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OPINION: From the Editor: Shell's denial of tax issue shameful

February 8th, 2013 | Carey Restino Print this article   Email this article  

It's been an interesting month for Unalaska reporter Jim Paulin, who broke the story that Shell's reasons for leaving Alaska included a $6 million tax bill the company was going to have to pay if the Kulluk oil rig was still docked in the Last Frontier on Jan. 1.

The story came to light more than a week before the Kulluk's ill-fated night on the seas - and then the beach - off Kodiak Island. As the Kulluk left Unalaska, Paulin and others pondered why it was choosing to leave its specially-built dock for the Lower 48. As luck would have it, Paulin had a conversation with city councilman Dave Gregory while collecting newspapers at the airport shortly after the Kulluk left. Gregory, obviously savvy about the tax laws pertaining to vessels, mentioned that Shell would have to pay a chunk of change if it stayed in state for the New Year. Paulin followed up with an email to Shell spokesman Curtis Smith, who confirmed the expense, saying the state's tax laws were a factor.

This was long before the menhir-like Kulluk ran into trouble, before five towlines snapped, the U.S. Coast Guard had to perform a heroic ballet to hoist crewmen off the oil rig, and long before Alaskans risked their lives to keep the Kulluk from grounding on the rocks off Kodiak while battling 40-foot waves and 50-knot winds. So it's not surprising that the response from Shell officials was somewhat off the cuff.

And it's also not surprising that the top officials of Shell now want to deny that the millions had any role in the Kulluk's ill-timed departure from Unalaska. But it really doesn't pay to try to shoot the messenger, especially when the messenger got his response from Shell in the form of an email.

This week, Shell CEO Peter Voser denounced the Bristol Bay Times-Dutch Harbor Fisherman's story in a London press conference, saying $6 million was nothing to Shell, and therefore didn't factor into the company's decision to move its rigs when they did. Remember, Shell's plan was not only to move the Kulluk, but also the Noble Discoverer, which ran into trouble, too, luckily while it was docked in Seward and bobbing around in a horrific storm at not a risk to Alaska like the Kulluk.

In an interview with KUCB's Stephanie Joyce, Voser said, "There was a statement made by a Shell person, but in a completely different context, in a completely different meeting. That was then taken out of that context and then someone made a story out it. Just to be very clear on this one."

Just to clear the air, here's exactly what exchanged between Paulin and Shell's spokesman Smith. Paulin called and left a phone message for Smith requesting a comment regarding the allegation that Shell's ships were leaving state to avoid taxes.

This is what Smith wrote back:

Hi Jim,

Sorry I missed your call. Trying to stay on holiday but that does not always work.

Anyway, we are now planning to sail both vessels to the west coast for seasonal maintenance and inspections. Having said that, it's fair to say the current tax structure related to vessels of this type influenced the timing of our departure.



Jim responded with this email:

Thank you and seasons greetings.

Could you describe the tax structure, and how much it would have cost Shell for taxes Discoverer, Noble Discoverer, etc.

Did Shell bring any vessels to Adak? Where is the Kulluk going on W Coast? Thanks, Jim Paulin

Smith then wrote:

Hi Jim,?I'm in and out of(phone/internet) coverage today.


Don't know the exact tax structure but it would have cost Shell multiple millions to keep the rigs here.

Kulluk off to Seattle. No vessels in Adak.?Best,


I'm sorry, but there's no way to take that out of context. Who knows who makes the calls about when to move rigs and why in the upper-level management of Shell, and surely not everyone was privy to the decision-making process. But at least one person at Shell thought this is why the ships were pulling up anchor.

It is somewhat hard to believe that the millions in taxes were the sole reason for moving the ships. But it sure might have a lot to do with the timing, and really, timing is everything when it comes to moving around in Alaska waters. If it hadn't been for the tax issue, would the Kulluk have come into Old Harbor when the weather got rough instead of trying to continue onward?

Maybe, as some suspect, Smith's comments were geared to get the attention of lawmakers, to twist some arms into changing the tax structure so Shell will keep its ships local in the future. Whatever was going on, they said what they said. Paulin didn't infer anything. He just reported the facts. And Shell is putting on its best game-face by following the golden rule of dealing with any public relations mess - deny, deny, deny.

The whole punches holes in Shell's credibility far more than it dents Paulin's reporting, which was rock solid. If Voser wants us to believe Shell is responsible and should be trusted in Alaska waters, he's going to have to work a little harder than that.

Carey Restino can be reached at


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