ARCTIC:

Interior, Coast Guard launch probes of Shell operations

Two federal agencies have announced separate investigations into Royal Dutch Shell PLC's Arctic operations, a day after the company's drillship Kulluk was successfully pulled off the rocky shores of Alaska's Sitkalidak Island and towed to a port of refuge.

The Interior Department yesterday launched a 60-day assessment of the regulatory problems and operational stumbles Shell faced during the 2012 offshore drilling season in Alaska's Beaufort and Chukchi seas.

The expedited study will examine Shell's management systems, its oversight of contracted services and its ability to meet the strict standards for Arctic development, according to a statement from Interior.

It also will focus on the problems that plagued Shell's oil spill containment vessel, the Arctic Challenger, which was never able to meet federal standards. As a result, Shell was not permitted to drill for oil this summer and instead was limited to sinking top holes on its leases.

The Interior probe will be led by Bureau of Ocean Energy Management Director Tommy Beaudreau, who is serving as the acting assistant secretary for land and minerals management.

At the same time, top U.S. Coast Guard officials ordered a formal marine casualty investigation into the circumstances that led the Kulluk to go aground during a late December storm as it was being towed from Dutch Harbor to Seattle.

That in-depth inquiry, which is expected to take several months, will examine the cause of the accident and look for evidence of equipment failure or personnel problems.

Coast Guard officials said Interior and the National Transportation Safety Board will serve as technical advisers on the probe.

The Coast Guard was a key player in the Kulluk's rescue, providing ships, aircraft and personnel to monitor and refloat the drillship. Also part of the Unified Command overseeing the recovery were Shell, the Alaska Department of Environmental Conservation, the Kodiak Island Borough and Noble Petroleum, which leases the Kulluk to Shell (EnergyWire, Jan. 7).

In the aftermath of the Kulluk grounding, environmental groups demanded that the Obama administration impose a moratorium on all Arctic oil exploration (Greenwire, Jan. 3).

They noted that even before the Kulluk incident, the Dutch oil company had stumbled through a series of mishaps that raise serious questions about the safety of oil development in the Arctic.

In July, the Discoverer nearly went aground in Dutch Harbor after slipping anchor. Drilling activities were slowed significantly by lingering sea ice, the company's failed test of its oil spill containment dome and Shell's inability to meet its initial air pollution standards.

The federal probes were praised by Mike LeVine, Pacific counsel for Oceana in Juneau, Alaska. "Recognizing the severity of the problems encountered by Shell and the need for broad review is an important step in the right direction," LeVine said in a statement.

"The government must reassess its commitment to exploration in difficult places like the Arctic and how it makes decisions about our ocean resources," he said.

Meanwhile, Alaska Sen. Mark Begich (D) yesterday sent a letter to Coast Guard Commandant Adm. Robert Papp Jr. and Shell's President Marvin Odum asking them to provide additional information on the Kulluk grounding.

Begich, chairman of the Senate Subcommittee on Oceans, Atmosphere, Fisheries and the Coast Guard, said he plans to hold a hearing on the incident sometime in the future.

"Moving ahead with the Arctic drilling program is critical to Alaska's economic future," Begich said in the letter.

"While this incident notably involves marine transportation and not oil exploration or drilling, we must quickly answer the many questions surrounding the Kulluk grounding and improve any regulatory or operational standards as needed to ensure this type of maritime accident does not occur again."

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