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Revenue v. legislators on info issues Addresses Senate Resources’ concerns about availability of property tax information, differences in North Slope reserves estimates Kristen Nelson Petroleum News
What information does the Alaska Department of Revenue collect from North Slope oil producers? Should that information be public — or at least be shared with legislators? Why does the state show very different numbers for North Slope reserves from those referenced in a recent court decision?
Those were some of the questions members of the Senate Resources Committee had after three days of hearings on the recent decision by Judge Sharon Gleason on the valuation of the trans-Alaska oil pipeline for property tax purposes.
On Feb. 23 they got answers to those questions, and a number of others, from the Department of Revenue.
Commissioner of Revenue Bryan Butcher and Johanna Bales, deputy director of the department’s Tax Division, reviewed information issues and the department’s policy on confidentiality.
Butcher told the committee that confidentiality laws in Alaska covering taxpayer information are not a lot different than those in other states, or those of the Internal Revenue Service.
Assessment process Bales reviewed the assessment process for the trans-Alaska oil pipeline, and said information the Department of Revenue receives, including taxpayer information and information used for revenue forecasting, is confidential.
Asked by Resources co-Chair Joe Paskvan, D-Fairbanks, why production forecasting information is confidential, Bales said it is particular to the business and affairs of the companies.
Butcher said reserves information is very tightly held by the companies. The department works to put together accurate production forecasts, he said, and it would have a “chilling effect” if companies thought the department would be sharing reserve estimates publicly on a company-by-company basis.
Sen. Bert Stedman, R-Sitka, said he understood why companies would want to keep their information confidential, but said legislators need aggregated information to make public policy.
Stedman questioned the discrepancy between North Slope reserves numbers of 7-8 billion barrels cited in the Gleason decision and the 4 billion barrel figure (about 2 billion at Prudhoe Bay and about 2 billion elsewhere on the Slope) cited by the Alaska Oil and Gas Conservation Commission.
Butcher said the numbers from the case were the judge’s opinion. He said he had discussed reserves numbers with AOGCC and the Department of Natural Resources and was comfortable with numbers the state has cited.
Stedman asked if Butcher had access to the information Judge Gleason saw. Butcher said he would have to have detailed discussions with the department’s production forecast team on what data is available to the department.
Butcher said the Gleason decision was part of an ongoing case, and said they’d been asked by the Department of Law not to get into the details of a case which Law is litigating.
He agreed with Sen. Bill Wielechowski, D-Anchorage, that the state should have more information. He said Alaska has access to more data than any other North American jurisdiction, and said the department is working to get more information.
Statutes broad Bales said the state’s confidentiality statutes are very broad; all information regarding the business affairs of any person or business is confidential.
She said the department does not share confidential information with SARB, the State Assessment Review Board, because SARB does not keep information confidential.
A 1983 opinion from the Alaska Attorney General said SARB did not violate the state’s confidentiality statutes by making valuation of a property being assessed open to the public.
But that, Bales said, was at a time when the valuation of the trans-Alaska oil pipeline was based on construction costs, and was not based on reserves, taxpayer income or particulars of a taxpayer’s business.
That same 1983 opinion, she said, also states that information on income or particulars of a taxpayer’s business should be held confidential.
Paskvan asked about a description of the assessment process in the court order as close to broken.
Butcher said he didn’t know what the specific reference was, but said clearly the process by which SARB has been running meetings is broken because they are unable to view confidential information. He said it’s a difficult situation for the department to deal with, because SARB disagrees with Revenue and the Department of Law.
Bales said because SARB has said it won’t hold information confidential Revenue has not released information to them.
She said she is aware there was information the municipalities wanted, and said it would be provided in the context of SARB if it were held confidential. The municipalities do have access to the information under protective order in court cases.
As to how that information could be protected in a public hearing, Bales said that would be no different from a Superior Court hearing, where the court will hold closed sessions to discuss confidential information.
Legislators also concerned During the 2007 special legislative session which enacted ACES, Alaska’s Clear and Equitable Share, the current production tax, both industry and legislators voiced concerns about Revenue’s ability to maintain taxpayer confidentiality, and legislators discussed increasing penalties for breaches of confidentiality, Bales said.
She said the department’s confidentiality requirements haven’t changed, but because of concerns expressed during the ACES’ discussions, the department drafted a confidentiality policy in December of 2007 and began requiring annual confidentiality training for all employees, contractors and others who have legal access to taxpayer information.
Under statute there is a penalty of up to $5,000 or a prison sentence of up to two years or both for each violation of confidentiality. Bales said the Department of Revenue takes the statutory requirements for confidentiality “very seriously.”
When information available Bales said the assessment process was based on information available at the time the assessment was done, while the court’s decision was based on information available in 2011 when the case was heard.
She said the trans-Alaska oil pipeline valuations by the Department of Revenue were $4.5 billion in 2007, $7.2 billion in 2008 and $7.7 billion in 2009, and said that based on the information available to the department when it did the assessments in those tax years, those valuations were reasonable.
The court ruled the value was $8.9 billion in 2007, $9.6 billion in 2008 and $9.2 billion in 2009, based on information from the de novo provisions at trial in 2011. Some of that information, Bales said, was not in existence in 2011.
The municipalities argued for a value of at least $13 billion while the owners argued for a value of some $1 billion.
Importance of confidentiality Bales said confidentiality was important to the department in doing its job of collecting taxes.
Confidentiality leads to cooperation between Revenue and taxpayers, fosters trust of the department by taxpayers, lends creditability to the Tax Division and aids the division in obtaining information without costly litigation.
Questioned by Paskvan on the issue of subpoenas, Bales said that because subpoenas can be litigated they are useless in the context of assessments, because of short statutory deadlines and because information obtained under subpoena could not be used before SARB upon appeal of assessments because of SARB’s lack of confidentiality for its hearings.
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