Canada regulator keeps Arctic drilling provisions

CALGARY, Alberta Thu Dec 15, 2011 3:45pm EST

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CALGARY, Alberta (Reuters) - Canada's National Energy Board said on Thursday that any company that wants to drill for oil and gas in Arctic waters will need to demonstrate it has the capacity to sink a relief well in the same drilling season to cope with possible well blowouts.

In the conclusion to a review launched following BP Plc's Macondo blowout in the Gulf of Mexico, the board said it decided to maintain the same-season provision despite a request from BP and Exxon Mobil Corp that it be waived.

Exxon, BP and Imperial Oil Ltd formed a joint venture last year to explore acreage the companies hold in the Beaufort Sea off Canada's northern coast. However a spokesman for Imperial said it was too soon to know if the board's decision will affect those exploration plans.

"It's going to take some time for us to read and digest (the report) to understand what implications it might have for our exploration planning," said Pius Rolheiser.

While the board is not blocking future drilling in environmentally sensitive waters, it has set out a stringent list of requirements that must be met before any approvals are granted.

Along with detailing what measures are in place to cope with any spills, local communities and governments need to be consulted, and drillers need to assure regulators that their operations, equipment and systems meet stringent safety standards.

Though it is known to contain rich oil and gas reserves, the Beaufort region has been little explored. The only Beaufort well in the past 20 years was drilled by Devon Energy Corp in 2005-06. It cost $60 million. Devon was looking for natural gas and found 240 million barrels of oil. It has not developed the field.

The NEB, which was criticized this week for lax oversight of pipeline operators, also said it would need to be assured that any company that wanted to drill a well in Arctic waters had the financial capacity to handle losses or damages from a blowout and spill, with no upper limit on the amount required, as proof of financial responsibility.

(Reporting by Scott Haggett; editing by Rob Wilson)

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