New twist in stricken rig saga: Shell was moving it to avoid tax

Professional Mariner Forum
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I worked for a Company that preached safety all of the time. I remember on vessels that were forced to sail more that once. One time when the Captain notified the company that he was going to stop cargo so we could get out before the weather got to bad only to be told to keep loading and they would have a lay berth set up for us just in case the weather was bad. Well we kept loading for another 18 hours. By the time we were done the weather was plain nasty. When the Captain asked about the lay berth he was told that there were none avaible due to our draft and the Oil Major who’s dock we were at would not allow us to stay. Long story short we sailed but did almost $100,000 in damage to the barge due to the seas.

These companies can preach Safety all they want but when push come to pull they could care less about putting their employees in danger. Shell did what they did and now will pay for it.

The amount of the “Tax” may not seem like a lot when looking at all of the $$$$ that they have already spent but as the saying goes “If you watch the Dimes and Nickles, the Dollars will take care of themselves”. A lot of very rich men live by this saying and have a lot of money to show for it.

22

From Alaska Daily News:

Shannyn Moore: Shell’s money play is on the rocks

Published: January 5, 2013
65 Comments E-mail Print
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By SHANNYN MOORE

Royal Dutch Shell’s Alaska operations could have used a dose of “local knowledge” to prevent their latest debacle: the grounding of the oil rig Kulluk. That phrase, “local knowledge,” should ring a bell for Shell. The company was the one of the largest contributors to a group opposing the restoration of Alaska’s Coastal Zone Management program.

Why did Shell spend so much money to keep coastal Alaskans away from the table? Don’t they value the experience of local people along the Beaufort and Chukchi coasts? Oh, that’s right. When you’re drilling in their back yards, you only want silent partners.

Here’s the scoop, geniuses. Local knowledge might have helped you figure out that shipping out of Dutch Harbor with only one, largely untested tug, IN THE MIDDLE OF WINTER, wasn’t a good idea. When the Deadliest Catch boats are still tied to the dock, maybe you should ask why.

I’m convinced the decision to leave their special berth in Dutch Harbor was financial. An annual tax of 20 mills is levied on oil company assets in Alaska on Jan. 1. The Kulluk just happened to leave state’s waters about a week before that. Does being Shell-shocked and fetched up still make you taxable?

Shell risked some of the worst sailing weather in the world in an attempt to avoid millions in taxes. Just because most of our Legislature bends every time an oil company exhales, it doesn’t mean Mother Nature will.

I realize I’m swimming against the tide on the issue of offshore Arctic drilling. President Obama thinks it’s a good idea and opened the area to leases after 20 years of closure. (Because he hates oil.) When asked about the safety of drilling in such a precarious place, Interior Secretary Ken Salazar said, “I believe there’s not going to be an oil spill.” Did he believe there would be a $400 million runaway oil rig stuck on a beach?

Our delegation in Washington, D.C., thinks it’s a brilliant idea to drill in Arctic waters even though Alaska doesn’t get the revenue - just the risk of a spill. Awesome.

Shell’s oil spill prophylactics have failed miserably. The company’s containment cap was tested in calm, ice-free waters. The 20-foot-tall dome “breached like a whale” and sank 120 feet, where it was “crushed like a beer can” by the pressure. Its containment barge was fined by the Coast Guard for spilling hydraulic fluid. When they ran aground in Dutch Harbor with the Noble Discoverer, the company denied it had run aground and then had tugs pull the ship off. The NTSB is investigating and Shell has lawyered up.

The backup plan for the latest voyage was another tug in Seward. It makes you wonder if some flatlander looked at a map and thought, “Well, that’s only an inch away.” It took 24 hours at full tilt in 30-foot seas to get that boat where it was needed.

Lloyds of London wouldn’t insure Shell or others in their Arctic venture. They said, “The environmental consequences of disasters in the Arctic have the potential to be worse than in other regions. The resilience of the Arctic’s ecosystems in terms of withstanding risk events is weak, and political sensitivity to a disaster is high. As a result, companies operating in the Arctic face significant reputational risk.”

The 1990 Oil Pollution Act has a limited liability clause. It limits the amount non-tanker vessels can be forced to pay in the event of an accident. So, after Shell has incurred $28 million in expenses, it may be able to invoke its liability limit.

Of the large Western oil companies operating in the U.S. or United Kingdom today, Shell has one of the worst safety records and, according to 2007 data, the highest mortality rate.

The Kulluk, tortured by curling seas and pounded on the surf, may breach. The 150,000-plus gallons of petro products may spill. The response teams will be in harm’s way on a Gulf-facing beach with little access. Boats, booms and white suits will pretend to do something for the cameras. Public relations is always a priority.

I talked to a businessman this week who strongly supports drilling in the Arctic. He’s furious at Shell. He thinks the company’s incompetence is jeopardizing the whole program. He was counting on the work. We are on opposite sides of the argument but we both agreed, if Shell can’t get its act together 50 miles from a Coast Guard base, what business does it have drilling oil wells almost 2,000 nautical miles from one?

Shannyn Moore can be heard weekdays from 6 to 9 p.m. on KOAN 1020 AM and 95.5 FM radio. Her weekly TV show can be seen Saturdays and Sundays at 3 p.m. statewide on ABC affiliates KYUR Channel 13 Anchorage, KATN Fairbanks and KJUD Juneau.

Read more here: http://www.adn.com/2013/01/05/2742778/shannyn-moore-shells-money-play.html#storylink=cpy#storylink=cpy

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[QUOTE=c.captain;93643]But it if means the master of the AIVIQ not going into shelter or sailing through Shelikoff Strait as has been suggested then? Negating the safest option because of financial considerations is a very valid question and for Shell to claim they have a “always safety first” corporate policy will be proven to be utter hypocrisy bordering on the criminal if not already so! Rather akin to BP being caught out like they were.
[/QUOTE]

If that’s the case the whole thing is a little bizarre. But, there is a spot along the route in the Shumigans that is both protected from the weather and outside the 3 mile limit. The Ruskies used to anchor there when they wanted to avoid port entry hassles. That might have been a good spot for the tow hole up till the forecast improved.

K.C.

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I’ve been on the rig end of a few of these tax voyages and the problem is momentum. The legal, finance and accounting departments are heavily involved and SEC fillings and such can’t easily be changed… so any alteration of the plan not only involves paying taxes but high level man-hours and the possibility of fines. I’ve found that corporate officers are often willing to spend the company’s money on operational changes that involve safety but are much less likely to approve changes that requires an investment in both money and their personal time.

Thus the more people and regulations involved with an operation (especially when they are high up the corporate ladder) the more difficult it is to change the plan… and these tax voyages often involve dozens of high level people and are strictly regulated by the likes of the SEC.

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If would be very foolish for any company in a highly regulated industry to embark on a reckless course of action with the potential to result in lost lives and property — and derail an entire industry — just to avoid a tax few dollars of tax.

What fucking planet do you live on?

Transocean and BP both proved that nothing else matters but the bottom line with DWH, and they derailed an entire industry.

What makes you think Shell is any different? They may talk a good game, but they are no better then any other company out there.

26

I’ll be selling my shares in Shell if they are going to put safety before profit
and
I only fly in government funded airlines that lose money to ensure they are safe

27

[QUOTE=Jemplayer;93752]What fucking planet do you live on?

Transocean and BP both proved that nothing else matters but the bottom line with DWH, and they derailed an entire industry.

What makes you think Shell is any different? They may talk a good game, but they are no better then any other company out there.[/QUOTE]
yes
its the governments job to ensure companies do things safely by regulation and enforcement then companies can get on with making a profit around a set of ground rules
Who helped/allowed BP and Transocean cut corners…the government

28

[QUOTE=powerabout;93894]I’ll be selling my shares in Shell if they are going to put safety before profit
and
I only fly in government funded airlines that lose money to ensure they are safe[/QUOTE]

Let me know what choir you sing in powerabout, I’d avoid it.

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[QUOTE=Sweat-n-Grease;93897]Let me know what choir you sing in powerabout, I’d avoid it.[/QUOTE]
lol
and I used to drive an Edsel as they had cutting edge safety features ( actually i’m not even sure I was alive then?)

30

[QUOTE=Jemplayer;93752]What fucking planet do you live on?

Transocean and BP both proved that nothing else matters but the bottom line with DWH, and they derailed an entire industry.

What makes you think Shell is any different? They may talk a good game, but they are no better then any other company out there.[/QUOTE]

I think it’s all about managing risk. If you run a business ashore out of a building there is a risk that the building could burn down. You can protect yourself against this loss by purchasing insurance but at the cost of reducing your profit. In this case measuring and mitigating the risk is relatively straight forward.

In the case of marine operations it’s a different story. Understanding and protecting again hazards at sea is much more difficult. It’s not just a routine matter of purchasing insurance. The information that a winter tow across the Gulf of Alaska of high value assets is an unacceptable risk may not have been understood by the right people. If it had been they would have done the equivalent of purchasing insurance, that is to say they would have accepted additional costs, longer tow, tandem tow, to lower the risks to an acceptable level.

It will be interesting to see what precautions they will take for the rest of the tow now that the risks are fully understood.

K.C.

Edit: I should say better understood, not fully understood.

31

[QUOTE=powerabout;93900]lol
and I used to drive an Edsel as they had cutting edge safety features ( actually i’m not even sure I was alive then?)[/QUOTE]

:wink:

It visited you in a dream. Hey, there are precedents.

powerabout, you and I are a good example how men can exchange messages, get their points across, without being rude.

32

Shell admitted to this tax bill today but said the grounding was the result of an unforeseen worsening of weather. My understanding is that this storm was forecasted to be big days out. I understand that moving assets out to sea in certain tax situations is perfectly normal, but what’s $6 million bucks on $4.5 billion? Now they have to pay the tax and every one else’s bill on top of that. Just thank god no one was hurt or killed.

http://gcaptain.com/lawmaker-asking-shell-if-kulluk-tow-was-motivated-by-alaska-tax-bill/

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Gulf of Alaska Storms Versus Shell Oil Drilling Platform
The storms win.

Shell Oil made a misguided and poorly informed decision to move a huge drilling platform (the Kulluk) from Dutch Harbor Alaska to Seattle starting December 21st. As described in the Seattle Times and elsewhere the problems grew from broken tow lines and faulty engines on December 26th, to the eventual grounding the Kulluk on an island just south of Kodiak island on December 31st.

The Kalluk beached south of Kodiak Island
Anyone familiar with the meteorology of the North Pacific and the Gulf of Alaska knows that this region is one of the stormiest on the planet with one major storm after another during midwinter. Unbelievably, a Shell Oil spokesman said, that forecasts indicated a favorable two-week weather window. This is at odds with the facts. First, as I will show below the forecasts on the day they left clearly suggested the potential for big storms during the 3-4 week voyage to Seattle, including the first week. Second, forecast skill drops substantially after 4-6 days and thus there was no guarantee of fair weather for this difficult tow.

Lets take a look at the surface charts during a few points in this ill-favored trip.
First, chart of 10am on the 26th, when wind conditions and large seas caused them to have lots of problems with tow lines. A 960 hPa low is found southeast of Kodiak; keep in mind this is about the same central pressure of the Columbus Day Storm, perhaps the greatest storm to hit Seattle during the past century. Such storms are a dime a dozen in the Gulf!

Then 10 AM on the 28th. Two major cyclones…one with 962 hPa and the other around 967 hPa to the southwest.

And then at 4 PM on December 31st, the coup de grace–a 959 hPa storm the produced very strong easterly winds over Kodiak and large (up to roughly 40 ft) seas.

Folks, a sequence like this is not unusual this time of the year and any experienced Pacific mariner knows it.

Were these storms big surprises as claimed by Shell? Let me show you some forecast model output and you decide! The University of Washington forecasts over the Pacific are virtually identical to that of the main U.S. global model, the model used heavily by the National Weather Service to forecast conditions over the Pacific. I have easy access to the graphics, so lets look at them. The tow began on 21 December, so lets examine the forecast started at 4 PM Seattle Time (3 PM Kodiak Time) valid at 4 PM on December 26th. A strong 967 hPa low south of the Aleutians. Not bad five days ahead of time…and of course the subsequent forecast got even better. Clear warning that the tow was a bad idea.

So there they were on December 26th and in trouble. You would think they would check the forecast to see whether they should head to port. So lets looks review the 5 day forecast for 31 December at 4 AM. ANOTHER strong storm…even deeper… with Kodiak Island in the area of strong pressure differences and thus strong winds.

I should note here that forecasts over the oceans have gotten much more accurate during the past decade or so, the key reason being the huge amount of satellite data we get over the oceans these days. In the old days we used to get a lot of observations in the middle of storms as storms got caught due to the poor forecasts. Today they avoid the storm!

Ok, that is one forecast. State-of-the-art forecasters use ensembles (the output of many model runs) that can give us uncertainty information and a measure of the confidence of the forecasts. One of the most popular ensembles collections used by U.S. forecasters is NAEFS…the North American ensemble system that combines the ensembles of both the U.S. and Canadian ensemble system. Here is the output from this system for the runs started at 4 PM on 26 December for the town of Kodiak. Look at the wind speed panel (note the wind speeds are given in km per hour, e.g., 40 km per hour is 25 mph). The bracket shows the range of speeds from the various ensemble members and the middle bar is the median). Clearly, some of the solutions are for very wind conditions.

The bottom line is that based on climatology and the forecasts available throughout the period, this was no time to be doing a very difficult tow over the northern Gulf of Alaska. We should expect more from a major international company that is being trusted to drill for oil in ecologically sensitive regions.
Cliff Mass Weather Blog at 5:44 PM

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I find the tax angle interesting. Especially when one considers why Massachusetts Senator John Kerry keeps his yacht in Rhode Island. . . . . .