By Mike De Souza
CALGARY, Alberta, July 29 (Reuters) - Canada's Conservative
government is studying whether to extend Arctic drilling
licenses, a move that could open the door to relinquishing
millions of dollars in deposits paid by major energy companies.
The right-leaning government is considering the change in
law in response to oil industry lobbying to extend licenses that
expire in 2020 for seven years due to the challenges of drilling
in harsh conditions while meeting safety requirements.
Environmentalists oppose the extension, saying it would cost
public coffers hundreds of millions of dollars in lost deposits
and prolong risky drilling projects. The government, facing a
tight election in October, said it wants to protect and promote
development of offshore resources with safe and effective
regulations.
The government review began after Imperial Oil Ltd IMO.TO
said last month it and partners Exxon Mobil Corp (NYSE:XOM) XOM.N and BP
Plc BP.L needed more time before they can drill an exploratory
well in the Beaufort Sea, a section of the Arctic Ocean that
could hold more than 1.36 billion barrels of oil.
ID:nL1N0ZC2HF
Under the existing law, the companies stand to lose a
portion of a C$441 million($341.23 million) deposit if they fail
to proceed with an estimated C$1.77 billion drilling proposal.
Imperial Oil declined to say how much the group could lose in
total.
"We are focused on securing a lease extension, not
contemplating a potential penalty," said Imperial Oil
spokeswoman Belinda De Wolde.
Canada's aboriginal affairs and northern development agency
said its minister, Bernard Valcourt, appointed a special adviser
to consult with industry and local communities on "a
comprehensive review" of options, including changing the law,
known as the Canada Petroleum Resources Act.
Valcourt's office confirmed the minister was lobbied on the
issue by Imperial in June. It declined to speculate on the
outcome of the review, but said the corporation that manages
business interests of the Inuit in the western Canadian Arctic
also asked for a review of exploratory licenses.
Rob Powell, a spokesman at environmental group WWF-Canada,
said the Canadian government should keep what is left of the
deposit, which he estimates could add up to C$400 million.
Changes to the law would not likely be possible until
Canada's Parliament resumes sitting after an October election.
The latest polls show the Conservatives running neck-and-neck
with the left-leaning New Democrats, with the Liberals in third
place.
($1 = 1.2924 Canadian dollars)
(Editing by Jeffrey Hodgson and Andrew Hay)