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Congress asks Shell about tax dodge statement before Kulluk grounding

  • Author: Katie Medred
  • Updated: September 27, 2016
  • Published January 11, 2013

Problems for Royal Dutch Shell and its $5 billion quest to drill in the Beaufort and Chukchi seas off Alaska's northwest coast escalated Thursday as federal regulators charged the company with air pollution during its brief and troubled exploratory season in the U.S. Arctic and a top Democrat in Congress alleged that tax evasion motivated the company's disastrous decision to tug a mobile oil-drilling rig across the Gulf of Alaska during severe weather.

Shell was forced to abandon the Kulluk to ground off the southern coast of Kodiak Island on New Year's Eve.

Massachusetts Rep. Ed Markey is ranking Democrat on the U.S. House Committee on Natural Resources. On Thursday, Markey sent a letter to Shell Oil president Marvin Odum stating that "conversations with the Alaska office of the National Weather Service (NWS) do not back up Shell's claim" with regards to a weather forecast the company has used to defend moving the Kulluk from Dutch Harbor, an international port in Alaska's Aleutian Islands, south to Seattle.

On Dec. 31, 2012 the Kulluk drifted free after its tug, the Aiviq, first lost engine power and then its connection to the rig.

In an email to the Dutch Harbor Fisherman, Smith confirmed the tax liability. He said it could cost "multiple millions" if the Kulluk was still in Alaska waters on Jan. 1 because of the state of Alaska's oil and gas property tax, a tax levied on all assets dedicated to oil and gas exploration, transportation and production in Alaska. The tax comes to 2 percent of the assessed value of the property.

Smith backtracked last week, telling Alaska Dispatch that Shell was aware of the tax, but that it wasn't a "strong driver" in determining when the vessels would leave.

"Financial considerations rather than safety may have factored into Shell's considerations, if true, are profoundly troubling" Markey wrote to Odum.

In the end, Shell will pay. David Mosley, a spokesman for the U.S. Coast Guard, told Bloomberg:

Shell may have to reimburse the U.S. government for some of its expenses related to the recovery of the Kulluk. He declined to estimate the potential costs. Taxpayers will pay for the rescue of 18 people off the Kulluk during the storm, Mosley said.

The Kulluk is now in Kiliuda Bay, Alaska. Read more on Royal Dutch Shell's Kulluk and the Alaska tax evasion theory.

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