August 24, 2005
Wednesday

ANCHORAGE, Alaska - An Anchorage judge has ruled that the city of Valdez has the right to impose a property tax on tankers coming in to pick up crude oil.

But the judge indicated the city probably has overtaxed them, raising the possibility that it will owe refunds to oil companies Conoco Phillips and Exxon Mobil.

The state Supreme Court likely will have final say, as lawyers for the city and the oil companies said they might appeal.

Valdez in 2000 imposed the property tax on large vessels, particularly the tankers, as a way to raise more money to offset declining property tax collections on the Alyeska Pipeline Service Co. tanker port.

The shipping subsidiaries for the oil companies sued the city, saying a property tax on tankers merely visiting the Port of Valdez was unlawful. Since 2000, Conoco's subsidiary, Polar Tankers Inc., has been levied at least $5 million while Exxon's SeaRiver Maritime Inc. has been charged more than $3.7 million.

A third major tanker operator, BP, in 2003 struck a 10-year deal with Valdez officials to pay a reduced levy on its ships.

In a recent ruling, state Superior Court Judge Peter Michalski of Anchorage held that a tax on the ships is permissible, a victory for Valdez. But he also suggested the city's taxation formula might be exacting too steep a charge.

Lawyers for the city as well as for Conoco and Exxon professed some satisfaction with Michalski's ruling. But both indicated the fight is not over and that they could appeal to the Supreme Court.

Leon Vance, a Juneau, Alaska, attorney representing the oil companies, said he believes the ruling could result in Valdez having to make large tax refunds. He said his clients still disagree that their ships should be liable for any property tax.

"We got a fair amount of what we wanted," Vance said of the judge's ruling. "The tax does not go away, but it is reduced substantially."

He added: "It's clear there are refunds owed."

Bill Walker, Valdez city attorney, said that while the tanker tax might need some tinkering, the city isn't on the hook for millions in refunds.

The most important thing is that the judge upheld the tax, Walker said.

"The city is very pleased," he said. "It's a significant decision."

Valdez can use tax collections on tankers, tugboats and other large vessels to offset declining tax revenue from the huge, privately owned tanker port operated on behalf of several oil companies by Anchorage-based Alyeska. The value of the port has dropped by 60 percent since it was built more than 25 years ago, crimping the city budget, Valdez officials have said.

An average of about one tanker a day comes to Valdez to pick up North Slope crude oil bound for West Coast refineries. City officials argue they provide services to the shippers, including fire protection, a hospital and an airport.

For Michalski, the question was whether, and to what extent, a port city can tax visiting ships that spend only hours or days in port before going on their way.

"Earlier in our history, courts took the position that only the home port could tax vessels," Michalski wrote. "As the world has changed, so has the law. Our courts now recognize that the economic value of a vessel is in the business that it does, and that those jurisdictions within which it does business should be allowed to tax the vessel - at rates commensurate with rates paid by locals - for the proportionate period that the vessel is within the taxing jurisdiction."

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