Coast Guard blames 2012 Arctic rig grounding on bad decisions

WASHINGTON — Coast Guard investigators on Thursday rapped Shell Oil Co. and its contractors for failing to heed the dangers of towing a drilling rig across stormy Alaska waters in late 2012 — an ill-fated voyage that ended when it ran aground on New Year’s Eve.

In releasing its report on the incident Thursday, the U.S. Coast Guard said tow planners “did not recognize the risks” or adequately plan for crossing the “notoriously treacherous” Gulf of Alaska during the height of winter.

While “a complex series of events contributed to the error chain that resulted in the grounding,” Rear Adm. Thomas Ostebo said, “the most significant factor was the decision to attempt the voyage during the winter in the unique and challenging operating environment of Alaska.”

The investigation also concluded that financial considerations — including a potential multimillion-dollar tax bill from the state of Alaska — played a role in Shell’s decision to begin relocating the unpropelled Kulluk rig to a Seattle shipyard in late December 2012.

“The inadequate assessment and management of risks by the parties involved was the most significant causal factor,” said Rear Adm. Joseph Servidio, the Coast Guard’s assistant commandant for prevention policy.

The episode capped Shell’s first-in-a-generation bid to find oil under Arctic waters north of Alaska and continues to give ammunition to critics who say drilling in the remote region is too risky for even major companies to pull off. It also underscored the challenge in conducting even routine maritime operations in remote Arctic waters, where infrastructure is sometimes as scarce as daylight.

“Today’s report again shows that Shell did not appreciate or plan for the risks of operating in Alaskan waters (and) prioritized financial considerations ahead of safety and precaution,” said Michael LeVine, senior Pacific counsel with the conservation group Oceana. “The report again confirms what common sense dictates: Companies and government agencies are not ready for the Arctic Ocean.”

Shell is not seeking to resume drilling its Chukchi and Beaufort sea wells this summer, but it could ask federal regulators for permission to return next year.

Sen. Ed Markey, D-Mass., said the Coast Guard’s inquiry “shows that Shell ran through every single safety and common sense red light in moving this rig because of financial considerations.”

“This kind of behavior should raise major red flags for any future Arctic drilling plans,” Markey added.

Shell said the company was reviewing the report.

The report builds on the findings of a separate Interior Department probe that said Shell had done a poor job managing and overseeing a web of contractors.

“We appreciate the U.S. Coast Guard’s thorough investigation into the Kulluk towing incident and will take the findings seriously,” said Shell spokeswoman Kelly op de Weegh. “Already, we have implemented lessons learned from our internal review of our 2012 operations. Those improvements will be measured against the findings in the U.S. Coast Guard report as well as recommendations from the U.S. Department of Interior.”

The Kulluk’s two-week trek across the stormy Gulf of Alaska began on Dec. 21, 2012, with Shell contractor Edison Chouest using its anchor handling vessel Aiviq to tow the drilling unit away from Dutch Harbor, Alaska. But when the vessels ran into a series of storms near Kodiak Island, the tow line broke and then the Aiviq’s four engines failed. After a five-day fight to tow the 266-foot rig to safe harbor, it plowed into the rocky seabed along an uninhabited Alaska island.

The Coast Guard said Edison Chouest may have violated laws or regulations by not reporting equipment failures and safety concerns. One of the four main diesel engines had overheated previously, and on Dec. 25, a minor leak was observed in the oil pan for a separate engine; after it was briefly shut down to check the issue, it could not be restarted.

A spokesman for Edison Chouest did not return a phone call seeking comment.
The Coast Guard also stressed that while personnel on board the Aiviq were “experienced in towing operations,” much of that work was in more temperate waters and didn’t prepare them for the winter conditions in the Gulf of Alaska. “The specific lack of experience was displayed during the towing operations on Dec. 27, where the crew took ineffective action to reduce extremes in towline tension during a period of nearly six hours,” the report said.

Shell also made the decision to move the vessel despite increasingly dire weather forecasts, prompting the master of the Aiviq to e-mail a candid warning to the tow master on the Kulluk. “To be blunt,” he said, in the Dec. 22 message, “I believe that this length of tow, at this time of year, in this location, with our current routing, guarantees an a– kicking.”

Although the two masters alerted Shell’s marine manager of their concerns and asked for a more direct route to the east side of the Gulf of Alaska to avoid the worst of the weather, the change in course was never formally granted. The Coast Guard report noted that the officials on the Aiviq and Kulluk had the discretion to make course changes under Shell’s tow plan.