Policy: Budgets & Deficits

Oil producers get break on Alaska property taxes

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News,Business,Alaska,Budgets and Deficits,Oil,Subsidies

ANCHORAGE, Alaska (AP) — Gov. Sean Parnell's administration worked out a deal with Alaska's major oil producers that let the companies withhold tens of millions of dollars in property taxes, public documents show.

The 2013 agreement occurred after producers disagreed with the state board that set the value of the trans-Alaska pipeline, the Anchorage Daily News reported (http://is.gd/FG5RBE).

The deal was negotiated after Steven Mahoney, an attorney for the oil pipeline owners, complained in a June 2013 email to an assistant attorney general that the State Assessment Review Board set too high a value for the pipeline, raising the tax bill for oil companies.

"As you may be aware, Owners consider the Determination of the Board to be both aberrant and irresponsible," Mahoney wrote.

Martin Schultz, supervising attorney in the state Law Department's oil, gas and mining section, said if the court determines more money is owed or a settlement is reached for a higher amount, oil producers would owe it plus interest.

The Parnell administration argues that declining oil flow is a reason for lower property taxes. Parnell, on another front, is pushing to retain cuts in oil production taxes approved by lawmakers last year, saying those decreases already are generating new investment.

"The value that SARB set for 2013 . . . is so much higher than has ever been set before by anybody, including the courts," Schultz said. "It seemed like a legitimate concern that potentially could expose the state to a tax refund."

The review board hears appeals from oil companies and local governments over the valuation of crude oil transport properties that are initially set by the state Department of Revenue.

The deal to give oil companies at least a temporary break emerged in public view in April when some of the municipalities that receive property taxes on the pipeline appealed the state's 2014 valuation. Municipalities argue the state's significant reduction from the previous year was improper.

Craig Richards, one of the attorneys objecting to the lower value, said the arrangement between the state and oil producers appears to be part of a broader strategy to ensure oil companies pay less.

"How does the state have a secret agreement with the oil companies that they don't have to pay their taxes, pending future litigation outcomes, and nobody knows about it?" Richards said.

Marty McGee, former chairman of the board that sets the 2013 value at a record $11.9 billion, was terminated from the board by Parnell, and another board member resigned.

Parnell appointed two oil industry executives to the board, but one withdrew his name because of controversy over his California residency.

Following Mahoney's email last summer, state official said producers could pay taxes on a smaller valuation of the pipeline, not the $11.9 billion set by the board.

The estate tax bill now amounts to $66 million, with another $47 million owed under the board's ruling.

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Information from: Anchorage (Alaska) Daily News, http://www.adn.com

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