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NEB says it will weigh Imperial, Chevron's Arctic spill response plans

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CALGARY - Two big energy players aiming to drill in the Beaufort Sea will get clarity from the National Energy Board as to whether their proposals to deal with a potential undersea blowout are adequate.

In letters to Imperial Oil Ltd. (TSX:IMO) and Chevron Canada Ltd. posted Friday, the NEB agreed to review the companies' contingency plans before they file formal applications.

Both made their requests to the board this spring, saying they needed more certainty before they could commit to spending huge amounts of money exploring in Arctic waters.

The energy watchdog requires companies to show they can kill a ruptured oil well in the Arctic offshore with a relief well in the same season it's drilled. But it's open to alternatives that would accomplish the same thing.

Both Chevron and Imperial have said a same-season relief well wouldn't be feasible in that harsh environment, but that there are more practical means to stop an underwater blowout. But the companies want to know early on in the regulatory process whether their alternatives will be accepted.

"After carefully considering the information submitted, the board has decided to grant the two requests for review," the NEB said in a release, noting each proposal will be weighed on its own merits.

"The board determined it would be beneficial, early in the regulatory review process, to establish whether the proposals would meet the intended outcome of the (Same Season Relief Well) Policy, as it is a major element of both projects. There will be an opportunity for public participation in the review process."

Any ruling will deal with whether the intent of the relief well policy has been met or exceeded, not whether the project will be allowed to proceed, the NEB cautioned in the letters.

The energy watchdog reviewed its Arctic drilling rules following the massive BP Deepwater Horizon blowout in the Gulf of Mexico in 2010.

In an affidavit filed to the NEB in May, the Canadian arm of California-based Chevron said it plans to drill an exploration well on its EL 481 prospect, 250 kilometres northwest of Tuktoyaktuk, NWT, around 2020. At that time, it will require an Arctic-capable drillship and up to three icebreakers, both of which are in "extremely short supply globally."

Chevron said it would likely have to sign five-year contracts starting around 2016 or 2017 to procure those vessels.

"Given Chevron's experience elsewhere in the Arctic, it expects that these capital commitments will be highly significant," it said.

"Chevron cannot make the above significant capital commitments for this specialized drilling and marine equipment without an advance NEB determination that the key building block upon which its drilling plans are being developed, the alternative well secure system proposed for use on EL 481, will satisfy the intended outcome of the SSRW policy."

Chevron aims to detail its blowout contingency plans to the NEB early next year.

Imperial, along with its U.S. parent ExxonMobil and U.K.-based BP PLC, is looking to explore the EL 476 and 477 licences, about 120 kilometres from the Northwest Territories coast.

In a letter to the NEB in April, Imperial said an early indication as to whether its same-season relief well alternative is OK would "avoid unnecessary duplication and confusion."

It said it would be prepared to provide details of its plan during the third quarter of this year.

Follow @LaurenKrugel on Twitter

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