FAIRBANKS — The assembly approved a settlement Thursday between the borough and its biggest taxpayer, the owners of the trans-Alaska oil pipeline.
The agreement puts the pipeline’s tax value at $8 billion through 2020, and all pending litigation gets dismissed.
If approved by the city of Valdez — the North Slope Borough Assembly OK’d the agreement on Tuesday — the settlement would end 10 years of litigation over how much the oil producers should pay in property taxes on the Trans-Alaska Pipeline System. The 800-mile long TAPS traverses the three municipalities.
“I don’t believe that this represents the true value, but I do think that this is the best step at this time,” said Kathryn Dodge, deputy presiding officer of the Fairbanks North Star Borough Assembly.
John Boyle, North Slope Borough spokesman, said his municipality’s assembly approved a resolution on Tuesday authorizing their mayor to enter into the settlement agreement.
Valdez City Clerk Sheri L. Pierce issued this statement via email on Wednesday: “The City of Valdez is currently in negotiations regarding settlement related to the pipeline tax value and has no comment at this time.”
The two other municipalities have extra legal issues with the state that are tied up in the pipeline litigation.
“That was the issue that blew up the last settlement,” Fairbanks Borough Attorney Rene Broker said. “This deal won’t go through if they can’t reach agreement.”
Broker said the two municipalities disagree with a state statute that limits the tax revenue they can collect from oil and gas property based on their respective populations.
The litigation has cost the borough millions yet netted even more money after state courts ruled in favor of the municipalities.
Multiple cases for various tax years are at different levels of the Alaska Court System. All of them would be dropped if the settlement goes through.
A borough spreadsheet shows there has been a wide gap between the pipeline owners — BP, ConocoPhillips, ExxonMobil and Unocal Pipeline Company — and the municipalities as far as the tax value of TAPS.
At one point, oil producers suggested a pipeline value as low as $800,000 million, and the municipalities have asked for as much as $15.47 billion.
The chief financial officer for the Alaska Gasoline Port Authority, Merrick Peirce, said the settlement establishes two tiers of taxpayers. He testified to the assembly about the agreement, encouraging them to keep fighting the oil companies.
One tier, Peirce said, is the regular people who pay taxes based on the fair market value of their property. The other tier is the oil industry, he said, who would pay taxes based on a pipeline value that is much lower than fair market value.
Borough Mayor Karl Kassel told the assembly that he thinks an $8 billion tax value is the best deal the borough can get.
“If the decision is try to settle for more, it won’t happen. I am confident of that,” Kassel said.
The assembly went into executive session to continue discussing the case before voting in public.
Assembly members who commented on the agreement said they think $8 billion is too low for a tax value of the pipeline. Yet they voted to settle to stop the fighting in court and gain some certainty as far as tax revenues in the coming years.
The borough collects roughly $1 million for every billion of the pipeline’s tax value. Fluctuations with how much is paid on the pipeline impacts how much everyone else pays in property taxes.
“To lock it in seems like the most prudent thing to do,” said John Davies, presiding officer of the assembly.
Contact staff writer Amanda Bohman at 459-7587. Follow her on Twitter at twitter.com/FDNMborough.