Shell contractor faces $12.2M in fines for environmental, safety violations

The company that operated both of the drill rigs used in Shell's ill-fated 2012 Arctic offshore season has agreed to pay $12.2 million in fines and community service payments stemming from environmental and safety violations aboard its vessels, the U.S. Department of Justice said Monday.

Noble Drilling (U.S.) LLC, owner and operator of the Noble Discoverer and operator of the Shell-owned Kulluk, will plead guilty to eight felony offenses and will receive four years of probation and must implement a comprehensive environmental compliance plan for violating federal environmental and maritime law in 2012, under a settlement announced by Karen Loeffler, U.S. attorney for Alaska.

Noble's parent company, London-based Noble Corp. plc, will also implement an environmental management system for all its mobile offshore drilling units, according to the settlement.

The vast majority of environmental and safety crimes occurred aboard the Discoverer, according to the plea agreement. Only one charge concerned the Kulluk, which was wrecked after it broke free from a tow during bad weather and ran aground south of Kodiak Island on Dec. 31, 2012.

"We believe these are serious offenses, and the charges and the penalties reflect that level of seriousness," assistant U.S. attorney Kevin Feldis said at a news conference.

That 56-page plea agreement describes a litany of malfunctions, hazards, misdeeds and deceptions aboard the Discoverer, which the document said occurred from the time the ship left New Zealand in February of 2012 for U.S. waters to the time it was towed to Seward at the end of the year on its way out of Alaska for the winter.

"During 2012, the Noble Discoverer experienced numerous problems with its main propulsion system, including its main engine and its propeller shaft, resulting in engine shutdowns, equipment failures and unsafe conditions," the plea agreement says.


Some of the engine shutdowns were automatic, triggered by lack of lube oil, and others were undertaken by Discoverer crew members trying to do emergency repairs while the ship was traveling to and from the drilling theater. The shutdowns were not reported to the Coast Guard, according to the plea agreement.

There were numerous engine backfires, some of them damaging the exhaust-venting system, which was already faulty and pouring "significant" amounts of exhaust into the ship's engine room, according to the plea agreement.

There were failures to use the required oil-water separator to clean wastewater, along with false log entries stating that the system was being used properly, leading directly to some of the criminal charges. In fact, the oil-water separator was inoperable for much of the Discoverer's 2012 operations for Shell. Instead of properly processing wastewater through required pollution-prevention equipment, Noble set up an illegal, makeshift barrel-and-pump that sent untreated wastewater directly overboard.

"Noble failed to notify Coast Guard and actively took steps to conceal its use of that illegal blue-barrel-and-pump system from Coast Guard," assistant U.S. attorney Yvonne Lamoureux said at the news conference.

There was an inoperable alarm, a broken backup generator that was leaking fluid and antifreeze, and frequent overflows of water in engineering spaces, according to the plea agreement. Ship operators used ballast tanks to store and discharge oil-laced wastewater, a violation of the law intended to prevent the spread of nuisance species, according to the plea agreement.

"By design, ballast tanks should contain only uncontaminated seawater," Lamoureux said. Instead, "Noble pumped the contents of its oily skimmer tank fluids and deck water, with a sheen, into its ballast tanks," she said.

In all, Noble agreed to plead guilty to five counts of violating the Act to Prevent Pollution from Ships, one count of violating the Nonindigenous Aquatic Nuisance Prevention and Control Act and two counts of violating the Ports and Waterways Safety Act. The sole count concerning the Kulluk was about false records of oil-waste management.

The main catalyst for the criminal case, Feldis said, was the Coast Guard inspection conducted after the Discoverer arrived in Seward "under a dead ship tow" in late November of 2012. By then, the ship's main engine was considered unsafe to operate and was not being used, according to the plea agreement. But there were other obvious clues that things were amiss aboard the Discoverer, Feldis said.

A powerful engine backfire in Unalaska in November of 2012, which coated fire-safety insulation with soot and oil residue and drew an emergency response from the local fire department, was one of those. So was the unauthorized discharge of bilge water into Unalaska's Back Bay in July of that year, an act that created a noticeable oily sheen, he said.

"There's a whole number of things that Noble did to draw attention" to its operational problems, Feldis said.

The settlement, if accepted by the court, resolves the criminal case against Noble, Feldis said. He declined to comment on any further legal punishment resulting from Shell's 2012 drill season.

In a statement, Noble said the criminal charges "principally relate to deficiencies and maintenance issues raised by the U.S. Coast Guard during an inspection of the Noble Discoverer following a successful drilling season in offshore Alaska during 2012."

Noble said the problems have been fixed.

"Concerns related to the Noble Discoverer have been addressed during the renovation and modernization of the rig which occurred as part of an extensive shipyard program conducted in Korea and Singapore. In addition to these improvements and upgrades to the vessel, Noble noted that it had strengthened its training programs to ensure that its operations more aptly reflect the company's deep commitment to safety, compliance and environmental protection."

In a statement, Shell spokesperson Megan Baldino said the company was "disappointed" in Noble's actions in 2012.

"While Noble has worked to resolve all of the issues and has appropriately accepted responsibility, we've made clear that their actions in 2012 are not acceptable," Baldino wrote in an email.

Baldino also said that the Noble Discoverer had undergone extensive repairs and the issues raised in the plea agreement have been addressed.


"In addition, both Shell and Noble have initiated procedural and safety management system reviews that will be verified through internal and external audits and a series of operational tests," she said. "Together, these actions are designed to ensure the integrity of the Discoverer and Noble's marine management systems for future operations."

Shell -- which managed to drill only part of a well in the Chukchi Sea and part of a well in the Beaufort Sea in 2012 -- still intends to bring the Discoverer to Alaska to resume drilling.

The company's revised exploration plan, filed in August with the U.S. Bureau of Ocean Energy Management, calls for the Discoverer and another contracted vessel, the Polar Pioneer, to drill simultaneously in the Chukchi. The plan calls for the two units to complete up to six wells over multiple seasons. The Discoverer, the plan says, "is ice-strengthened for operating in Arctic OCS waters" and has "state-of-the-art drilling and well-control equipment."

Feldis said the plea agreement, if approved, does not preclude Shell or Noble from bringing the Discoverer back to Alaska. But that ship, like all the modular drill units in Noble's fleet, is subject to extra oversight under terms of the plea agreement, he said.

Environmentalists cited the Noble case as evidence that Shell should not be allowed to drill again in Arctic waters.

"Shell's current plan to drill in the Alaskan Arctic in 2015 is put in stark relief by the facts of this case. That Shell could have engaged Noble Drilling, a company now guilty of eight felonies, is the clearest indicator that this company cannot be trusted to drill in such a precious and risky environment," Leila Deen, Greenpeace's deputy director of campaigns, said in a statement.

Noble's arraignment is scheduled for Dec. 19 in Anchorage.

Yereth Rosen

Yereth Rosen was a reporter for Alaska Dispatch News.