Friday, January 11, 2013

Oil Giant’s Rig Crash Could Be A Tax Dodging Attempt Gone Wrong

The latest of a series of Shell mishaps in the Arctic occurred on New Year’s Eve, when Shell’s drilling rig, Kulluk, ran aground while being towed out of Alaskan waters. Harsh weather conditions began shortly after Shell began towing, causing the rig and its 150,000 gallons of fuel and drilling fluid to wash up on an island along the Alaska coastline.

Rep. Ed Markey (D-MA) challenged the suspicious timing of Shell’s decision to move despite the harsh conditions. If Shell had kept its rig stationed in Alaska waters on January 1, the company would have potentially paid $6 million in state taxes:

Shell could have been exposed to potential state tax liability on the Kulluk drill rig if it remained in the state on January 1st. Chapter 43.56 of the Alaska Statutes states that an annual tax of 2 percent can be assessed each tax year on January 1st on “the full and true value of taxable [oil and gas] property taxable under this chapter” Shell had reportedly spent $292 million just on upgrades to the Kulluk since purchasing the drill rig in 2005. That would mean that Shell could have potentially been exposed to state tax liability on the Kulluk in excess of $6 million.

Shell’s official response maintains that the “two-week window of good weather” prompted the decision to move out of Alaskan waters.

Shell has a history of tax dodging. For example, it has offshored pre-tax profits to avoid UK taxes. At the federal level in the U.S., Shell also lowers its tax bill with $200 million in annual tax breaks.

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