By Yereth Rosen and Timothy Gardner
ANCHORAGE, Alaska/WASHINGTON Jan 10 Shell may
have moved an oil rig that ran aground off Alaska last week
partly to avoid millions of dollars in taxes, U.S.
Representative Ed Markey said, raising 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
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 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.
CONOCO LOOKS ON
Its efforts have been closely watched by many in the
industry, and especially by ConocoPhillips ahead of its
planned Arctic drilling program off Alaska slated for 2014.
According to the U.S. government, the Beaufort and Chukchi
seas hold an estimated 23 billion barrels of recoverable oil -
equivalent to a tenth of Saudi Arabia's reserves.
But the Kulluk accident is only Shell's latest problem in
Alaska. Its 2012 Arctic drilling season was plagued by delays
due to lingering ice in the water and problems getting a
mandatory oil spill containment vessel certified by the Coast
The U.S. Interior Department said this week it would review
Shell's Arctic oil drilling program to assess the challenges it
faced and to guide future Arctic permitting.
Markey's committee does not have the power to stop drilling.
His investigation, which is in its early stages, will focus on
why the rig was being towed along the coast down to Washington
state in such severe weather in addition to Shell's safety
policies, an aide to Markey said.
Any permitting changes or delays resulting from the Interior
Department review could threaten Shell's 2013 drilling plans, as
the company has a limited drilling window during the summer.
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.
Winter transit in northern waters is not unusual for rigs.
Just this month, one owned by rig contractor Seadrill
was due to arrive in Norway to start work for Statoil,
while another was headed to Canada for Exxon Mobil Corp.
The Kulluk, before heading south, had previously been at a
private facility in Unalaska/Dutch Harbor operated by Kirkland,
Washington-based Offshore Systems Inc, which serves fishing and
other vessels in Alaska. Harbormaster Jim Days said it was there
for at least a month after completing its Beaufort Sea drilling.
Unalaska/Dutch Harbor is the home port for crab fishermen
featured on TV on "The Deadliest Catch." It is the nation's
top-volume seafood port and a cargo-shipping hub.
The environmental impact of the Kulluk accident is so far
fairly limited. The incident response team has located all four
survival ships and one rescue ship that were dislodged from the
drillship when it ran aground. The survival ships all had
68-gallon-capacity fuel tanks, and two had been breached.
But none of the 155,000 gallons of fuel and other oil
products aboard the Kulluk itself had leaked.