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Canada’s offshore faces change NEB official predicts operators will have to show means to handle spills; final report to Canadian government likely in 2012 Gary Park For Petroleum News
With an eye on parallel developments in the United States, Canada is making measured progress toward an overhaul of its 40-year-old laws and liabilities covering drilling in Arctic waters, aiming to complete the first of three phases by the end of 2011, an official with the National Energy Board told an Arctic gas symposium in Calgary.
Robert Steedman, the federal regulator’s environment team leader, said the current review is expected to result in “enormous” responsibilities being placed on operators to establish their “financial and technical capabilities” to handle spills.
The NEB was already engaged in updating its Arctic offshore safety and environmental regulations when it was blindsided by BP’s Macondo well blowout in the Gulf of Mexico, which prompted the Canadian government to order a more comprehensive review.
Steedman said the first phase involves fact finding and information gathering, with stakeholders given until April 1 to make their submissions.
Phase 2 to discuss those submissions is expected to commence in May and June with hearings scheduled in Inuvik and Yellowknife in the Northwest Territories, Whitehorse in the Yukon and Iqaluit in Nunavut/
The final phase involves presentation of a final report to the Canadian government, which is unlikely to happen until 2012.
Attention to Deepwater Horizon Steedman said the NEB will pay special attention to recommendations of the U.S. National Commission on the BP Deepwater Horizon blowout.
The final report of that commission in January urged a major reform of the industry and government approach to offshore drilling in the Gulf and Arctic.
It called for the U.S. government to persuade countries such as Canada, Russia and Norway to accept a common regulatory standard for Arctic drilling and ensure there is an international capacity to respond to blowouts.
The U.S. commission said the Macondo incident was not so much a case of one rogue company ignoring common safety standards as a failure by both government and industry to properly assess the risks as industry operations moved into deeper waters and harsher environments.
“There has been a culture of complacency that affects both government and industry,” said commission co-chair William Reilly, a former Republican head of the Environmental Protection Agency.
Although the U.S. panel did not call for an outright moratorium on drilling, it said much needs to be done to strengthen safety and response capability before major activity should proceed.
Critics of Canada’s offshore rules noted that last August a drillship contracted by Chevron Canada completed an exploration well in Newfoundland’s Orphan basin — the deepest offshore well in Canadian history.
But current rules give Chevron two years from the well completion to disclose details about the design of the well, what equipment was in place to prevent a blowout and how that equipment held up in such uncharted depths.
Nathan Cullen, a Member of Parliament for the left-wing New Democratic Party, said the “coziness” between regulators and the industry in Canada is “so reminiscent of the U.S. situation in the Gulf. The public has been left in the dark. But if you’re proud of your safety procedures, then clearly you’d want to tell the public about it.”
Canadian rules in place for 40 years The NEB’s call for a review attracted about 90 registrations from oil and gas companies, provincial and territorial governments, labor organizations, non-governmental organizations, environmental groups, aboriginal communities, political parties and individuals.
While the NEB’s mandate covers technical and operational issues, the Canadian government is under extreme pressure to update rules that have been in place for 40 years, when the price of oil was about US$7 a barrel.
The liability cap under a same-season relief well policy — which itself is being questioned by Imperial Oil and ExxonMobil Canada as they develop plans to drill in the Beaufort Sea — is C$40 million, a tiny fraction of the market capitalizations of Imperial, ExxonMobil, BP and Chevron, which hold deepwater acreages in the Beaufort.
But the liability caps are only modestly more onerous in the U.S. at US$75 million and the British North Sea at US$120 million.
Adding to the Canadian concerns is the loss of physical equipment and human knowledge since Beaufort Sea drilling went into sharp decline in the 1980s.
As far back as 20 years, a Northern Environmental Impact Review Board found there was a “startling lack of preparedness” by the Canadian government and Gulf Canada Resources (since acquired by ConocoPhillips) to deal effectively with a major oil well blowout during the open waters season.
An 82-page report by the board rejected an application by Gulf Canada because of a worst-case scenario that a well blowout could release 40,000 barrels per day for 15 days, resulting in 1.8 million barrels flowing into a wide area — seven times the volume released by the Exxon Valdez.
In a submission to the NEB, the British Columbia Investment Management Corp., which has assets valued at about C$80 billion under its control including shares of BP, said companies should be forced to drill simultaneous relief wells when they are drilling deepwater wells in Canada.
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