Checks, Balances and Pipeline Valuation

Sometimes you just have to sit back and admire the system of checks and balances that the Founding Fathers built in to the U.S. government. The Alaska Constitutional Convention included many of those checks and balances in Alaska’s Constitution. Because it works; the judicial branch checks and balances the folly of the executive branch, at least some of the time. And most recently in matters of property tax valuation.

Signing the U.S. Constitution

Signing the U.S. Constitution, oil on canvas, Junius Brutus Stearns (1810-1885)

WC recently noted Governor Sean “Captain Zero” Parnell’s efforts to pack the State Assessment Review Board (SARB), the administrative agency that reviews state property tax assessments of the oil industry infrastructure, including the Trans-Alaska Pipeline. By sacking the knowledgable assessor who was the chair of the SARB and appointing two oil industry employees, Captain Zero looked like he was going to do to property taxes what he did to productions taxes: multi-billion dollar giveaways to Big Oil.

The Alaska Supreme Court, last Wednesday, made that goal a little more difficult. Because the Alaska Supreme Court, in BP (Alaska), Inc. v. State, affirmed the 2006 valuation of the pipeline set by Superior Court Judge Gleason, which was the very methodology that former SARB Chair Marty McGee.

The assessed value isn’t the present value of the income from the pipeline, the Supreme Court held. After all, since Big Oil owns the pipeline, Big Oil can charge pretty much what they want, controlling the income stream and thereby the present value. Rather, the court said, the assessed value should be the replacement cost of the pipeline, less depreciation. There was some squabbling about what the amount of depreciation should be but the bottom line is this: Big Oil wanted to the assessed value to be $850 million. The municipalities wanted it to be $11.570 billion. The Alaska Supreme Court found it to be $9.98 billion. More than ten times what Big Oil wanted.

Yes, the decision is just for 2006. Big Oil has appealed every year since. But the ground rules have changed in a way that will make it harder for the SARB – even a SARB that is hand-picked by Captain Zero – to jigger the numbers.

More Than One Way to Climb on the Pipeline

More Than One Way to Climb on the Pipeline

Next, WC supposes, Captain Zero will try to pack the Alaska Supreme Court. Good luck with that. In the meantime, here’s <clink> to the Founding Fathers, who understood separation of powers and checks and balances on the power of the executive.