Bristol Bay Times-Dutch Harbor Fisherman Editor Addresses Kulluk Tax Inaccuracies

Bristol Bay Times and Dutch Harbor Fisherman editor Carey Restino printed an editorial in today's electronic edition of those papers, probably in response to disinformation that came out on the Shell drill rig Kulluk Thursday, due to the last two lines in an Associated Press article:

Critics suggested Shell may have risked the trip to dodge the tax. 

Shell says the vessel was on its way to Seattle for maintenance.

Restino, in today's editorial, writes:

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.

Restino then goes into the details of the correspondence between Paulin and Smith

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.  

Best,  

Curtis  

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.  

Frustrating.  

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,  

C-

To the credit of KUCB public radio in Unalaska, and to Alaska Public Radio, which has been running Stephanie Joyce's KUCB stories on this, they have observed throughout that Voser's concrete information was 180 degrees in contrast with that being put out recently by Shell.

Voser is telling the truth.  Shell is lying.

In a sense, it doesn't matter what Smith and Shell thought.  The Parnell administration has found an old ruling by Attorney General Avrum Gross on taxing offshore rigs in Alaska:

[The Kulluk] is affected by a legal opinion issued by former [Jay Hammond administration] Attorney General Avrum Gross in 1977, the year oil first flowed through the trans-Alaska pipeline. Gross addressed the question of whether the state could tax property used to drill for oil more than three miles offshore. Oil companies objected to taxes on support vessels, and Gross decided the policy also applied to drill ships in federal waters.  

“It is our opinion that property used or committed by contract for use solely in OCS (outer continental shelf) exploration and development in federal waters off Alaska cannot be taxed,” he wrote.  

State oil and gas attorney Martin Schultz said the policy covers the Kulluk. 
“It’s a pretty straightforward interpretation as it applies to the Shell Kulluk,” Schultz said. “That particular definition has not changed since this attorney general’s opinion was issued.”

The Gross ruling from 1977 is probably definitive.