US BOEM director defends Shell Arctic drilling decision

Washington (Platts)--21May2015/450 pm EDT/2050 GMT

Faced with intense opposition from environmentalists, the director of the US Interior Department's Bureau of Ocean Energy Management defended the administration's conditional approval of Shell's plans to drill in the Arctic this summer, a decision she indicated was based on both federal statute and, partly, national security.

"There are certain regulatory requirements and [Shell] had met all of those requirements," BOEM Director Abigail Ross Hopper said in an interview with Platts on Wednesday. "We don't have the ability to push things back, we can either approve or deny or approve with conditions. [Shell] met all the regulatory requirements ... there's not a basis upon which to reject it."

The majority of environmental groups are pushing for an effective ban on US Arctic drilling, a path some felt President Barack Obama may have been moving toward when in late January he designated 9.8 million acres in the Beaufort and Chukchi seas offshore Alaska as off-limits to future oil and gas leasing.

But Hopper, who was named BOEM's director in December, said the administration is committed to oil and gas development in the Arctic as part of both diversifying the nation's energy supply and growing US oil and gas resources for national security reasons.
"I think we are willing to facilitate development in the Arctic," Hopper said. "I think that as an administration we believe that it can happen safely if you meet these stringent requirements, which we think are appropriately balanced to allow industry to move forward while also being protective of the environment."

The administration's stance on Arctic drilling has confounded groups on both sides of the debate. It has spent the year blocking certain future development along Alaska's coast, unveiling Arctic drilling standards criticized by environmentalists as overly lax and industry as unduly burdensome, and paving the way for Shell to return to the Chukchi this summer and, possibly, other oil majors to drill in coming years.

But Hopper stressed that Chukchi drilling was by no means a certainty because Shell still needed a host of additional permits and approvals before the drilling season begins in July.

"It's far from a foregone conclusion that there will a 2015 drilling season," Hopper said.

In addition, the administration has crafted Arctic drilling rules aimed at preventing the likelihood of a drilling disaster, such as a requirement for inspectors with Interior's Bureau of Safety and Environmental Enforcement to be on Arctic rigs at all times they are drilling.

"Those inspectors have the right to stop operations if they see anything that is not compliant with what the permit conditions are," Hopper said.

If problems arise with Shell's operations, the administration has carved out ways to shut down drilling almost immediately, she said.

"I do think that we have laid out and BSEE has laid out and the other agencies have laid out very clear guidelines that Shell has to abide by and operate under, and if at any point we feel that that's not happening then we have the ability to call a halt," she said.

Shell will be required this summer to have a secondary rig nearby to drill a relief well in the event of a blowout, an element of Interior's Arctic rules, which have drawn criticism from industry for being prohibitively expensive.

"Obviously we have heard that criticism and we thought obviously for this season that's the appropriate requirement," she said.

Still, she indicated that this requirement was ripe for change.

"The rule has an overlay of flexibility and if there can be proven technologies that would be as effective in killing a well as a second rig to drill a relief well, then we're open to that," Hopper said.

This would likely require collaboration with BSEE and, potentially, the Center for Offshore Safety, an industry group, before a technology can be verified by regulators as meeting these requirements, she said.

"A company coming in and saying 'We have this technology ... trust us," ... it's not going to cut it," she said.

--Brian Scheid, brian.scheid@platts.com
--Edited by Annie Siebert, ann.siebert@platts.com

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