Montezuma County Assessor Mark Vanderpool on Monday asked the Montezuma County Commission to hire a specialty attorney to represent the county in a $2.02 million property tax appeal.
Kinder Morgan earlier had appealed the assessors audit that resulted in a tax increase of $2.02 million in 2008. The commissioners rejected a tax abatement, or initial appeal, for the CO2 producer in February after a compromise couldnt be reached.
Ive tried to make sure the oil and gas taxpayers are held to the same standard as other taxpayers, Vanderpool said Monday, prior to making his request.
The taxes have already been collected (see chart). Some $779,696 were paid to four county governmental departments: General Fund, Road and Bridge, Social Services and Law Enforcement.
Following Vanderpools request, County Attorney Bob Slough recommended the county hire an expert attorney in oil and gas to handle the appeal. Vanderpool said he hopes the county commissioners reach a decision on hiring a specialty attorney by early October. Vanderpool said hes talked to an oil and gas attorney in Denver, but declined to name that person at this time.
Kinder Morgan produces the CO2, or carbon dioxide, from the McElmo Dome and ships it to west Texas, where it is injected into old oil wells in a process called tertiary recovery. The process is designed to get the old wells to produce more oil.
Kinder Morgans second appeal will be heard in early February, said Kinder Morgan Tax Manager Walker Knight. Knight declined further comment.
Weve not had much success in the (Board of Assessment) appeals, Commissioner Gerald Koppenhafer said during Mondays meeting. Any decision by the Board of Assessment Appeals could be appealed to the state Court of Appeals, and ultimately to the state Supreme Court.
Weve not had good luck on Board of Assessment appeals in regard to oil and gas, but on other matters (such as agricultural), weve won way more than weve lost, Vanderpool said.
In regard to a question from the commission, Vanderpool said the cost to hire an attorney would be around $100,000. In essence, the county would be spending $100,000 to save $2 million in local tax revenue. The appeal would likely impact future tax assessments.
This is the first tax assessment that Kinder Morgan has appealed in his 10 years in office, Vanderpool said. It followed an audit of its gas production by the county.
Its a complicated case, Vanderpool said. The net value of the product was higher than they reported, and some of the expenses they claimed (for transporting the product to Texas) should not have been allowed.
In February, the Cortez Journal reported that Knight maintained that, considering the costs of transportation and shipping the carbon dioxide via the Cortez pipeline, they should be allowed a tariff, which would have doubled the companys operational expenses of $48 million.
On Monday, Vanderpool said that Kinder Morgan should only be able to deduct for actual transportation expenses since it and its partner Exxon Mobil own a majority of the Cortez pipeline.
Vanderpool noted that any increase in the local property taxes Kinder Morgan pays would be largely offset by an 87-percent deduction on its state severance taxes.
More money needed for computers
In an unrelated matter, Vanderpool told the commissioners the assessors office needs six new computers. The request came as part of Vanderpools 2013 budget presentation. The computers would cost $4,000.
Vanderpool said the six computers in question are seven years old. It takes two to three minutes to open an email, he said.
The county commissioners historically act on departmental budget requests in December.