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ANCHORAGE, Alaska/WASHINGTON (Reuters) – Shell could have moved an oil rig that ran aground off Alaska last week partly to avoid tens of millions of dollars in taxes, U.S. Rep. Ed Markey stated, raising much more questions in regards to the oil firm’s choice on the timing of the move.

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The letter from the highest Democrat on the Home of Representatives Pure Assets Committee provides to the already-intense political scrutiny of Royal Dutch Shell’s formidable and troubled Arctic drilling foray final yr.

Shell’s 30-yr-outdated Kulluk drillship ran aground on New Year’s Eve in what were described as “near hurricane” situations while it was being towed south for the winter.

In a letter to Shell’s top U.S. govt, Marvin Odum, Markey mentioned the decision to move the rig “might have been pushed, in part, by a need to keep away from…tax liability on the rig.”

In late December, a Shell spokesman advised a neighborhood newspaper, the Dutch Harbor Fisherman, that it was “truthful to say the current tax structure associated to vessels of this sort influenced the timing of our departure.” But Shell mentioned in response to Markey on Thursday that its decision was guided by security, not taxes.

Markey, an outspoken critic of the oil and gas trade, said his office received information about Shell and taxes from Alaska’s income division.

Shell might have been exposed to a state tax if the rig had remained within the state until January 1, as Alaska law says an annual tax of 2 p.c may be assessed on drilling equipment on that date, Markey stated in the letter despatched on Wednesday.

The company spent $292 million on upgrades on the rig since purchasing it in 2005, so the legal responsibility could have been about $6 million, he wrote. In total, Shell has spent $4.5 billion since 2005 to develop the Arctic’s huge oil reserves.

Jim Greeley, Anchorage-based mostly petroleum property assessor for the Alaska Division of Revenue, defined that the tax applies to property used for exploration, production or transportation of oil or natural gasoline. He could not say whether the Kulluk would have been taxed or whether or not Shell’s actions prevented a tax.

The problem was sophisticated by the truth that Shell’s drilling was in federal waters.
“There’s no tax precedent for that,” a minimum of in current occasions, Greeley mentioned, adding that department officials have been researching the tax practices from two decades in the past when there was a flurry of drilling offshore Alaska.

The choice would have to be made by the point the state publishes its tax rolls on March 1.
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Shell’s Arctic work has been closely watched by many in the business and especially by ConocoPhillips forward of its planned Alaska offshore drilling program slated for 2014.

In keeping with the U.S. authorities, the Beaufort and Chukchi seas hold an estimated 23 billion barrels of recoverable oil – equivalent to a tenth of Saudi Arabia’s reserves.

A Shell spokeswoman mentioned the plan for the Kulluk this winter was always to move it in December.
“While we’re conscious of the tax environment wherever we function, the driver for operational selections is governed by security.” She said an authorised tow plan for the rig included weather issues.

Winter transit in northern waters is not unusual for rigs. Just this month, a rig owned by contractor Seadrill was resulting from arrive in Norway to start work for Statoil, while one other was headed to Canada for Exxon Mobil Corp.

The Kulluk accident is only Shell’s latest drawback in Alaska. Its 2012 natural gas used as feedstock Arctic drilling season was plagued by delays on account of lingering ice and problems getting a necessary oil spill containment vessel certified by the Coast Guard.

Also, the U.S. Environmental Protection Company mentioned late on Thursday it issued notices of violation for air pollution in 2012 for the Noble Corp-owned Discoverer, Shell’s other Arctic rig, and for the Kulluk.

The EPA additionally terminated a short lived, more lenient permit granted natural gas used as feedstock to Shell in September for the Discoverer and said Shell’s software for a much less strict air permit was nonetheless below evaluation.

The U.S. Division of the Interior stated this week it will review Shell’s Arctic oil drilling program to assess the challenges it faced and to information future Arctic allowing.

Markey’s committee doesn’t have the ability to cease drilling. His investigation would concentrate on why the rig was being towed along the coast all the way down to Washington state in such extreme weather and on Shell’s security insurance policies, an aide to Markey mentioned.

Any allowing changes or delays resulting from the Inside Department evaluation may threaten Shell’s 2013 drilling plans, as the corporate has a restricted drilling window during the summer time.

The Kulluk, earlier than heading south, had beforehand been at a personal facility in Unalaska/Dutch Harbor operated by Kirkland, Washington-primarily based Offshore Programs Inc, which serves fishing and other vessels in Alaska. Harbormaster Jim Days mentioned it was there for at the least a month after completing its Beaufort Sea drilling.

The environmental impression of the Kulluk accident is so far limited. The incident response team has located all four survival ships and one rescue ship that have been dislodged from the drillship when it ran aground. The survival ships all had sixty eight-gallon-capacity gas tanks and two had been breached.

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