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Californian withdraws from consideration for Alaska pipeline tax board appointment

Lisa Demer
Becky Bohrer

JUNEAU -- A former oil industry analyst from California nominated by Gov. Sean Parnell to serve on a board that determines the tax value of the trans-Alaska pipeline withdrew his name for consideration Wednesday evening after a controversy arose over his residency.

Dennis Mandell of Salinas, Calif., talked with legislators Wednesday and some were concerned that he doesn't live here, Parnell told reporters Thursday. But Parnell said he didn't ask Mandell to step aside from the State Assessment Review Board appointment and that the decision was Mandell's.

"The politics of naming an out-of-state resident certainly played into this," Parnell said.

Mandell said in an interview that he didn't want to be a distraction for lawmakers evaluating a natural gas pipeline project and other big issues.

"It seemed like a lot of chatter about someone who isn't anyone," Mandell said, amused that news stories call him a former oil executive. He said he was an 18-year analyst for Arco and more recently has run a consulting business, Mako Strategies. He said he last lived in Alaska in 1995.

Byron Mallott, a Democrat challenging Parnell for governor, lampooned the appointment, and independent candidate Bill Walker sharply criticized it, as did Democrats in the Legislature.

The governor maintained that he had every right under the Alaska Constitution to pick a Californian despite a state law that says board and commission appointees must be registered Alaska voters.

The Legislature's legal arm said Parnell may be right. An opinion done for House Speaker Mike Chenault concluded that the state law likely violated a provision in the state Constitution that says members of regulatory or quasi-judicial boards must only be U.S. citizens.

The Senate Finance Committee had been scheduled to consider two candidates for the tax review board.

The panel still took up the nomination of Bernie Washington, another former Arco official who now serves as the chief financial officer at Alaska Public Media, the parent nonprofit for public radio station KSKA, public television station KAKM and the Alaska Public Radio Network.

Both men are qualified but Mandell would have run into trouble over the residency issue, Sen. Kevin Meyer, R-Anchorage and co-chairman of the Finance Committee, said in an interview.

The committee agreed to forward Washington's name to the full Legislature for confirmation.

"The last 15 years I worked in the pipeline area and I was responsible for TAPS, TAPS valuation, TAPS tariffs," Washington, 63, said by phone in testimony to the committee. He was referring to the trans-Alaska pipeline system.

Parnell nominated Mandell to replace another board member, former Anchorage tax assessor Marty McGee, whom he kicked off the five-member board last month. The board members are unpaid but receive expenses, and they are appointed to indefinite terms.

Asked why he removed McGee, Parnell asserted that the State Assessment Review Board relied on a flawed method for determining the tax value of the oil pipeline.

"It appeared to me that it is broken right now," Parnell said.

Property taxes on the 800-mile-long pipeline are a major source of revenue for communities along the route -- especially the North Slope Borough, the Fairbanks North Star Borough and Valdez. Anchorage also gets a piece, mainly for offices and the pipeline's operations center.

An assessor in the state Department of Revenue determines the pipeline's value for tax purposes every year but the municipalities and the oil companies that own the pipeline can appeal the figure to the board and, in recent years, usually both have.

Parnell referred to the pipeline's tax value of more than $9 billion in 2006, as set under a 2010 court ruling.

Since then, oil production has slowed, and 2 billion barrels of reserves have been depleted, yet the State Assessment Review Board last year put the pipeline's value higher than it was in 2006, Parnell said.

"Everything says that line should be worth less today than it was eight years ago," the governor said.

Last year, Valdez, Fairbanks and the North Slope Borough challenged a state determination that said the pipeline system was worth $7.16 billion. The board, under McGee, took a fresh look and put the number at $11.9 billion. If it stands, the decision would generate tens of millions more in taxes for local communities and the state.

Parnell contended the board ignored judicial rulings and created its own methodology -- and that it acknowledged doing so.

Just the opposite, McGee said Thursday.

"We certainly did not disregard the court ruling on the 2006 case," McGee said. "In fact, we used it extensively as the basis for our decision."

The board's 37-page tax determination discussed how it used the court analysis. It found that it was the state assessor who failed to give the judicial ruling proper weight.

Parnell said he was considering whether to remove the other two board members.

Already one ex-oil industry executive from Outside is serving on a state board.

Richard Rabinow of Houston, Texas, was appointed by Parnell last year to serve on the board of the state's new Alaska Gasline Development Corp. The agency was created to develop an in-state natural gas pipeline. Rabinow, who is now a pipeline consultant, worked 34 years for Exxon Mobil, including a stint as head of its pipeline company.

Rabinow was in Anchorage Thursday for the AGDC monthly board meeting and then was on a plane and unavailable, said the agency's government relations director, Miles Baker.

The Legislature has yet to confirm Parnell's picks for the AGDC board.

Reach Lisa Demer at ldemer@adn.com or 952-3965. Daily News reporter Richard Mauer contributed to this story.


By LISA DEMER
ldemer@adn.com