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Week of October 31, 2010
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Alaska pipeline owners go for new judge in epic property tax case

Thus far, the owners of the trans-Alaska pipeline haven’t fared so well in an epic court battle over the taxable value of the state’s most vital asset.

Back in May, you might recall, state Superior Court Judge Sharon Gleason staggered the owners with her ruling that the pipeline system is worth $9.98 billion for property tax purposes.

The owners had argued the pipeline was worth only $850 million.

Gleason’s decision could mean the owners owe an extra $113 million just for 2006, the tax year at issue in her ultracomplex 170-page ruling.

Now the owners — BP, ExxonMobil, ConocoPhillips, Chevron and Koch Industries — are trying a new approach.

They want to bounce Gleason off the case and bring in a new judge.

The owners went in this direction after returning to court over the summer to appeal the state Assessment Review Board’s 2010 pipeline assessment. The owners have appealed assessments for each tax year since 2006, and a trial for years 2007 through 2009 is scheduled for the fall of 2011.

When the issue arose as to whether to fold, or consolidate, the 2010 appeal into the same case with the appeals from prior years, the pipeline owners balked.

In August they filed a notice saying, well, if such a consolidation was ordered, they would “exercise their right to peremptorily challenge Judge Gleason.”

That is, change judges sans debate.

Parties in a court case can do this. The pipeline owners cite Rule 42(c) of the Alaska Rules of Civil Procedure, which says in part: “In an action pending in the Superior or District Courts, each side is entitled as a matter of right to a change of one judge and of one master.”

‘Forum shopping’

On Aug. 23, Gleason did, in fact, consolidate the 2010 appeal into the case with prior tax years. The same day she also, per Rule 42(c), assigned the question of whether she should be replaced to another judge, fellow Superior Court Judge Peter Michalski.

Michalski hasn’t yet ruled on the matter.

One player in the massive tax battle, the City of Valdez, is fighting the effort to disqualify Gleason.

The city is among municipalities along the pipeline route that want a high assessed value for the system, as it means greater property tax collections for them.

In court papers filed Sept. 7, lawyers for Valdez noted that “hundreds of millions of dollars in tax revenue per year is in dispute,” and that the municipalities asserted the pipeline was worth $11.57 billion, even more than what Gleason ruled.

The Valdez lawyers, Bill Walker and Craig Richards, argue the pipeline owners have lost, or waived, their opportunity to remove Gleason because they’ve already long fought the tax case in her court.

The 2010 appeal is just another phase of the ongoing case, and the owners shouldn’t be allowed to engage now in what’s known as “forum shopping,” the Valdez lawyers contend.

That is, switching judges in hopes of getting one more favorable to the pipeline owners.

Property tax cases by nature “can involve the same issues and parties from one tax year to the next and allowing the taxpayer or taxing entity to forum shop each tax year in such situations would be nonsensical,” the Valdez lawyers argue.

They add that the owners themselves have argued in the past that consolidating the various tax years is appropriate to speed up the case.

The pipeline owners are expected to appeal Gleason’s ruling on the 2006 tax year to the Alaska Supreme Court.

—Wesley Loy



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