Waves crash over the conical drilling unit Kulluk where it sits aground on the southeast side of Sitkalidak Island, Alaska in this U.S. Coast Guard handout photo taken January 1, 2013.

LONDON/ANCHORAGE, Alaska | Thu Jan 3, 2013 7:04am EST

LONDON/ANCHORAGE, Alaska (Reuters) - An oil rig that ran aground in Alaska on New Year's Eve in "near hurricane" conditions dragged two vessels trying to control it more than 10 miles toward a wave-battered rocky shore before the crews cut it loose to save themselves.

The stricken Kulluk oil rig is owned by Royal Dutch/Shell and is a vital part of its controversial Arctic oil drilling program, which has encountered several problems.

The 28,000-tonne, saucer-shaped rig was pushed toward the shore by waves up to 35 feet and winds up to 62 mph, dragging its main towing vessel the Aiviq and a tug, the Alert, behind it.

"We are talking about near hurricane-strength conditions," said Darci Sinclair of the Kulluk Tow Incident Unified Command, set up by the U.S. Coast Guard and the companies involved.

The unified command said the Kulluk was now "upright and stable" on Sitkalidak Island in the Gulf of Alaska. Salvage experts spent three hours aboard it Wednesday for a structural assessment to be used by Netherlands-based Smit Salvage.

They saw no sign that the fuel tanks had been breached. It was still too early to give a recovery timeline, said a Coast Guard official, ahead of a more detailed update on Thursday.

Smit had worked on the Selendang Ayu, a ship that broke in half and spilled fuel and soybeans after grounding in bad weather off Unalaska Island in December 2004. Smit also worked on the Costa Concordia, which grounded off Italy last year.

More than 600 people are involved in the Kulluk response.

"It is important that the American public and our elected officials understand the dangerous and difficult challenges being faced by the response crews," Rear Admiral Thomas Ostebo, commander of the Coast Guard in Alaska, said in the statement.

The 30-year-old Kulluk is operated by Noble Corp and was refitted by Shell for its summer 2012 drilling expedition in the Beaufort Sea off northern Alaska.

Shell spent $4.5 billion preparing for extraction activities there and in the Chukchi Sea further east, but has yet to complete a single well.

Headlines that raise questions about the wisdom of drilling so far north in such an environmentally delicate and technically challenging place were not expected so early in 2013, given that activity stopped for the season two months ago.

Any Kulluk damage may threaten Shell's 2013 drilling program because its oil-spill plans require a second rig to be available at all times in case a relief well needs to be drilled to kill a well. The Noble-owned Discoverer is Shell's other Alaska rig.

The Kulluk was on its way south for the winter. It had been towed east from the Beaufort, and then south through the Bering Strait that separates the northernmost U.S. state from Siberia.

The Kulluk's 18-strong crew had already been lifted off when the four-day battle to keep it off the rocks began.

On December 28, about halfway to its winter destination in Seattle, and 50 miles south of Kodiak Island in the Gulf of Alaska, engine failure struck the Aiviq -- an icebreaker that is less than a year old and whose name means "Walrus".

A few hours after nightfall on December 31, with the shore less than 19 miles away, Aiviq, one of two vessels attached at the time, lost its line.

Despite the Aiviq reattaching its line, the storm continued to drag the oil rig and the two towing boats closer to shore.

On January 1 the order came to cut the Kulluk lines to save the Aiviq, the Alert and the crews, and the oil rig ran aground about 1,600 feet from the shore on Sitkalidak Island.

Noble had no comment, while Shell in London referred calls to the unified command.

"ONE DISASTER TO THE NEXT"

The spill risk from the drillship is limited to the 143,000 gallons of ultra-low-sulfur diesel and 12,000 gallons of other oil products on board. Opponents of Arctic drilling said the accident showed Shell was unable to keep the Arctic safe.

"Shell has lurched from one Arctic disaster to the next, displaying staggering ineptitude every step of the way," Greenpeace campaigner Ben Ayliffe said on Wednesday. "Were the pristine environment of the frozen north not at risk of an oil spill it would be almost comical. Instead it's tragic."

Last month, the Coast Guard briefly detained the Discoverer in Seward, Alaska, on safety concerns. A mandatory oil-containment barge, the Arctic Challenger, failed for months to meet requirements for seaworthiness, and a ship mishap resulted in damage to a piece of equipment intended to cap a blown well.

Asked why the Kulluk was still at sea two months after drilling ended, a contract drilling source said "demobilization" can take days or weeks depending on the rig and its anchoring.

Replacing the Kulluk, if it ends up being badly damaged, would add to the cost of the accident for Shell, which must reimburse the federal and state governments for response costs.

The Noble Discoverer costs Shell $240,000 per day. Shell had to spend $292 million upgrading the Kulluk, which had been slated to be scrapped before Shell bought it in 2005.

(Additional reporting by Braden Reddall in San Francisco; Editing by Leslie Gevirtz, David Gregorio, Andre Grenon and Michael Perry)

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