USCG: Shell’s attempt to avoid tax in Alaska partly led to Kulluk grounding

The U.S. Coast Guard Thursday released the report of investigation into the circumstances surrounding the grounding of Shell’s conical drilling unit Kulluk on the eastern coast of Sitkalidak Island, Alaska, Dec. 31, 2012.

Kulluk Grounding Coast Guard

The Coast Guard said that the most significant factor which led to the incident was the decision to attempt the voyage during the winter in the unique and challenging operating environment of Alaska. Shell and Edison Chouest Offshore’s ineffective risk management and application of towing measures for the voyage also contributed to the grounding.

The weather experienced during the tow of the KULLUK, beginning on December 26, was extreme. No less than four strong low pressure systems swept through the area, creating
difficult conditions, particularly for the response vessels attempting to assist the MODU. Seas in excess of 20 feet and wind in excess of 35 knots prevailed during the response efforts. Seas in excess of 30 feet and winds in excess of 50 knots were recorded by on scene vessels. The conditions encountered during the response are rare outside tropical cyclones that occur throughout the globe, but common in Gulf of Alaska waters, particularly in the winter.

Related:  Kulluk Drilling Unit Runs Aground in Alaska

Inadequate route

The Shell Towing Plan was not adequate for the winter towing operation crossing the Gulf of Alaska.

The Coast Guard also said that the selection of a near coastal route provided inadequate sea room to allow time for response actions to take place before being set onto Albatross Bank and into the more dangerous shallower waters. Had a route been taken that was further offshore, it would have allowed more time for response assets to arrive and provided an opportunity to simply ride out the passing low pressure systems and seek safe harbor once a suitable weather window presented itself. Due to the slow transit speeds of the tow, safe harbors that were identified in the towing plan would have been difficult to utilize using the coastal route selected.

Related:  VIDEO: Kulluk Reaches Safe Harbor Location (Alaska)

Single towing vessel

Furthermore, the report highlighted the fact that the tow was being conducted by a single towing vessel, the Aiviq, adding that the severe weather anticipated should have necessitated additional assets towing to share bollard pull requirements and to provide redundant towing points for the eventuality of mechanical breakdown or towline failure. Reliance on previous bollard pull requirement for towing the KULLUK was inappropriate for this voyage and weather conditions as expressed in the Metocean study for that time period. To remind, AIVIQ experienced a total loss of main propulsion engines on on December 28, 2012, most likely due to to fuel contamination by seawater.

Tax issue

The report also hints that the reason behind Shell’s decision to attempt to tow the rig to Seattle for repairs instead repairing it in Alaska was taxation.

“The Alaska tax laws also influenced the decision to make the tow. Shell believed the  KULLUK qualified as taxable property and was subject to taxation under the state’s laws
applicable to personal property involved in the oil & gas industry. The tax would be assessed on January 1, 2013 if the vessel was still in Alaskan waters. Shell estimated that the tax liability would be in the millions of dollars if the vessel was located in Alaskan waters on January 1, 2013,” the report reads.

Related Kulluk Stable. No Fuel Spill Detected (Alaska)

Among the safety recommendations issued in the report is the recommendation that the U.S. Coast Guard Commandant partner with the Towing Safety Advisory Council to establish a working group to draft and accept a task statement addressing, but not limited to, the issues raised by this marine casualty, the towage of mobile offshore drilling units in the arctic marine environment and several other concerns.

“The Coast Guard reminds companies that safety and risk management need to be a priority when evaluating maritime evolutions to ensure responsible, safe and efficient operations. Professional mariners have a responsibility to ensure they manage and follow approved procedures for all maritime operations to prevent and mitigate potential incidents,” the Coast Guard said in a press release.



Offshore Energy Today Staff,  April 04, 2014