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Big Oil wants big refund over Alaska pipeline property taxes

Ben Anderson
The owners of the Trans-Alaska Pipeline System are suing various government entities in Alaska, arguing that they overpaid on property taxes on the pipeline -- which they estimate is worth about $7.5 billion less than state estimates -- in 2011. Aaron Jansen illustration

A new skirmish is brewing in the perennial conflict over the value of the infrastructure that carries Alaska's lifeblood from the North Slope oil patch to tankers in Valdez. Owners of the Trans-Alaska Pipeline System (TAPS) -- including Alaska’s “Big Three” oil companies: BP, ConocoPhillips and Exxon Mobil Corp., recent recipients of a state tax cut worth at least several hundred million dollars per year -- are suing a variety of Alaska municipalities and boroughs in hopes of recouping millions in property taxes paid “under protest” on the pipeline and other facilities in 2011.

In complaints filed against different government entities in Alaska, BP, Conoco and Exxon, along with pipeline companies and fellow TAPS owners Koch and Unocal, argue that the State Assessment Review Board (SARB) -- which ascribes an overall value to the pipeline, upon which property taxes are based -- overvalued the pipeline by billions of dollars.

In a July 25, 2011, letter to Valdez Finance Director Walter Sapp, attorney James Seedorf, representing the TAPS owners, said that in 2011, the SARB estimated the pipeline’s value at $8.672 billion.

“The TAPS Owners claim that the total value should have been assessed at approximately $1.2 billion,” Seedorf wrote in the letter. "If the TAPS Owners prevail in their claim regarding the value of TAPS, they will be entitled to a refund of taxes paid under protest based on the excess valuation which is 86.16% of the total valuation, or $7.472 billion.”

In other words, if the TAPS valuation comes in at a substantially lower amount on appeal, the companies could be entitled to a proportional refund on those taxes already paid.

The TAPS owners are suing the North Slope Borough (to whom they paid about $42.3 million in taxes, “under protest,” in 2011), the city of Valdez (about $38.5 million), the Municipality of Anchorage (about $2.9 million) the Fairbanks North Star Borough. A request for a copy of the complaint against the FNSB was not returned by press time Friday.

The taxes were paid on actual property as well as buildings and equipment, including terminal facilities in Valdez and 177 miles of pipeline property snaking through Alaska’s farthest north borough, among other taxable items.

This isn’t the first time state entities and TAPS ownership have sparred over the valuation of the pipeline -- it’s been a longstanding battle between the state and TAPS owners in determining an acceptable compromise on the pipeline’s value as the years wear on and production steadily declines.

Meanwhile, Big Oil already got a big break earlier this year when the Alaska Legislature passed Senate Bill 21, which could see the state lose about $6 billion over the next six years in oil tax revenue. Gov. Sean Parnell and other lawmakers hope that the cuts will be enough to spur production and boost the flow of oil in TAPS, which has long been on the decline.

Opponents of SB21 have been organizing a referendum that they hope will see Alaska voters repeal the legislation.

Contact Ben Anderson at ben(at)alaskadispatch.com