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Controversial Parnell appointee withdraws from consideration

Pat Forgey

JUNEAU -- Just before facing what was expected to be a tough confirmation hearing, a California executive with oil-industry ties has withdrawn his name from consideration for an important appointment.

Gov. Sean Parnell had named Dennis Mandell of Salinas, Calif. to the State Assessment Review Board, which decides whether local property tax assessments such as that of the trans-Alaska pipeline, are accurate. The appointment came despite the fact that such appointees are supposed to be Alaskans.

Senate Minority Leader Hollis French, D-Anchorage, raised concerns that Parnell was not following state law that requires such appointees to be Alaska residents and registered voters. French pointed out that Mandell lives, works and is registered to vote in California.

The appointment appeared to be in trouble Wednesday when Senate Majority Leader John Coghill said French had "made a good point."

Coghill said he was waiting to hear from the governor about his justification for the appointment.

Instead, Rep. Andy Josephson, D-Anchorage, revealed Thursday that Mandell had unpaid corporate taxes in California and that the financial consulting company he founded had had its business license suspended.

Then, just before the the Senate Finance Committee was scheduled to hold a confirmation hearing on Mandell and other appointees Thursday, Sen. Kevin Meyer, the committee's co-chair, announced that Mandell had withdrawn his name from consideration.

The review board plays a key role in deciding the value of the oil pipeline, which in turn plays a key role in determining how much property tax revenue the North Slope Borough, the Fairbanks North Star Borough and the City of Valdez receive from the expensive pipeline infrastructure there.

The companies that own the 30-year-old pipeline claimed that its value was less than $1 billion. But the Assessment Review Board and then a judge determined it was worth far more, eventually determining its value is closer to $10 billion.

Parnell also fired from the board Marty McGee, a former Anchorage municipal assessor, who had fought for a higher valuation. 

In a press conference on Thursday, the governor claimed the SARB board was trying to tilt the pipeline’s value in a direction that the facts said it shouldn’t go. Last year, the board said it had knowingly ignored findings of the courts to determine the value of the pipeline, Parnell said.  

With less oil flowing through the pipeline than eight years ago, and with the North Slope containing 2 billion fewer oil reserves that were not replaced, Parnell said, “everything says that line should be worth less today,” than it was in previous years.

Yet the SARB board had set a higher valuation than it had in 2006. “Instead of $9.9 billion in 2006, it’s now supposedly worth $11 billion,” Parnell said.

“We need people who follow the law,” he said.

Parnell’s response, however, contradicts what the Alaska Supreme Court ruled recently: That the value of the pipeline is contained in the ability “to monetize the Alaska North Slope’s $350  billion worth of oil reserves.”

The pipeline value should be raised after the additional oil begins to flow through the pipeline and oil reserves increase, Parnell argued.

McGee, reached by phone, rejected the claim by Parnell that SARB did not follow the law in its assessment decision and the claim that the SARB did not follow provisions of a court decision by former Superior Court Judge Sharon Gleason.

While Parnell said that the pipeline should be worth less than it was eight years ago, McGee defended the process that produced the valuation of more than $11 billion. The assessment is not based on the current rate of oil flow, but on a combination of factors, including replacement cost of the pipeline, depreciation and the size of North Slope reserves.

The valuation is based on the theory that the reserves are extensive enough that the oil companies would replace the pipeline if they had to and that cost plays into the tax value.

McGee said the SARB "paid close attention to the court's decision and our entire response was created around that."

As for why Mandell withdrew his nomination, Parnell said it occurred after Mandell spoke with lawmakers on Wednesday.

Parnell said that to his knowledge, his administration did not ask Mandell to withdraw. But Parnell said notes were compared, and when the chances of confirmation were not there, Mandell decided to withdraw. 

Parnell said Mandell was the most qualified of the names he’d reviewed, and said he’d now look for a replacement.

Josephson Thursday blasted Parnell's role in the review board process. 

“Firing the assessor who stood up for Alaskans and replacing him with someone who doesn’t live here, doesn’t pay his taxes, and has a history of working against Alaska on behalf of the oil industry just doesn’t inspire confidence that the state is working in Alaska’s best interest,” said Josephson.

Parnell told the Alaska Public Radio Network that he would not withdraw the nomination to the board, even though French had revealed Mandell was ineligible under Alaska statute.

The backup material provided for board nominees to be reviewed by the Senate Finance Committee included information for Mandell, but with his state of residency information blacked out. His city of residence was also blacked out, but Salinas was referred to elsewhere in the materials. 

Thursday, after Mandell's withdrawal, the committee went ahead with a confirmation hearing for Bernard Washington of Anchorage for appointment to another seat on the board. He, like Mandell, had formerly worked for Arco.

After Arco's Alaska operations became part of ConocoPhillips, he continued there until 2000, including service on loan to the Alyeska Pipeline Co., the pipeline's operator.

Washington spoke at the meeting of the difficulty of determining value on aged assets like the pipeline, but he did not give an opinion as to what its value should be.