Shell Moves Rig to Avoid Potential Tax Liability
Tuesday May 28, 2013  

Royal Dutch Shell plc moved the Kulluk drilling rig from Dutch Harbor, Alaska to avoid potential tax liability, The Anchorage Daily News reported a Shell official as saying.

The company preferred that the rig be gone from Alaska by the end of 2012 due to economic factors, Sean Churchfield, operations manager for Shell's Alaska operations, said.

"The end of the year to my understanding was when the tax liability potentially would have become effective," Churchfield said during a May 25 Coast Guard investigation panel hearing in Anchorage, Alaska. Cost of maintaining the rig at Dutch Harbor was another factor, but the potential tax liability was a bigger expense.

Shell moved the Kulluk drilling rig Dec. 7 from Dutch Harbor to a Seattle shipyard for major off-season maintenance, including replacement of the rig's cranes, said Churchfield.

Shell had previously said that taxes were a consideration but not a driving factor for the decision to move the Kulluk to Seattle, the Anchorage Daily News reported.

In early January, the U.S. Coast Guard said it would launch a formal marine casualty investigation into the Dec. 31 grounding of the Kulluk.

Shell reported in February it would put its Alaska drilling plans on hold for 2013 in order to prepare its equipment and employees for future drilling.

In March, the U.S. Department of the Interior determined that Shell failed to finalize key components of its 2012 Alaska Arctic drilling program, including its oil spill containment system, which led to Shell's failure to obtain needed permits to drill into oil-bearing zones in the Chukchi and Beaufort seas.

"Shell's decision to put tax avoidance over the safety of Alaska's coastline was reckless in the extreme," said Greenpeace U.S. Deputy Campaigns Director Dan Howells in a May 28 statement. "It now transpires that instead of taking a safe and precautionary approach, Shell's leadership rushed moving the Kulluk to try to avoid paying the taxes they owed to the state of Alaska. This is part of a corporate culture which puts cost-saving above safety from Nigeria to the North Sea and now the Arctic."

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