SPILL FEARS MAY BLOCK GULF DRILLING PROGRAM IN CANADIAN BEAUFORT

A Canadian environmental panel has warned it will recommend against a drilling program by Gulf Canada Ltd ' in the Beaufort Sea unless Gulf provides detailed information on a worst case oil Spill.

Jim Livingstone, chairman of the federal Environmental Impact Review Board, said if Gulf cannot provide the information the board will have no option but to recommend to federal regulators that the drilling plan be rejected.

Gulf is seeking to drill three wells during 3 years in the Beaufort Sea using the Kulluk rig. The company is prepared to begin the drilling program this month with a well at the South Kogyuk site north of Tuktoyaktuk.

Gulf holds interests in seven oil and three gas discoveries in the Beaufort Sea, as well as interests in four gas strikes on the Mackenzie Delta and Tuktoyaktuk Peninsula. Gulf expects Amauligak field, with reserves of 500 million bbl, to be the lead project for any Beaufort Sea oil development.

Spill possibility Livingstone said evidence shows in the event of a major blowout oil would come ashore in the vicinity of Tuktoyaktuk Peninsula, and even a less than worst case spill could have a devastating effect on the shoreline that could last for decades.

Gulf has estimated a worst case blowout, which it said has extremely low probability, would spill 2.6 million bbl of crude in the 66 days it believes would be needed to control the well. Gulf said it could not estimate how much oil would reach land in the case of a major spill or the cost of cleanup.

"We don't feel we can provide any numbers with the accuracy and integrity that are required," said Frank Mitton, Gulf's northern operations manager.

The company has a $300 million insurance policy to pay for a relief well that could cost $150 million. Remaining funds would be used for containment. Gulf has another $300 million for containing a spill at the site and has negotiated a $1.2 billion line of credit with bankers.

The board adjourned until early this week to give Gulf time to provide more information.

But Gulf said it has submitted as much information as possible and does not intend to submit more. The company said there are too many variables to accurately predict how bad a spill would be or if it could cover cleanup costs.

Gulf earlier told the hearing there would be no possibility of an accident that would rank with the Exxon Valdez spill. If a blowout occurred, the volume spilled likely would be smaller and confined to the immediate area.

Gulf said even if all oil could not be cleaned up in the summer drilling season, it could be sandwiched between layers of sea ice and burned the following spring.