Sweat-n-Grease (January 5th, 2013)
Sweat-n-Grease (January 5th, 2013)
love it! What a bunch...they deserve their misery!
New twist in stricken rig saga: Shell was moving it to avoid tax
Friday 04 January 2013
Shell’s ill-fated attempt to tow an offshore oil rig from Alaska to Seattle in the final days of December was motivated by a desire to avoid $7m (£4.3m) of Alaskan state taxes, it emerged today.
But the oil giant will instead suffer a multi-million dollar loss on the exercise after the rig ran aground off the Alaskan coast on Monday night.
The rig was beached during a violent storm on its way to a Seattle shipyard for routine maintenance, in a round-trip timed so that, thanks to an accounting loophole, Shell could avoid an Alaskan state tax.
However, because the rig ran aground late on New Year’s Eve and began 2013 within three miles of the Alaskan coast, Shell remains liable for a unique state property tax on equipment dedicated to oil and gas development and exploration.
Shell admitted today that its decision to move the rig, the Kulluk, just weeks after it was brought to the Gulf of Alaska in November, was motivated by financial considerations.
“It’s fair to say that the current tax structure related to vessels of the type influenced the timing of our departure. It would have cost Shell multiple millions to keep the rigs here,” a Shell spokesman said.
Another Shell spokesman, in London, said: “While we are aware of the tax environment wherever we operate, the driver for operational decisions is always governed by safety. In this case, what mattered most to Shell was the two-week window of favourable weather that was forecasted for that journey.”
He denied suggestions that the routine maintenance and inspection could have been carried out in Alaska.
David Gregory, a councillor for the city of Unalaska, said Shell’s equipment tax bill would come to between $6m and $7m, adding: “Maybe they should have just stayed there.”
In addition to the tax, Shell faces millions of dollars of charges including the cost of repairs. It must also reimburse the federal and state governments for an emergency response which involved more than 500 people, including the evacuation of the rig’s crew of 18 by Coast Guard helicopters in weather the Captain later described as “close to a hurricane”.
Salvage experts flown to the rig concluded that none of the 139,000 gallons of diesel and 12,000 gallons of hydraulic fluids on board had been spilled. However, they cautioned that it was unclear how serious the damage was or how long it would take to refloat and move the Kulluk.
For Shell, the incident is the latest in a series of setbacks in its costly pursuit of oil in the environmentally-sensitive Arctic region which is nonetheless regarded as the next great frontier for oil exploration.
The Kulluk began its journey on 21 December and a week later was about 50 miles south of Kodiak Island – out of reach of the Alaskan tax man.
But the tug that was pulling it suffered multiple engine failures just as a subtropical cyclone made its way into the North Pacific. On Monday night, in the dying hours of 2012, the rig ran aground about 1,600 feet from Sitkalidak Island, next door to Kodiak.
Shell has so far spent £3.2bn buying up leases and on exploratory drilling off Alaska’s north and north-west coasts but has yet to discover any commercial quantities of oil. Full-scale production in the region is still thought to be years away.
Shell shareholders...please demand Peter Slaiby's head on a pike! HE MUST BE FIRED IMMEDIATELY
Remember this post:
An old Sea Captain (a man who experienced WWII) mentioned to a few of us who joined him in a honky-tonk tavern in a foreign sea port, "Men, before you call it an accident, see if there is a who or what benefitting."
~ the road goes on forever and the party never ends ~
Hmmm. Pressure from the office? Kind of like what happened with the Bounty disaster.
I don't really understand why this is a big deal. Hundreds of companies move businesses to avoid taxes, bank offshore to avoid taxes, register vessels with flags of convenience to avoid having to pay higher wages, etc. Plus, far more devious things.
According to another post the Alaskan statute that the tax comes from has been around for awhile and has always been public knowledge. It's not like Shell was secretly trying to avoid the tax. Also, it was a foregone conclusion and reality for those involved in the venture that both vessels would be coming back to shipyards outside of Alaska after the season ended.
Putting lives in danger and the potential loss of multiple million dollar vessels is not the same thing as banking in the Caymans or hanging a flag of convenience.Originally Posted by Kingrobby
Sweat-n-Grease (January 8th, 2013)
This just keeps getting better and better.
Alaska does not have any personal state income or sales taxes. There is a small local option sales tax collected by some cities, e.g., Kodiak and Fairbanks. There is a modest state corporate income tax on "c" corporations. Just about all of Alaska's state tax revenue comes from oil and gas severance taxes and equipment taxes of one sort or another.
If Alaska is going bear the environmental risks and social costs of oil drilling, at least they are smart enough to get some tax revenue out of it.
Shell should have been a good corporate citizen and just paid the damn tax. $7 million is peanuts compared to the $5 billion they have spent so far on this project.
You watch, Shell's next tax fight with the State of Alaska will be over whether they should pay the tax based upon the pre-grounding value of KULLUK, or whether they should pay much less (probably nothing) based upon KULLUK's post-grounding value. Shell will spend millions on legal fees litigating this issue for years before they will pay Alaska one dime of that tax.
Traitor Yankee (January 5th, 2013)
When you're right, you're right tugsailor.
Flying home, via Newark, from the GOM I happened to be sitting next to a well dressed man (think Bob Kraft in the owners booth at Gillette). He was a CFO from a smaller exploration company here in the Gulf. I asked what kind of return they made on their investment, say a million dollars. He said they look at a 4-1 return. If they have 5 billion invested they will make a lot more than 20 billion. I don't blame them for not paying taxes legally. I live in New Hampshire which has no state income or sales taxes. Too bad it will cost a lot more than the seven mil they tried to avoid and may void any jobs we may have had up there too. Alaska weather is incomprehensible to most of us in the lower 49 states. Going the great circle route in Jan through Unimak Pass I heard NPR weather report on AM radio say Nome was -40 with ice fog. I live in NH and have never seen ice fog except on Mt Washington. You folks in Alaska earn your money working out on the ocean up there.
seacomber (January 7th, 2013)
I don't see this being much of an issue. To an accountant decreasing expenses or increasing income is the same thing. Mariners move vessels both to make profits and to avoid losses or expenses. Our job is to keep risk at a reasonable level and provide feedback as to what levels of risk the various plans entail.