The energy industry has been quick to criticize the Obama Administration's proposed regulations for exploratory drilling in the US Arctic Ocean, calling them "unnecessarily burdensome."
The Interior Department proposed Feb. 20 its first regulations ever for the US regions of the Arctic Ocean that would require energy companies to have contingency plans and spare equipment to contain any spills in the region. They would apply to the Beaufort Sea off the northern coast of Alaska and the Chukchi Sea over the Bearing Strait between Alaska and Russia.
An Interior Department report said in 2011 that an estimated 22 billion barrels of oil and 93 trillion cubic feet of gas – both technically recoverable – lie beneath these two seas owned by the federal government.
Under the new proposals, companies exploring for oil and gas in the region would have to prepare plans for responding to spills and have "prompt access" to equipment capable of controlling and containing the leak. They also must have a separate drilling rig on hand in case they lose control of the spill altogether.
The plan was criticized immediately by Eric Milito, director of upstream operations at the American Petroleum Institute, the leading trade association for the US oil industry.
"Other equipment and methods, such as a capping stack, can be used to achieve the same season relief with equal or higher levels of safety and environmental protection," Milito told Platt's. "For this reason, it is unnecessarily burdensome to effectively require two rigs to drill a single well."
Nevertheless, one specific company, Royal Dutch Shell (NYSE:RDS-A)(NYSE:RDS-B), has already committed to proposed regulations and will adhere to them in large part during its exploratory drilling this summer in both the Beaufort and Chukchi seas even before they go into effect. That includes having a backup drilling rig available in the event of a spill.
The reason for Shell's early compliance are an agreement between the Anglo-Dutch energy company and the US Department of Energy (DOE) because of Shell's shaky performance in Arctic drilling during the summer of 2012, in which its exploratory drilling was undone by mechanical failures exacerbated by harsh weather.
Because Arctic drilling generally is conducted only from July to October, the regulations would require operators to submit plans for quick response to any accident. "If there were to be an uncontrolled well event, we want to make sure that the well can be secured within the drilling season," said Brian Salerno, director of Interior's Bureau of Safety and Environmental Enforcement.
These regulations already apply to drilling in the Gulf of Mexico, "where generally mild weather conditions and an established industry presence have created extensive infrastructure and logistical support that allow for nearly year-round operations," said Abigail Ross Hopper, the director of the Bureau of Ocean Energy Management.
The proposed regulations for exploratory wells still must await a 60-day public comment period, and there was no word when they would become final. Meanwhile, Salerno said the Interior Department will propose in the next few years new regulations for production as well as exploration.
By Andy Tully of Oilprice.com. Oilprice has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.