An organization formed to protect the interests of smallshare carbon-dioxide owners has filed a lawsuit against Montezuma County claiming overtaxation.
The complex case is a spinoff of a Colorado Supreme Court case decided in 2017 that ruled Kinder Morgan LLC underreported its taxable carbon-dioxide property value, and therefore owed back taxes to the county.
That court ruled then that Kinder Morgan did not qualify for a transportation deduction on its property tax filings because the company is a majority owner, or “related party,” in the Cortez Pipeline that delivers the gas.
Without the deduction, Kinder Morgan’s taxable assessed valuation increased for years 2009 to 2017, which amounts to millions of dollars owed in back taxes to the county.
But CO2 Committee Inc. – formed in 2002 to oversee 150 small-share interests – claims in a civil lawsuit filed against the county that the Colorado Supreme Court tax decision against Kinder Morgan does not apply to them.
The county filed a motion to dismiss, saying the issue has been decided by the Colorado Supreme Court. Oral arguments were presented during a hearing April 12 in front of District Court Judge Todd Plewe.
The CO2 Committee’s attorney, John Cogswell, argued the 150 fractional interest owners they represent are not a “related party” to the Cortez Pipeline, and therefore do qualify for the transportation deduction.
By stripping an allowable deduction, the county is overtaxing the small carbon-dioxide owner, he said.
The small shareholder “did not under-report value” because they qualify for the transportation deduction, Cogswell said. “The retroactive assessment is only if under reporting.”
Each carbon-dioxide interest owner is liable for a portion of the property tax, which can affect royalty payments.
The lawsuit further claims defendants were denied due process because they were not given notice by the county of the higher assessed valuation to be applied retroactively.
In the motion to dismiss, county attorney John Brutard argued the CO2 Committee lawsuit claims are not valid because the issue has already been decided by the Colorado Supreme Court.
“Kinder Morgan tried to use unrelated methodology to reduce their tax bill; it’s the same thing the plaintiff wants in this case,” he said.
The county says notice to all the smaller carbon-dioxide interest owners was not necessary because under state tax statute Kinder Morgan is the responsible entity for paying all the taxes on behalf of all other interest owners in the McElmo Dome Unit, and Kinder Morgan is the entity with the right to seek abatement.
The Supreme Court decision does apply to the smaller carbon-dioxide owners, Brutard said.
During the Kinder Morgan case against the county, the company made the same argument – that other interest holders were not related to Cortez Pipeline and therefore qualified for the deduction.
But by ruling in favor the county, the county says that argument was rejected by the Court of Appeals and the Colorado Supreme Court.
“There is the previous final judgment,” Brutard said.
Plewe stated April 12 he would make a decision on the county’s motion in a month.