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Shell’s Arctic oil exploration operation faces multiple investigations

By Lisa Demer

The Anchorage Daily News: Posted on Wednesday, 01.09.135

ANCHORAGE, Alaska — As response teams continued Tuesday to evaluate Royal Dutch Shell’s once-grounded oil drilling rig, the Coast Guard, the Obama administration and U.S. Sen. Mark Begich all announced investigations or reviews taking a close look at Shell:

• Interior Secretary Ken Salazar announced “an expedited, high-level assessment” of Shell’s 2012 offshore drilling program in the Beaufort and Chukchi seas.

• The Coast Guard commander for Alaska has ordered a formal marine casualty investigation into the circumstances of the Dec. 31 grounding of the then-unmanned Kulluk during a pounding Gulf of Alaska storm just offshore Sitkalidak Island, south of Kodiak.

• Begich, in a letter to the national Coast Guard commandant, Adm. Robert Papp, and Shell Oil Co. president Marvin Odum, said he planned to hold an oversight hearing in his capacity as chairman of the Senate Commerce subcommittee on oceans, atmosphere, fisheries and Coast Guard.

The Kulluk, a heavy, round, Shell-owned drilling rig, was refloated Sunday night and towed Monday to Kiliuda Bay on the southeast side of Kodiak Island. It was pulled by the Shell-contracted Aiviq, the same ship that was towing it when troubles started Dec. 27 during the winter storm.

Shell and its salvage crews were waiting to get more information on the Kulluk’s condition from underwater inspections by divers, remote-operated vehicles or both. ROVs were headed to Kiliuda Bay Tuesday. A spokesman for the command team managing the Kulluk incident said he didn’t know if they would perform in-water inspections Tuesday or when results would be available. The command team wasn’t planning a live video feed of the inspections but images should be available after the fact, said spokesman Ignacio Gonzalez, who normally works for Shell in Houston.

In October, the Kulluk began drilling a single exploratory well in the Beaufort Sea and a Shell-contracted vessel, the Noble Discoverer, began a well in September in the Chukchi. An oil-spill containment dome was damaged during testing, so Shell wasn’t allowed to drill to depths at which it expected to find oil.

The Department of Interior review, expected to be complete in 60 days, will examine practices as well as what the agency called Shell’s challenges. Among those are the damaged oil spill containment dome, a novel apparatus that Shell volunteered to engineer but that now is required as part of its oil spill response; problems in getting Coast Guard certification of the companion oil-spill containment barge, the Arctic Challenger; and issues with both of Shell’s drilling rigs, the Kulluk and the contracted Noble Discoverer. The Discoverer dragged its anchor while in Dutch Harbor this summer, and also had problems with safety and pollution control equipment.

The broad review will look at Shell’s safety management systems, its oversight of contractors, and its ability to meet what Salazar called strict standards for oil exploration and development offshore in the Arctic. It will be led by Tommy Beaudreau, the director of Interior’s Bureau of Ocean Energy Management. Inspectors with BOEM’s sister agency, the Bureau of Safety and Environmental Enforcement, were on board Shell’s rigs during drilling operations.

Environmentalists welcomed the broad review by the Obama administration, which has been pushing Arctic oil exploration as a way to reduce dependence on foreign oil.

“A full, fair and public review of these processes and reassessment of the commitment to move forward and explore for oil in the Arctic is a good first step and way overdue,” said Michael LeVine, Juneau-based Pacific senior counsel for Oceana, an advocacy organization. Environmentalists hope the Interior Department, one of the agency’s that allowed Shell to move forward in 2012, will take the hard look necessary, he said.

“Quite frankly, that agency is at least partially responsible for this past season’s fiasco,” he said.

Shell has stressed that its drilling operations concluded safely and successfully. The new review covers the events leading up to and following the short drilling season.

“While we completed our drilling operations off the North Slope safely and in accordance with robust permitting and regulatory standards, we nevertheless experienced challenges in supporting the program — especially in moving our rigs to and from the theater of operations,” Shell spokesman Curtis Smith said in an e-mail. “We have already been in dialogue with DOI (Interior) on lessons learned from this season, and a high level review will help strengthen our Alaska exploration program going forward.”

The Coast Guard formal investigation was ordered by Rear Adm. Thomas Ostebo, Coast Guard 17th District commander, on Friday and should be completed in four months, spokeswoman Lt. Veronica Colbath said Tuesday.

The Coast Guard convenes such a formal investigation “when a vessel casualty has considerable regional significance, may indicate vessel class problems, or is the best means to assess technical issues that may have contributed to the incident,” the Coast Guard said in a written statement.

The investigation will be led by Cmdr. Joshua McTaggart out of the Coast Guard’s Investigations National Center for Expertise in New Orleans, Colbath said.

The investigation will examine the causes of the grounding, any evidence that a material failed, and any evidence of misconduct, inattention or willful violation of the law, the Coast Guard said.

Among other aspects, the Coast Guard will look into the towing vessels, towing equipment, procedures and personnel. Some information will be gathered through public hearings though no details were available on them yet, Colbath said.

Begich said in his letter Tuesday to the Coast Guard and Shell that he had received frequent updates on the Kulluk situation but still had many questions.

“I feel it is important to examine how this grounding occurred; the adequacy of the towing ships for the job in extreme, but not unexpected, weather; the failure of the tow vessel Aiviq’s engines; reports of inadequate spare parts inventory; and the failure of the towing systems which led to the grounding of drill rig,” Begich said in the letter.

The circular Kulluk, especially built for Arctic drilling, is 266 feet in diameter with a 160-foot drilling derrick in its center. When empty, it weighs 18,000 tons and is much heavier loaded. It’s much harder to maneuver even than a oil tanker with a bow and stern, according to tug operators.

The Aiviq, a massive new ship 360 feet long and built by Louisiana-based Edison Chouest for Shell, lost its original towline to the Kulluk on Dec. 27 and connected back to the rig with an emergency towline. But early the next day it lost power to all four of its engines. For a time both vessels were adrift in high seas and fierce winds.

The Aiviq regained power after the crew repaired the engines at sea and switched to a different fuel tank. Initial reports indicated contaminated fuel caused the engine malfunctions but that has not been confirmed. A number of vessels that came to the scene also lost their towlines to the Kulluk during the days leading up the grounding.

The effort to refloat and recover the Kulluk — Shell’s most prized drilling rig for exploratory wells offshore in the Arctic — involves some 730 people with Shell, its contractors, the state of Alaska, the Coast Guard, the Army and other organizations including those on tugs, support vessels and helicopters and in command posts in Anchorage and Kodiak.

Shell invested $292 million in upgrades to the Kulluk but Smith said he didn’t know its total value. Shell says it is sparing no expense to recover it safely but doesn’t yet know what the response is costing.

Reach Lisa Demer at [email protected]

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