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Crime & Justice

Shell drilling contractor's sentence includes $12.2 million fine

  • Author: Yereth Rosen
    | Arctic
  • Updated: September 28, 2016
  • Published December 19, 2014

The Shell contractor that broke environmental and maritime safety laws during the oil giant's troubled 2012 drilling season was sentenced on Friday to pay $12.2 million in fines and community payments, serve four years' probation and undergo a company-wide environmental compliance program that will be subjected to the scrutiny of third-party experts.

Noble Corp.'s senior vice president for operations, Bernie Wolford, entered eight guilty pleas on behalf of the company's U.S. unit and admitted that the government's allegations of violations aboard the Discoverer drill ship and Kulluk drilling rig were true. U.S. District Court Judge Ralph Beistline imposed the sentence, under terms of a plea agreement reached between federal prosecutors and the company and filed in court on Dec. 8.

Seven of the eight felony counts concerned practices aboard the Discoverer, a ship plagued with engine and operational problems throughout 2012. Many of those problems involved an oil-water separator that is required, under long-standing federal law, for large ships like those in Noble's fleet. The Discoverer's oil-water separator was inoperable, but Noble concealed that from the U.S. Coast Guard and other regulators, according to court documents. Instead of using the separator to prevent oil from entering marine waters, the Discoverer crew rigged up a primitive bucket-and-hose system that sent much of the oily waste overboard. Improper use of the ballast tanks resulted in a noticeable oily sheen when the ship was at port in Unalaska.

Video: Watch Karen Loeffler discuss the Noble Drilling sentencing

The Discoverer's engine and propulsion system were also working improperly, and the results included shutdowns, flame-sparking backfires, intermittent engine shutdowns and excessive amounts of exhaust in the engine room, according to the plea agreement.

The violations were serious and numerous, Assistant U.S. Attorney Kevin Feldis said.

"These aren't just paper violations where somebody forgot to fill out a form," he said at a news conference that followed Friday's hearing. "These are knowing, intentional and willful violations. They knew what they were doing, they did it on purpose, knowing better, and then when the Coast Guard was on board, they specifically did acts or steps to hide these activities from the Coast Guard, affirmative steps, including taking away the blue barrel system and others, so that nobody could find out about what they were doing."

Some of the crew members interviewed in the investigation thanked federal officials for prosecuting Noble for the violations, Feldis said.

One crew member in particular appears to have played an important role in obtaining the conviction. A portion of Noble's penalty, $512,000 will go to a whistleblower who provided critical information to investigators and prosecutors, Feldis said at the news conference. That represented half of the penalty assessed for one of the felony counts, he said.

The identity of the recipient is being kept confidential, Feldis said. The award is authorized under provisions of the Act to Prevent Pollution from Ships, one of the federal laws Noble admitted violating.

Workers put themselves and their careers at risk when they make such reports, so confidentiality is warranted, Feldis said. "This is not an easy thing to do, to step forward, especially when you're, you know, hundreds of miles out at sea on a small or relatively small vessel, to report these violations."

The $12.2 million penalty against Noble, which comprises $8.2 million in criminal fines and $4 million in community service payments, was based on the federal Alternative Fines Act, Feldis said. Under parameters of that act, the fine was calculated with a formula including the 51 days the Discoverer was on the drill site and the approximately $240,000 per day that Noble was being paid for those drill-site services, he said.

Of the $4 million in community service payments, $2.5 million will go to the University of Alaska Fairbanks' International Arctic Research Center, $1 million will go to the National Fish and Wildlife Foundation's Alaskan Arctic Fund and $500,000 will go to the Arctic Research Consortium of the United States, officials said.

At the plea and sentencing hearing, Noble's attorney, John Cox, told Beistline that the company has already launched reforms.

"Noble has done everything possible to ensure that all of its crews and all of its equipment operate in compliance with all applicable laws," Cox said.

Noble did some important things right in 2012, Cox told Beistline. "Noble's drilling operations conducted during 2012 were flawless," he said. Though the engine and propulsion system were troubled, "It's important to note that the vessel was under tow at all critical stages," he said. And Noble cooperated fully with prosecutors once the violations were found, he said.

Shell still plans to use the Discoverer to drill exploration wells in the Chukchi. According to Shell's revised exploration plan, the Discoverer will be joined by another contracted drill ship, Transocean's Polar Pioneer, to drill wells simultaneously over multiple seasons in the Chukchi. That plan has yet to be approved by federal regulators.

The Kulluk, which was wrecked in a Dec. 31, 2012, grounding in the Gulf of Alaska, is considered inoperable and will not be brought back to Alaska, Shell has said. The company does not have immediate plans to resume drilling in the Beaufort, where the Kulluk started an exploration well in 2012.

If the Discoverer returns to Alaska, operations and equipment will be much improved, a Noble spokesman said.

"We've accepted responsibility for what we pled to today," John Breed, a company spokesman in Houston, said in a telephone interview. "We've made significant changes in our internal practices."

There is now much better training -- supported by a new 29,000-square foot training facility that opened in Houston -- and standardization of operations "to make sure this does not happen again," he said.

There has also been significant investment in improvements to equipment, Breed said. The Discoverer, currently at a shipyard in Singapore and undergoing sea trials, has a new engine and other major fixes, he said. "The rig itself has received more than $190 million in enhancements and upgrades," he said.

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