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Shell may have moved rig to avoid taxes, lawmaker says

Salvage teams assess Shell’s Kulluk drill barge on Kodiak Island’s Kiliuda Bay in Alaska Jan. 9, 2013, in this picture provided by Greenpeace.


Royal Dutch Shell PLC may have moved an oil rig that ran aground off Alaska last month to avoid millions of dollars in taxes, U.S. Representative Ed Markey said on Thursday, disputing company assertions that it relocated the rig based on weather forecasts.

The 30-year old Kulluk rig ran aground on New Year's Eve in what were described as "near hurricane" conditions while it was being towed south for the winter.

Mr. Markey, in a letter sent to Shell president Marvin Odum on Wednesday, said the decision to move the rig "may have been driven, in part, by a desire to avoid … tax liability on the rig."

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Shell said in response that its decision to move the rig was guided by safety not taxes.

An outspoken critic of the oil and gas industry and the top Democrat on the House Natural Resources Committee, Mr. Markey said his office received information about Shell and taxes from the Alaska revenue department.

Shell could have been exposed to state taxes if the rig had remained in the state until Jan. 1, as Alaska law says an annual tax of 2 per cent can be assessed on drilling equipment on that date, Mr. Markey said in the letter.

The company spent $292-million (U.S.) on upgrades on the rig since purchasing it in 2005, so the liability could have been about $6-million, he wrote.

By comparison, Shell has spent $4.5-billion since 2005 to develop the Arctic's vast oil reserves.

The Kulluk incident was the latest problem for Shell in the Arctic. Its 2012 drilling season was plagued with delays due to lingering ice in the water and problems with getting a mandatory oil spill containment vessel certified by the Coast Guard.

The U.S. Interior Department said this week it will review Shell's Arctic oil drilling program to assess challenges the company faced and to guide future permitting in the region.

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A Shell spokeswoman said the plan was always to move the Kulluk in December.

"While we are aware of the tax environment wherever we operate, the driver for operational decisions is governed by safety." She said an approved tow plan for the rig included weather considerations.

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