Report details financial and tax considerations, missteps, mechanical oversights and failures in Kulluk grounding last year; Affirms numerous questions raised by Senator Markey about Shell’s decision-making, actions

A comprehensive review by the U.S. Coast Guard of the actions taken by Shell oil company when its Kulluk drilling rig ran aground in Alaska last year has found that the company did move the vessel in part due to tax considerations, and that the crew in charge of towing the drilling vessel expressed “blunt” concerns about the dangers posed by towing the vessel in such weather at that time of year. The report also details multiple failures to inspect or verify the towing equipment, lack of attention to alarm systems, and major mechanical failures that led to engines shutting down.

Following the grounding of the Kulluk, Senator Markey, who was then the top Democrat on the House Natural Resources Committee, raised numerous questions about Shell’s reasons to move the rig at that time, including whether perceived financial incentives to move the rig before January 1, 2013 to avoid paying taxes trumped safety considerations.

“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,” said Senator Markey, a member of the Senate Commerce and Environment Committees. “Shell should be held accountable for its reckless behavior.”

Key findings in the Coast Guard reporton the Kulluk incident include: 

• Financial considerations, including the issue of potential state tax liability first highlighted by then-Rep. Markey, played a role in Shell’s decision on the timing of moving the rig.

• Shell continued to move the rig despite forecasts of increasingly bad weather shortly after departure on December 21, as then-Rep. Markey had asserted. 

• Numerous deficiencies in the pre-voyage inspection of the vessels and numerous problems with key pieces of equipment. 

• Personnel aboard the towing vessel expressed “blunt” reservations about the towing plan, route, and time of year.

• The USCG found that Shell’s tow plan was not adequate and the route taken also impaired the ability to respond in the event of an emergency. 

Starting in December of 2012, Senator Markey questioned Shell’s ability to drill in the Arctic due to the failure of the company’s tests on containment structures needed in the event of an oil spill.

After the Kulluk ran aground, Senator Markey pressed Shell for answers about the incident and future plans to prevent another grounding. He also challenged Shell on whether financial concerns were a main driver in Shell’s decision on the timing of moving the rig, and later released massive safety violations found on Shell’s other Arctic drill ship.

Shell recently announced it would not pursue drilling in the Arctic in 2014.