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Trans-Alaska pipeline worth $3 billion State review board upholds Revenue’s decision regarding value of TAPS, keeps line’s value at about same level as last four years Matt Volz Associated Press Writer
It’s pumping half the oil it did in its prime, and tariffs could drop sharply in the coming years, but the Trans-Alaska Pipeline System is still worth $3 billion, according to a state review board.
The five oil companies that own the 800-mile pipeline had appealed that assessment by the Alaska Department of Revenue, which this year changed the way it values the pipeline in figuring the property tax owed.
The owners say under the method used previously — basing the assessment on tariff income — the pipeline’s value is actually $1.5 billion.
The local governments through whose land the pipeline runs also appealed the state’s assessment, but took the opposite line: The state’s price tag is as much as $11 billion short of the real value.
The Department of Revenue’s number was upheld recently by the State Assessment Review Board, keeping the pipeline’s value at about the same level as it has the past four years. Taxes the reason for dispute The reason for the dispute is taxes. Upholding the $3 billion assessment for 2005 means the pipeline owners will have to pay $60 million in property taxes to be split between the state, five municipalities and the North Slope Borough.
“The last time it went to a hearing was four years ago,” said Dan Dickinson, Tax Division director. “All the parties agreed looking at it, the revenue stream was the way to go.
“This year when we looked at it, we said there is a good chance for a reduction in tariffs.”
If tariffs are reduced in 2009, when a settlement expires in calculating those fees, the property tax would go down using that method of calculation, Dickinson said.
Because of that possibility, the division used a new way of calculating the pipeline’s value. Using that method, the value is based on how much it would take to replace the entire pipeline system, minus the cost of depreciation.
The division figures the oil pipeline is about halfway through its life, and is expected to last until 2034, according to Randy Hoffbeck, state petroleum property assessor.
The review board said continuing to use tariff income as the basis for the assessments would “understate the full value of the TAPS.”
“The board agreed with the division that valuation of the TAPS based on its tariff income stream is likely to become less and less reliable as an indicator of the TAPS’ full and true value,” wrote board chairman Steven Van Sant in the May 26 decision. Appeal possible Daren Beaudo, spokesman for BP Exploration (Alaska), said since 2001, there has been depreciation and a reduction in oil flowing through the pipeline, pointing to a lower overall value of the pipeline. He said the company stands by its $1.5 billion assessment, but has not decided whether to pursue the appeal in court.
“We’re challenging the appraised value just as homeowners have the right to challenge the appraised value of their homes,” Beaudo said.
Dawn Patience, spokeswoman for ConocoPhillips Alaska, said ConocoPhillips also believes the $1.5 billion is the appropriate appraisal, but declined to go into details, saying it was “an ongoing dispute.”
The municipalities’ assessments, which ranged from $8.9 billion to $13.9 billion, includes costs the state kept out of its assessment — road and bridge construction, legal fees, program management and other costs. The municipalities also argued that the pipeline’s life is through 2040, not 2034.
The review board said the state did nothing wrong in excluding those costs, but the division should review the 2040 date in future assessments.
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