Relief wells urged in offshore drilling

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One of the country's most important investors is calling for new rules that would dramatically increase the cost of drilling for Canadian offshore oil.

In one of a series of recommendations made to the National Energy Board as part of its review of Arctic drilling, the British Columbia Investment Management Corp. says oil companies should be forced to drill simultaneous relief wells when operating in deep waters around the country, whether it's in the Far North or the Atlantic.

It's a request that will no doubt provoke a fierce response from oil companies, which would see such a law as too expensive to comply with, acknowledges Doug Pearce, BCIMC's chief executive officer.

Requiring a simultaneous relief well would mean drilling two wells - one for production, one as a potential safety and shutdown valve - where companies currently only have to drill one, often at immense cost. Some industry leaders have also argued that doubling the wells required would also double the risk of a dangerous blowout such as the one from BP PLC's Macondo well in the Gulf of Mexico.

But in a letter to the NEB, Mr. Pearce argues that after BP's disaster, "for investors like [BCIMC]to more confidently provide capital to the offshore drilling industry, particularly deep water drillers, we must be assured of better long-term outcomes."

One way to achieve that, Mr. Pearce wrote, is by creating "a more robust safety and environmental culture." That means ignoring the short-term losses that might result from additional drilling costs and focusing instead on avoiding the catastrophic losses from another Macondo-style spill.

Mr. Pearce writes from experience: BCIMC, which manages $80-billion in funds, held more than $100-million in BP shares as of its latest update in March, 2009, and "we must be concerned about the possibility of future accidents and try to find ways to mitigate these risks," he wrote.

The BCIMC recommendation is one of many contained in more than three dozen letters submitted to the NEB as it prepares to study Arctic offshore drilling. The review, launched this May, has attracted interest from more than 100 people and groups, including oil companies, Inuit hunters, territorial and provincial governments, environmental lobbyists and private citizens.

The Communications Energy and Paperworkers Union seeks better monitoring and enforcement. Imperial Oil Ltd., which is counting down the nine-year window it has to work on its Arctic exploration licences, asks the NEB to "conduct its review in an expeditious manner." Akita Drilling Ltd. posits that "Canada has very good regulations in place which will require minimal modification."

Several groups, including the federal NDP, have asked the NEB to broaden its review to include drilling in all of Canada's seas, not just the Arctic. Fisheries and Oceans Canada also flags the need to look into diplomatic issues since, in an accident, ocean currents "would move the ice plus oil towards the Alaska offshore where, in the spring, it will be released in US water by the melting ice."

The letters point both to the strong interest in Canadian offshore drilling and the substantial challenge the NEB faces.

"It's a new breed of national unity discussion, because it brings into play regional economics, and environmental protection, both of which are important to all Canadians," said William Amos, director of the Ecojustice Environmental Law Clinic at the University of Ottawa.

"What we are doing offshore in the Arctic is something people in both Toronto and Saskatchewan care about."