Did Shell move rig to avoid taxes? PDF Print E-mail
Friday, 11 January 2013 12:56

Shell may have moved an oil rig that ran aground off Alaska last month in order to avoid $6 million in taxes, according to U.S. Representative Ed Markey.

In a charged in a letter to the oil behemoth's president, Markey raised even more questions about the oil company's decision on the timing of the move.

The letter from the top Democrat on the House of Representatives Natural Resources Committee adds to the already-intense political scrutiny of Royal Dutch Shell's ambitious and troubled Arctic drilling foray last year.

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

In a letter to Shell's top U.S. executive, Marvin Odum, Markey said the decision to move the rig "may have been driven, in part, by a desire to avoid ... tax liability on the rig."

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

Markey, an outspoken critic of the oil and gas industry, said his office received information about Shell and taxes from Alaska's revenue department.

Shell could have been exposed to a state tax if the rig had remained in the state until 1 January, as Alaska law says an annual tax of two percent can be assessed on drilling equipment on that date, Markey said in the letter sent on Wednesday.

The company spent $292 million on upgrades on the rig since purchasing it in 2005, so the liability could have been about $6 million, he wrote. In total, Shell has spent $4.5 billion since 2005 to develop the Arctic's vast oil reserves.

Jim Greeley, Anchorage-based petroleum property assessor for the Alaska Department of Revenue, explained that the tax applies to all property used for exploration, production or transportation of unrefined oil or natural gas.

But he could not say whether the Kulluk would have been taxed or whether Shell's actions avoided a tax.

The issue was complicated by the fact that Shell's drilling was in federal waters. "There's no tax precedent for that," at least in recent times, Greeley said, adding that department officials were researching the tax practices from two decades ago, when there was a flurry of drilling offshore Alaska.

The decision would have to be made by the time the state publishes its tax rolls on March 1.


For the latest news click here

For the latest Travel features click here

For the latest Food & Drink features click here

Follow myresources.com.au on Twitter

Add comment

Security code