February 26, 2014 | Vol. 26 Edition 8

Oil property tax victory for Valdez

But don't break out the champagne yet attorney says

Valdez and the other municipalities in the pipeline corridor won a significant victory Wednesday after the Alaska Supreme Court upheld a lower court ruling that valued the Trans Alaska Pipeline System – TAPS - at $9.8 billion for the 2006 tax year.

Valdez Star file photo
The Alyeska Marine Terminal in Port Valdez is part of the TAPS system that pays property taxes to the city of Valdez.

The ruling is a giant leap forward in settling the long-running legal dispute between the municipal taxing authorizes of the North Slope, Fairbanks North Star Borough and Valdez and TAPS owners, including BP, ConocoPhillips and ExxonMobile.

"The decision means that the general approach adopted by Judge Gleason to value TAPS is acceptable in 2006 and future tax years," according to Craig Richards, partner to city attorney Bill Walker. " However, the parties still disagree about a number of particular issues that are on appeal that have not been decided by Alaska Supreme Court. "

With interest, the decision involves almost $40 million in tax revenues owed to the City of Valdez that have been paid into an escrow account.

Richards indicated that it's still too early to break out the champagne glasses.

"Those funds can now be made available to the City," he wrote in an email to the Valdez Star. "However, the State has filed a separate lawsuit laying claim to that money. The City has not made a decision about how it will handle the funds during resolution of the State's lawsuit."

Other issues effecting how the remaining tax years' litigation is also still pending according to Richards.

"The decision means that the general approach adopted by Judge Gleason to value TAPS is acceptable in 2006 and future tax years," Richards wrote. "However, the parties still disagree about a number of particular issues that are on appeal that have not been decided by Alaska Supreme Court. In the 2007-2009 appeal currently pending before the Alaska Supreme Court the municipalities asked the court to define how collateral estoppel is to be applied to future tax years."

Collateral estoppel is defined by the legal dictionary published online by www.law.com as ".. the situation in which a judgment in one case prevents (estops) a party to that suit from trying to litigate the issue in another legal action."

Richards also said he does not believe TAPS owners can or will appeal the issue to federal courts.

"It is possible that the TAPS owners will appeal to the US Supreme Court," he wrote. "However, the Alaska Supreme Court's decision was not based on interpreting any federal questions of law, so it is unlikely such an appeal would be accepted by the US Supreme Court." Then added "I expect the next decision issued by the court for those tax years will explain the extent to which the parties will be bound by this decision in future years."

The value of TAPS properties began decreasing for property tax purposes in 1986, after the state and the oil companies settled on an oil-shipping tariff without input from the municipalities. In 1995, the corridor municipalities hired their own experts to appraise the pipeline and oil related properties based on cost-replacement and submitted that information to the state. The opposing parties have been in court over the taxable value of the 800-mile pipeline and its associated properties since 2006. The superior court ruling upholds the landmark ruling by retired Superior Court Judge Sharon Gleason.

In the original lawsuit, the municipalities claimed TAPS properties were valued at over $11 billion. TAPS owners claimed the properties were worth much less, only $850 million total. The municipalities argued the system should be taxed based on its replacement cost; TAPS owners argued for a method based on the value of fees collected by oil shippers.

The value of the pipeline is assessed each year by the state's Department of Revenue. If pipeline owners or affected municipalities appeal the value assess by the state, the petition is heard first by the Department and then, if the taxpayer still disagrees with the decision, by SARB. SARB's decision determines how much money in property taxes that the State of Alaska, Fairbanks North Star, the North Slope borough, and Valdez will receive.

Numerous lawsuits and resultant appeals under this system have resulted.

Valdez taxes all properties in the city limits at 20 mills. The state of Alaska collects an additional 10 mills, with a statewide 30 mill cap on oil-property taxes. Approximately 20 percent of the taxable TAPS system is located within the Valdez city limits.

Reader Comments

(1)

Cortez writes:

The City of Valdez should be filing suit to force the EPA or State of Alaska to stop the pollution from across the bay that always seems to be drifting around at an elevation of one or two hundred feet around the entire basin of the port. At one point, the EPA took down the air quality monitoring stations because it was too bad to measure from what we were told back in the early nineties. Many thought vapor recovery collected the vapors as the crude was loaded into the tankers, but no such luck.