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Largest Property Taxpayer - TAPS - Agreement Expiring

Luca Galuzzi

TAPS, the Trans-Alaska Pipeline System, is the Fairbanks North Star Borough’s largest property taxpayer. In 2016, legal agreements settled on a value of $8 billion dollars ($8,000,000,000). Those agreements will expire at the end of this year. The next step is to calculate a new value for the 800-mile long structure. The Borough Assembly meets tonight.

The pipeline is primarily owned by subsidiaries of BP, ConocoPhillips and ExxonMobil. It’s operated by Alyeska Pipeline Service Company. The proper value of the pipeline and how much it should pay in property tax has been a source of legal wrangling for years. Especially for the three municipalities it was built through: City of Valdez, the North Slope Borough, and between them, the Fairbanks North Star Borough.

It took a long time to land on that $8 billion value. That’s how much it cost to build the pipeline in 1977. The municipalities argued the structure had gained value over the 40 years it was pumping,  but the oil companies argued that it was declining in value.

Before the 2016 agreement, the owners claimed it was worth only $2.7 billion; the municipalities claimed $13.7 billion –11 billion dollars different.

According to the Alaska Journal of Commerce, in May 2014, the State Assessment Review Board valued TAPS at $10.2 billion, and the Department of Revenue suggested $5.7 billion.

The assessment process starts with the Office of the State Assessor, who has legal authority to evaluate oil and gas facilities. But parties can appeal to the State Assessment Review Board and if they still disagree, they can litigate. And that took a lot of time and money before two settlements resulted in this five-year agreement. Now, says Jim Williams, Fairbanks North Star Borough’s Chief of staff, the settlements are about to expire.

“Where we’re at now is the whole valuation of the pipeline, we’re just kind of aware that that agreement’s about to turn into a pumpkin.”

Tonight, The Borough Attorney’s office will make a public presentation on the expiration of the settlement agreement. Then the Assembly will very likely go into an executive session to hear any strategies for a new assessment for 2021.

“What’s about to happen with the state Oil and Gas Assessor, and if they want to go into executive session to give us any special instructions, we’ll do that.”

None of the parties are publicly talking about any litigation at this early stage. But parties must agree on the state assessor’s method for determining value.

It’s unknown how the decline of world-wide oil prices might affect the value of the structure.

According to the Alaska Journal of Commerce, the pipeline cost $8 billion to build in 1977 and was the world’s largest privately-funded construction project at that time.

TAPS owners & percentages as of January, 2019:

  • BP Pipelines (Alaska), Inc. 48.441%
  • ConocoPhillips Transportation Alaska, Inc. 29.2086%
  • ExxonMobil Pipeline Company 20.9943%
  • Unocal Pipeline Company 1.3561%