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Municipalities to appeal pipeline assessment Fairbanks North Star Borough, city of Valdez, North Slope Borough disagree with drop in trans-Alaska pipeline taxable value The Associated Press
The Fairbanks North Star Borough will contest the state’s assessment of the tax value of the trans-Alaska oil pipeline.
Mayor Jim Whitaker said the borough, along with Valdez and North Slope Borough officials, disagree with the state petroleum property assessor’s $3 billion assessment of the pipeline and associated property for 2005.
That’s down from $3.017 billion in 2004 and does not make sense during a time of rising property values and high crude prices, Whitaker said.
“We think it is nearly inconceivable that a devaluation can be made for the trans-Alaska pipeline,” Whitaker told the Fairbanks Daily News-Miner.
Pipeline owners pay about $4 million a year in taxes and are the borough’s largest taxpayers, Whitaker said.
The municipalities filed an administrative appeal to the Department of Revenue in March, objecting to the state’s method for assessing the pipeline and noting a failure to use expert economic analysis. The state upheld its original assessment a few days ago.
Filing with the state assessment board is the second step in the appeal process. The North Slope Borough and Valdez may also appeal, Whitaker said.
“We may all do it independently but we may all do it collaboratively,” Whitaker said. “We have every reason to believe we’ll do it together.”
If rejected, the borough could sue in Alaska Superior Court and the Alaska Supreme Court. The borough will take the case to the Supreme Court, if necessary, Whitaker said. Deterioration, volume cited in assessment Rick Hoffbeck, the state petroleum property assessor, said there were two main reasons he reduced the value of the pipeline: depreciation and decrease in function. He based the depreciation on physical deterioration of the pipeline. He declined to name the exact amount of deterioration, saying that was proprietary information.
Hoffbeck further reduced the pipeline’s value because it transports 1 million barrels of crude daily, not the 2 million barrels for which it was built. Also, he added a temporary deduction for the current outmoded method of using diesel for power generation at the pipeline’s pump stations.
Alyeska Pipeline Service Co. is hooking some pump stations to the electrical power grid. When that is completed, the value will go up, Hoffbeck said.
The 800-mile Alaska oil pipeline from the North Slope to Valdez is owned by BP Pipelines (Alaska), ConocoPhillips Transportation Alaska, ExxonMobil Pipeline Co., Unocal Pipeline Co. and Koch Alaska Pipeline Co.
If the municipalities file an appeal to the assessment board, it will be second time that has happened, Hoffbeck said.
Four years ago, the two boroughs and Valdez appealed the pipeline’s value to the assessment board and won. The petroleum assessor was considering making the pipeline’s value $3.017 billion but owners contended it should be $2.1 billion. The state assessor placed the value at $2.75 billion.
The municipalities challenged the state’s pipeline assessment and got the value raised to $3.017 billion, translating into an extra $350,000 for the Fairbanks borough. That marked the first time the pipeline’s value went over $3 billion.
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