolated but energy-rich waters.
“The Arctic region is known for its challenging environmental conditions, geographic remoteness and relative lack of existing infrastructure,” according to the proposal from the department’s offshore safety agency. There is a “need to develop additional measures specifically tailored to the operational and environmental conditions of the Arctic.”
Shell has said it wants to resume exploration when the weather gets warmer this year after halting operations in 2012 when a drilling rig ran aground and it was fined for air pollution. Environmental groups, citing harsh conditions and a fragile ecosystem, say it’s a mistake to drill in the region.
Oil E&P companies in the past decade stepped up plans to drill in the Arctic, using technology that may let them reach reserves trapped in the sea floor beneath ice. The Chukchi and Beaufort Seas may contain 24 billion barrels of oil, according to the U.S. Geological Survey.
Shell’s Requirements
The Interior Department said the rules build on requirements placed on Shell when it applied to explore in the Arctic. The rules require companies to use equipment designed specifically to perform in the extreme cold and high seas; have a relief rig and containment dome ready and nearby; and halt drilling 45 days before the short season ends to provide enough time to drill a relief well, if needed.
The proposal is subject to 60 days of public comment.
Shell, the only company with current plans to explore off the Alaska coast, drilled two preparatory wells after spending about $6 billion over almost a decade in preparation. While the drilling itself had few glitches, Shell had difficulty deploying and then moving out its drilling rigs, Interior said in its proposal.
Shell’s conical drilling barge, the Kulluk, was damaged when it ran aground in southern Alaska Dec. 31, 2012, while being towed during a storm. The Noble Discoverer drillship was temporarily detained by the U.S. Coast Guard a month earlier after it lost propulsion while docking at Seward, Alaska.
In 2013, the Environmental Protection Agency said that Shell’s operation of the Kulluk violated “numerous conditions in the permit” under the Clean Air Act.
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