Oil: a risky business

By Geoff Cumming

The rewards may be infinite, but a fresh wave of oil exploration in our coastal waters also brings potential for environmental ruin. The Government says stringent safeguards are in place but documents accompanying Anadarko's drilling applications suggest there are gaps.

Oil is gushing into the Tasman Sea from Anadarko's blown Romney 1 well at the rate of 12,000 barrels a day. After failing to shut in the well with blowout preventers, the crew have abandoned their drillship, 160km off the Waikato coast. It is autumn, raising the likelihood to 66 per cent that oil will be washed ashore by the prevailing southwest wind and waves.

Auckland's drawcard west coast beaches - Muriwai, Bethell's, Piha and Karekare - are expected to suffer most and low concentrations of light oil could make shore in as little as three days.

And the best estimate for capping the well to stem the flow is 35 days. A relief well, if needed, would take 45 to 70 days to drill.

This "worst case" scenario comes not from deepsea oil drilling opponents but from Anadarko itself. The daily flow of oil is higher than the 10,000 barrels a day estimate cited by Greenpeace last October - modelling which John Key dismissed as scaremongering and which Petroleum Exploration and Production Association CEO David Robinson branded "science fiction".

The scenario is among more than 1800 pages of documents supporting Anadarko's drilling applications, released before Christmas under the Official Information Act.

Evaporation and wave action would disperse much of the expected light oil from a Taranaki basin blowout; it would reach shore in very low concentrations. But there's a medium chance that 200km of coastline would be contaminated with a low chance that contamination would stretch from south of Raglan to north of Kaitaia.

Such a catastrophic loss of well control is extremely unlikely (Environment Minister Amy Adams has put the risk at 0.25 per cent). The Ministry of Business, Innovation and Employment says the very low statistical likelihood of a major well blowout needs to be balanced against the huge potential gains of successful exploration. Current oil and gas production in Taranaki adds $1 billion to regional GDP and the Romney prospect area is estimated to contain up to 1.6 billion barrels of oil.

Maritime NZ's head of safety and response, Nigel Clifford, says in most cases a well blowout would not force evacuation of a drillship, allowing work to stem the flow before repositioning the ship to drill a relief well.

But blowouts are more likely during exploration than production and the risks rise with deepwater drilling (the Romney well starts at 1520m).

Anadarko's track record hardly soothes doubts. Though a latecomer and minority shareholder in BP's Deepwater Horizon project, it did not escape blame for the world's worst oil drilling disaster in the US congressional and presidential inquiries that followed.

The trajectory modelling justifies Greenpeace's claims (using modelling by science data consultancy Dumpark) that oil from a major blowout would reach shore and take a disastrous toll on marine life.

The documents were supplied to Maritime NZ which approved the company's discharge (oil spill) management plan and related contingency plans before drilling began. The biggest worry - in the "extremely unlikely" event of a worst case disaster - is the time it may take to stop the flow. Under Anadarko's contingency plans, equipment for a capping stack would be sourced from Peterhead, Scotland (a service centre for the North Sea oil fields), flown to Singapore for assembly, then shipped to New Zealand. The timeframe to cap the well, including a 21-day sea voyage, is put at 35 days.

Anadarko spokesman Alan Seay says in most circumstances efforts could be made to contain the slick and stem the flow before a capping stack arrived. The drillship Noble Bob Douglas has state of the art monitoring equipment to minimise the risks of a blowout. Drilling has revealed that temperatures and pressures in the area are much lower than conditions in the Gulf of Mexico which contributed to the Deepwater Horizon disaster.

The Texan company, encouraged by Government regulatory reforms, is one of several exploration giants showing renewed interest in New Zealand's offshore oil and gas potential and the first in recent years to drill in deep water. In December, the Government granted five more permits for offshore drilling off Northland, Taranaki and Canterbury - permits which could lead to exploration work costing $760 million. Anadarko is spending $1 million a day in the Taranaki basin and plans to wrap up drilling at the end of the month and move to a new exploration site off the Canterbury coast, where natural gas is the prospect.

Seay says huge costs and the extreme unlikelihood that one would ever be needed rule out storing equipment for a stacking cap in New Zealand. Maritime NZ accepts this, Clifford says. "No country, with the possible exception of the United States, maintains a domestic capability to respond to all possible oil spill events."

But what New Zealanders might expect is that such a low risk/high consequence activity is overseen by a watertight regulatory framework, response agencies with capability and experience and best practice contingency plans.

Environmental advocates say on all three counts Anadarko is far from convincing as a test case and recent history - the Rena and Pike River disasters - suggests concerns about regulatory oversight and capability should not be dismissed. And, in laying out its welcome mat to oil companies, the Government is ushering in regulations that will reduce public scrutiny - offshore drilling will become a non-notified activity under draft regulations to accompany the new Exclusive Economic Zone and Continental Shelf Act.


Where are the gaps?

Environmental Defence Society chairman Gary Taylor says the Anadarko case has exposed flaws in the regime for approving offshore drilling under the new EEZ Act. The act makes the Environmental Protection Authority responsible for assessing the environmental impacts of drilling before issuing a marine consent. But the environmental assessment excludes consideration of detailed plans for responding to an oil spill - that responsibility rests with Maritime NZ.

This division of responsibilities and limited state funding for the agencies raise the prospects for inadequate risk assessment, conditions which contributed to the Deepwater Horizon disaster in the United States, Taylor says.

In its marine consent application, Anadarko supplied only a summary version of its discharge management plan and contingency plans to the EPA. This prompted a High Court challenge last month by Greenpeace, essentially arguing that the EPA had not adequately assessed the environmental risks before issuing consent.

But Justice Alan Mackenzie found the EPA had applied the new law correctly. Its role was "limited to assessing whether the application contains information about the required matters" and its decision was "essentially administrative".

Greenpeace says the splitting of responsibilities raises the risk that the environmental consequences of a well blowout are not properly considered by either agency. "Discharge management plans are not an environmental risk assessment," says Greenpeace lawyer Duncan Currie. "They are plans detailing what to do if a spill happens rather than assessments aimed at determining whether an activity should go ahead.

"Fundamental to an environmental impact assessment is whether the activity should be carried out at all. Do the risks - in both probability and magnitude - mean the activity shouldn't go ahead?"

The judge ruled that the EPA's task was essentially preliminary, to ensure that it and the public would have sufficient information for the next publicly-notified stage of the application. But there won't be public notification of offshore drilling applications under new rules planned by the Government. Draft regulations out for consultation until January 31 make exploration drilling a non-notified activity, meaning no input from environmentalists and the wider public.

Taylor argues offshore drilling should be treated in the same way as resource consents on land - subject to Environment Court and potential High Court scrutiny where applicants can be cross-examined and expert witnesses called.

"There's a lack of transparency and clarity and we are unable to raise questions to ensure absolute best practice is being applied," he says. "Yes, we are dealing with a low probability event but the potential consequences mean we need to apply a risk-averse approach. There needs to be more rigour."


What's at stake?

A daily flow of 12,000 barrels points to an astronomically greater environmental catastrophe than occurred in the Bay of Plenty in 2011, when 2500 barrels of oil leaked from the wreck of the Rena. In the worst case - over winter with the drillship disabled and no ability to cap the flow or contain the oil - half the 420,000 barrels of oil released over 35 days could come ashore, at a concentration of up to 10.21 cu m per km.

This would almost certainly spell the end for the critically-endangered Maui's dolphin, thought largely confined to inshore waters between the Kaipara Harbour and the Mokau River (north of New Plymouth). Seabirds, turtles and other surface-dwelling wildlife would also be victims. The drilling area is a hotspot for the flesh-footed shearwater and grey-faced petrel; a Forest and Bird analysis notes the internationally vulnerable Cook's petrel frequents the area.

The coastal waters are a marine mammal sanctuary, used at times by migratory whales, and are important nurseries for juvenile fish and shellfish. The coastline provides habitat for migratory wading birds, breeding areas for grey-faced petrels and includes rare forest remnants. Coastal sites of importance to Maori include shark and whale bone fossils at Waiiti beach.

Even a slight oil sheen would rule out commercial fishing in the area, most notably the lucrative jack mackerel fishery.


How would we respond?

Maritime NZ would take charge, its national response team assembling in New Plymouth and liaising with other agencies. It has stockpiles of booms, skimmers and other containment equipment in New Plymouth and Auckland and could commandeer up to 11 oil rig support vessels. But booms and skimmers are of little use in ocean conditions; the likely first response would be aerial spraying to speed the break up of the oil, using environmentally-controversial chemicals. Auckland Council has little in the way of equipment to assist in a clean up of the west coast surf beaches.

The practical response to a major blowout would rely heavily on Anadarko and contracted specialists Wild Well Control and Crane World Wide.

The drillship and the company's three support vessels have firefighting equipment and containment gear. The main focus would be to cap the well before drilling a relief well to ease pressure in the reservoir. Though some engineering equipment could be sourced locally, much of the heavy duty equipment for debris removal and capping would be flown from overseas bases (potential sources include Scotland, Florida, Australia and Singapore), landed at Auckland and freighted by truck. If its drillship was damaged and no suitable local vessel available to drill a relief well, Anadarko identifies the Belford Dolphin, currently off East Africa, as the alternative. Sailing time is estimated at 35-45 days and the estimate for killing the well is a further 45-70 days.


Can Anadarko be trusted?

The US congressional investigation into Deepwater Horizon described the oil spill response plan signed off by BP and Anadarko as "tragically flawed" and "embarrassing". It criticised the lack of a "systems approach" to assess and manage risks and a joint decision to reduce from 16 to six the number of centralisers used to secure the well.

Investigative journalist Gordon Campbell has detailed Anadarko's role in the disaster on website werewolf.co.nz.

He says the company played a central part in decisions that led to safety breaches and cost-cutting that directly resulted in the disaster, approving the well design plan and well permit applications prepared by BP.

Seay says Deepwater Horizon provided salutary lessons for the entire industry and its safety culture and monitoring now leave nothing to chance. But the company's reputation has been further damaged by its efforts to escape liability for historic pollution costs linked to chemical company Tronox, a subsidiary of a company it acquired in 2006. A US judge's preliminary ruling last month leaves it facing a multibillion-dollar clean up and compensation bill.

Seay says he can't comment on the case, as it is still before the courts. But in terms of Anadarko's credentials as a good corporate citizen, he points to Mozambique, where the company's natural gas discoveries have proved "transformational, creating huge investment and jobs". He urges New Zealanders to weigh up the risks of a disaster against the potential economic gains "if we or some other exploration company is successful in locating resources that may exist in our economic zone."


Can Maritime NZ be trusted?

If Deepwater Horizon destroyed the complacency of the offshore exploration industry, the Rena grounding off Tauranga was a wake-up call for Maritime NZ and the Government.

The Murdoch Review of Maritime NZ's handling of the Rena disaster is disturbing. Its size and capability were constrained by funding; it initially "buckled" in its response. Its national response team lacked skills and experience; development and training levels were too low and exercises few and far between. Relationships with other agencies, notably the Department of Conservation, were flawed. Its booms and skimmers were not suitable for the conditions. The agency is overhauling its national response team and the Government is boosting funding by $2 million over three years to improve equipment and coordination.

Nigel Clifford says the agency sought advice from international experts and inspected facilities in Singapore before approving Anadarko's plans. It required plans to be tailored to New Zealand conditions.

Though a rig disaster would be far more challenging than Rena, he says the agency now has "much greater understanding of the need to scale-up and join-up much faster than we did last time". But he concedes it may still lack sufficient experienced staff to cope with a major offshore well blowout.

- NZ Herald

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