Energy companies, once keen to explore U.S. Arctic waters for crude oil, have had a turbulent year. In September, Royal Dutch Shell abandoned its drilling operations off the Alaska coast after spending more than $7 billion in the region. In May, after months of stunted oil prices, Shell, ConocoPhillips and other companies gave up drilling rights to more than 890,000 hectares (2.2 million acres) in the Chukchi Sea. And in late June, Shell stood down from its fight to win extensions for some of its remaining leases in the Beaufort and Chukchi seas.
Any future activity in the region will only become more challenging and expensive. Companies planning to drill for crude oil in U.S. Arctic waters now face tougher regulations governing their operations, following Thursday’s roll-out of new standards by the Department of the Interior.
The new rules – the first time offshore drilling has had Arctic-specific regulations – require energy companies to have a backup rig nearby, to stop drilling before ice enters the area and to be able to predict and respond to ice conditions and adverse weather. They apply to floating drilling vessels and mobile offshore drilling rigs operating in the Beaufort and Chukchi seas.
The region’s oil and gas potential, its ecosystems and its Indigenous communities were considered in the development of the rules to ensure that any exploratory drilling operations are done in a “safe and environmentally responsible manner,” Assistant Interior Secretary Janice Schneider said in a statement.
“These are world class rules, but they are not unrealistic for companies to still operate,” said Eleanor Huffines, a senior officer for the U.S. Arctic at the Pew Charitable Trusts.
“The real goal here is prevention and immediate containment. Once oil gets in the water it is very difficult, if not impossible, to clean up,” she said.
Although the risk of a catastrophic oil spill is small, it could have crippling consequences for ecosystems, the economy and people’s livelihoods in the Arctic. It took B.P. nearly three months to successfully cap the oil-well pipe that was leaking oil into the Gulf of Mexico following the explosion of the Deepwater Horizon drilling platform in April 2010.
“In the Arctic, you’re thousands of miles away, there are only small roads, there is one landing strip. You don’t have access to all that infrastructure in a timely manner,” said Huffines. “This rule really tries to narrow that window of response.”
The international organization Oceana called the new rules “a significant step in the right direction.”
“The rules announced today are both necessary and long overdue,” said Michael LeVine, Pacific senior counsel for Oceana.
The new regulations are in line with the pledge made by U.S. president Barack Obama and Canadian prime minister Justin Trudeau in March to allow commercial drilling in the Arctic only if it met the highest possible safety and environmental standards.
The Department of the Interior estimates that complying with the new requirements could cost the industry $2 billion over the next 10 years.
“This is an unfortunate turn by this administration and will continue to stifle offshore oil and natural gas production,” Erik Milito, a group director at the American Petroleum Institute, said in a statement. Low oil prices, lack of regulatory certainty and the high costs of working in the Arctic have curbed companies’ activities in the region, Milito said during a panel discussion on offshore energy development in June.
The Beaufort and Chukchi seas are estimated to hold about 23 billion barrels of oil and more than 2.8 trillion cubic meters (100 trillion cubic feet) of natural gas. Although many companies have relinquished their leases in the U.S. Arctic waters, operators still hold several active leases in the Beaufort Sea and one in the Chukchi Sea. No Arctic leases have been sold since 2008, but the proposed five-year offshore drilling plan from 2017 to 2022 remains on the table.
While environmental groups have been urging the White House to cancel all future drilling in the region, oil companies and Alaska lawmakers have been pushing the government to allow the lease sale to go ahead.
The Obama administration previously cancelled two scheduled Arctic offshore lease sales late last year, due to poor market conditions and lackluster interest from energy companies. In late June, Alaska Senator Lisa Murkowski told an Arctic policy forum that the likelihood of additional oil and gas lease sales in U.S. Arctic waters was on shaky ground.
“This rule should be a positive sign for the administration’s willingness to offer new leases in the offshore Arctic, but instead it continues to hint toward an even more uncertain future for the regulatory regime in this region,” Murkowski said in a statement following the release of the new Arctic regulations.
“Until and unless companies can operate safely and without harming the health of Arctic Ocean ecosystems, the government has no business selling leases or authorizing exploration in the region,” said LeVine.