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Kulluk grounding: Coast Guard report finds series of failures, questionable decisions by Shell

Lisa Demer
The tugs Corbin Foss, Ocean Wave and Lauren Foss begin the tow of the conical drilling unit Kulluk from Kiliuda Bay near Kodiak Island, Alaska, Feb. 26, 2013, with the tug Guardsman, tug Warrior, Nanuq and Aiviq on scene to assist. A Coast Guard report released Thursday is critical of Shell's handling of the Kulluk drilling rig's grounding.
Petty Officer 1st Class Sara Fra
The Kulluk grounded in Kiliuda Bay off Sitkalidak Island, Alaska.
NOAA photo

A series of problems doomed a winter tow of Royal Dutch Shell's prized Arctic drilling rig and contributed to its grounding Dec. 31, 2012, near Kodiak Island, the Coast Guard concludes in a new investigative report.

Pounding weather, including huge swells, rocked the round, hard-to-handle Kulluk rig.

A design flaw allowed seawater into the fuel tanks of a new, custom-built tow vessel, and mechanical problems plagued the journey.

Bridge officers, who had to work overly long shifts, had never before been responsible for towing a vessel across the harsh Gulf of Alaska. Crew members ignored alarms and some, including the captain, may have committed negligence, the report said.

Shell's tow plan was inadequate, poorly vetted and misidentified a critical piece of equipment: a huge shackle, or buckle, used to connect tow gear, the report said. That shackle, which received only a visual check before the voyage, failed and was lost in the storm.

Shell made a strategic move to leave Dutch Harbor for a 1,700-mile winter transit despite forecasts of worsening weather in part to avoid millions in state property taxes to the state of Alaska, the Coast Guard found.

The 152-page report was released Thursday, 10 months after a nine-day Coast Guard hearing in Anchorage into the circumstances and causes of the Kulluk grounding. The investigation was led by Coast Guard Cmdr. Joshua McTaggart of the Coast Guard Investigations National Center of Expertise in Louisiana.

WARNINGS OF TROUBLE

The Kulluk was towed by the Aiviq, a vessel built and operated for Shell by Edison Chouest Offshore. During a fierce Gulf of Alaska storm, the Kulluk broke free and numerous attempts to get it securely under tow by the Aiviq and rescue vessels, including a Coast Guard cutter, failed.

One Coast Guard leader who reviewed the investigation said the single most significant factor was a failure to assess and manage the extreme risks of the Gulf of Alaska.

"In this case, the risks associated with a single vessel tow by a new purpose-built vessel of a unique conical-shaped hull, with people aboard, in winter Alaskan waters where weather systems and seas are expected to rapidly develop, were extremely high," Rear Adm. Joseph A. Servidio, Coast Guard assistant commandant for prevention policy, wrote in the report's comment section.

Rear Adm. Thomas Ostebo, commander of the Coast Guard in Alaska, said in his written response that further investigation is underway to determine if Aiviq crew members committed illegal misconduct or negligence.

Names of key players, including crew members and officers, were blacked out in the report including those who testified in the public marine casualty hearing in Anchorage. Even names of the federal officials other than McTaggart on the investigation hearing panel were redacted.

The report said the captain of the Aiviq emailed the tow master on the Kulluk on Dec. 22, 2012, a day into the voyage, warning of trouble. The rig was on a journey to a Seattle-area shipyard for maintenance and repairs.

"To be blunt I believe that this length of tow, at this time of year, in this location, with our current routing guarantees an ass kicking," the Aiviq captain wrote. "In my opinion we should get to the other side just as soon as possible."

No one was injured but the rig was severely damaged in the grounding. The Kulluk's skeletal 18-person transit crew had already been plucked off by Coast Guard helicopter crews.

Environmental groups and a key Senate Democrat said the report confirmed that Shell was ill-prepared for a complicated Arctic operation.

Shell, which still is regrouping and doesn't intend to drill on its promising Alaska offshore leases this year, responded that it was reviewing the Coast Guard report.

"We appreciate the thorough investigation and will take any findings seriously. Already, we have implemented lessons learned from our internal review of our 2012 operations. Those improvements will be measured against the findings in the USCG report as well as recommendations from the US Department of Interior," Shell said in a written statement.

TOW FOR TAXES CONFIRMED

Regarding the taxes, the investigation found that Shell believed the Kulluk was subject to state taxes on oil and gas properties. The tax would have been assessed on Jan. 1, 2013, if the Kulluk was still in Alaska waters. The Aiviq with Kulluk under tow left Dutch Harbor on Dec. 21, 2012.

Before the grounding, a Shell spokesman, Curtis Smith, told a reporter in Dutch Harbor that the tax implications "influenced the timing of our departure." But after the Kulluk ended up stuck on the rocky shore near Kodiak off Sitkalidak Island, both Smith and a Shell executive, Sean Churchfield, denied that the prospect of a hefty tax bill caused the vessels to leave when they did. Churchfield later admitted under oath to the Coast Guard investigation panel that taxes were a factor.

"The Alaska tax laws also influenced the decision to make the tow," the Coast Guard said.

On Dec. 27, with the storm building, the Kulluk towline was stressed by extreme fluctuations in tension over a span of six hours. An alarm set to go off at 50 percent the strength setting of the tow equipment went off 38 times that morning, but the third mate mistakenly thought it was a different, faulty alarm, the report said.

The shackle failed, the Kulluk was adrift and the seas were too rocky to reset the heavy tow gear with cranes. Crews temporarily connected an emergency tow line. But it soon failed as did others.

Within hours, the Aiviq temporarily lost all four of its main engines. The Coast Guard determined that it appears the vessel lost propulsion as a result of seawater getting into fuel tanks through poorly designed vents. The Aiviq crew did not have a good system to check for water in the fuel and in fact may have become complacent about a recurrent overflow alarm that could have caught the problem.

A 20-page analysis by the Coast Guard's Marine Safety Center in the report details a series of problems with the Aiviq's fuel configuration and supply system including improperly installed filters.

Tests of the diesel fuel in one tank after the grounding found 10 times the maximum amount of water specified by the engine manufacturer, Caterpillar. The water mixed with diesel to create a sort of slime. The saltwater corroded the fuel injectors, which had to be replaced at sea during the storm.

"The Aiviq chief engineer may have committed an act of negligence by not adhering to good marine engineering practices with regard to onboard fuel management practices," the report found.

QUESTIONS OF NEGLIGENCE

As to sanctions, the Coast Guard report recommends the chief engineer and several other Aiviq crew members be evaluated for possible actions against their Coast Guard mariner's licenses. The Aiviq captain may have failed to ensure enough oversight of the towing operation. Bridge officers worked 12-hour shifts even though federal rules for long voyages limit shifts to eight hours. The third mate may have failed to ensure there was proper tension on the towline.

Efforts to reach officials with Edison Chouest Offshore, which owns and operates the Aiviq, were unsuccessful Thursday.

Sen. Ed Markey, D-Massachusetts, and a sharp critic of Shell who serves on the Senate Commerce and Environment committees, flagged the investigation's key findings.

"This report 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 said in a written statement. "Shell should be held accountable for its reckless behavior."

Michael LeVine, Pacific senior counsel for Oceana, said of the report: "The true significance of it lies in putting all of those problems in one place and having the Coast Guard point at Shell's cumulative difficulties with management, oversight, and risk assessment."

Neither oil companies nor the government are ready for Arctic drilling, he said.

The report includes recommendations including that the Coast Guard's Towing Safety Advisory Committee examine the best tow arrangements for drilling rigs.

Reach Lisa Demer at ldemer@adn.com or 257-4390.

Read the Coast Guard's report on the Kulluk grounding
By LISA DEMER
ldemer@adn.com