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US to release Arctic-specific drilling rules before year end


WASHINGTON -- When Shell sought permission from the United States government to drill for oil in the icy waters of the Arctic Ocean, it agreed to follow a special set of standards to control oil spills in a challenging environment.

Interior Department officials now say they will ask other oil companies to follow similar protocols if they want to operate off Alaska' s north coast. Interior Deputy Secretary David Hayes said the agency is working on Arctic-specific rules that should be proposed before the end of the year.

We do believe it' s appropriate to put the Arctic standards in regulations Mr. Hayes told a Senate committee.

Depending on the requirements, the rules could encourage future exploration in the Arctic or discourage oil companies from operating in the area because of associated costs.

Senator Lisa Murkowski urged Mr. Hayes to make the rules flexible, reflecting the fact that different oil companies employ different technologies and drilling techniques.

In order to receive approval for its exploratory drilling, Shell agreed to construct an Arctic containment system capable of responding to potential blowouts. The company also agreed to have a back up drilling rig on hand in order to drill a relief well.

It' s unclear whether the Interior Department will impose the same requirements on all companies that plan to operate in the region.

Interior Department officials say there are about 26.6 Bbbl of technically recoverable oil in the Alaska outer continental shelf. That' s nearly four times as much oil as the United States consumed in 2011, according to the Energy Information Administration (EIA).

The timeline for future Arctic drilling is uncertain. Shell announced in February it was abandoning plans to drill in 2013 after confronting a series of challenges and mishaps in during the 2012 season. A drilling ship owned by Shell, known as the Kulluk, broke free from ships taking it to Seattle and ran aground on an uninhabited island during a storm.

In April, ConocoPhillips said it was suspending plans to drill off Alaska' s north coast in 2014, citing uncertainty in the federal regulations.

Dow Jones Newswires



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