Arctic drilling faces tougher scrutiny

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The oil slick spreading across the Gulf of Mexico is pushing Canada's energy regulator to take a harder look at a bid by several major oil companies to relax safety regulations for offshore drilling in the Arctic.

The National Energy Board sent a letter Wednesday telling the oil industry that it "is aware of the recent fire and sinking of Transocean Ltd.'s Deepwater Horizon rig in the Gulf of Mexico" and "intends to ask questions during the proceeding about this incident."

Similar questions are being asked across Canada and the U.S., where President Barack Obama recently moved to give industry access to new ground for offshore drilling. A White House spokesman said Thursday that the rig explosion will form part of U.S. government deliberations on which areas of the country's offshore it will open to oil and gas development.

In Canada, the explosion has renewed criticism from environmental groups of British Columbia's bid to lift a moratorium on offshore drilling, and plans by Enbridge Inc. to build a crude pipeline to the West Coast, where it would fill oil tankers.

"This rig explosion amplifies the risk for us and really drives home that modern technology doesn't stop environmental disasters from happening," said Stephanie Goodwin, a senior campaigner for Greenpeace in Vancouver. "It reinforces that it's not a question of if, it's a question of when there's going to be an environmental disaster."

But perhaps the most urgent response has come from the National Energy Board, which gave companies until noon on Monday to tell it how "this incident, the continuing response to it and the ongoing investigation should have on the scope and timing of" its hearing into an industry request that it drop a requirement known as the "same-season relief well" rule.

The rule stipulates that any company drilling an offshore well must also be able to drill a relief well in the same season. Relief wells are used in an emergency to stop an out-of-control well by using a drill to pierce the leaking well and stop its flow.

The ability to drill a relief well in the same season is especially important in the Arctic, where thickening ice typically forces a halt to all drilling by December. If a relief well can't be completed by then, oil could continue to leak into the ocean for months - possibly years - until the problem is fixed.

But a group of major companies has argued that new deep-water exploration areas in the Beaufort Sea require wells that will take two or three years to drill - making a same-season relief well impossible. They have also said that new technology has made drilling so safe that relief wells are no longer needed - and that, in any case, they are rarely the right tool in an emergency.

The latter argument has, however, come into question now that BP PLC has said a relief well is one of the top options to stop oil flowing from the well the Deepwater Horizon was drilling, and some believe the explosion will derail that request entirely.

"I'm sure the National Energy Board is going to err on the side of caution. … It isn't going to go the way the companies wanted it," said Ian Doig, a newsletter writer and keen observer of northern oil and gas. "I mean how the hell do you control something up [in the Arctic]if it gets out of control like what's happening in the Gulf of Mexico?"

BP is among the companies pushing for the Arctic rule change, as are Transocean - the company that leased the Horizon to BP - and Imperial Oil Ltd., Chevron Canada Ltd., Shell Canada Ltd., MGM Energy Corp. and ConocoPhillips Canada Resources Corp.

Andrew Hudson, a lawyer with the energy board, said the board "fairly frequently" asks hearing participants for their views on how it should proceed. But he declined to identify what sorts of questions the board wants answered.

"The board itself may be asking a bunch of questions with regard to it. They'll be made public when they're issued," he said.

In arguments to the regulator, companies detail advances in technology that they say will allow them to provide a level of safety equivalent to drilling a relief well. Some of those include using redundant blowout preventers - although the partial failure of a blowout preventer is being blamed for the leak in the Gulf of Mexico.

A spokeswoman with Imperial said earlier this week that the company will apply whatever lessons are learned from the Gulf into its Beaufort plans.

But Mike Miller, the chief executive officer of well-control company SafetyBOSS Inc., said a relief well is the only certain way to contain a blowout.

"I would have a problem with" removing the same-season relief well rule, he said. "It's the only sure shot."