{"id":9,"date":"2026-05-14T13:37:34","date_gmt":"2026-05-14T13:37:34","guid":{"rendered":"https:\/\/movingtoalaskausa.com\/?p=9"},"modified":"2026-05-14T13:37:34","modified_gmt":"2026-05-14T13:37:34","slug":"after-10-year-truce-a-major-tax-dispute-looms-over-the-trans-alaska-pipeline-system-2","status":"publish","type":"post","link":"https:\/\/movingtoalaskausa.com\/?p=9","title":{"rendered":"After 10-year truce, a major tax dispute looms over the trans-Alaska pipeline system"},"content":{"rendered":"
\n

Is the value of the trans-Alaska pipeline system $2.8 billion, or $10.3 billion? Or is it $20 billion?<\/p>\n

Read more After 10-year truce, a major tax dispute looms over the trans-Alaska pipeline system<\/a><\/p>\n

This week, a state review board will hold a formal hearing to determine which figure is the right one \u2014\u00a0with major financial implications for state government and the three municipalities along the pipeline system\u2019s route.<\/p>\n

At stake are hundreds of millions of dollars in property taxes, equal to 2% of the pipeline system\u2019s value, that its oil company owners could owe each year to the state,\u00a0the North Slope and Fairbanks boroughs and the city of Valdez.<\/p>\n

The pipeline\u2019s value had been set at $8 billion by a five-year settlement reached in 2016<\/u>, which the parties extended through the end of 2025. But before that, the municipalities and the system\u2019s owners spent a decade feuding over annual assessments in the courts\u00a0\u2014 with appeals to the Alaska Supreme Court and one trial that lasted more than two months. <\/p>\n

The pipeline system property taxes, in past years, have represented more than half of Valdez\u2019s regular recurring revenue, according to city budget documents, as well as a significant contribution to the state\u2019s yearly unrestricted revenues.<\/p>\n

A decision setting the system\u2019s value at the municipalities\u2019 preferred value of at least $20.083 billion would result in pipeline ownerspaying at least $400 million a year in property taxes\u00a0\u2014 compared to the $56 million that would be owed if the value is set at $2.8 billion, the value favored by the owners.<\/p>\n

This week\u2019s hearing, before the governor-appointed State Assessment Review Board, is unlikely to be the last word on the matter. While the board can consider arguments from all sides, its decisions are ultimately appealable to the courts.<\/p>\n

The pipeline system\u2019s owners include affiliates of ConocoPhillips, ExxonMobil and Hilcorp,\u00a0the North Slope\u2019s major oil-producing companies.<\/p>\n

With the expiration of the settlement at the end of 2025, the state Department of Revenue\u2019s assessment for 2026 \u2014\u00a0based on the estimated cost to replace the system, minus depreciation \u2014 actually boosted the pipeline system\u2019s value from the settled figure, to $10.3 billion.<\/p>\n

Discussions had been underway about a new settlement, Fairbanks finance officials wrote in a letter to borough policymakers<\/u> in January. But no such deal has been announced.<\/p>\n

A spokesperson for Alyeska Pipeline Service Co., which operates the pipeline system for the owners, declined to comment on those companies\u2019 behalf, citing the pending review by the state board. A spokesperson for the Department of Revenue also declined to comment.<\/p>\n

Robin Brena, a longtime Alaska attorney who for decades has represented the municipalities in their fights over the pipeline system\u2019s value, said he hopes that the parties can mediate their differences and strike a new agreement.<\/p>\n

He stressed that historically, the pipeline system\u2019s owners have argued for aggressively low valuations of the property that the courts have rejected. In 2006, the owners argued for an $850 million valuation<\/u>, before the Alaska Supreme Court ultimately affirmed<\/u> a lower court judge\u2019s ruling that the value was actually $9.98 billion.<\/p>\n

Brena\u2019s clients, the municipalities, wrote in their recent appeal<\/u> to the board that the state revenue department made a legal mistake in its $10.3 billion valuation by ignoring updated estimates from the municipalities that say replacing the pipeline system today would cost some $40 billion.<\/p>\n

Instead, the municipalities say, the state relied on a court decision that set the 2009 replacement cost of the system at $19.1 billion, then made inflation adjustments to produced a 2026 replacement cost of $28.6 billion.<\/p>\n

The courts and the state assessment board have preferred new cost estimates to inflation adjustments, the municipalities said, because they better capture updates in the pipeline system\u2019s designs and allow mistakes to be corrected.<\/p>\n

A second major error by the revenue department, the municipalities said, was that it used an inappropriate new technique to calculate depreciation: comparing the current flow of oil through the pipeline system, some 460,000 barrels a day, to its peak flow of 2 million barrels, which came in the late 1980s.<\/p>\n

That depreciation technique, the municipalities argued, ignores legal precedent that says the calculation should account for the quantity of oil not just actively flowing from, but also available for future production at, Alaska\u2019s big oil fields\u00a0\u2014\u00a0a figure known as proven reserves.<\/p>\n

A calculation based only on current production neglects the value contained in two huge new oil fields, Willow and Pikka, that are still under construction, according to Brena. Those fields are set to help boost the daily flow through the pipeline system to some 650,000 barrels at a new peak in 2034, according to state projections<\/u>.<\/p>\n

\u201cThe department\u2019s calculation completely ignores proven reserves that are not in production,\u201d Brena said.<\/p>\n

The oil companies, meanwhile, say in their appeal<\/u> that the pipeline system is a \u201cdepreciating asset\u201d with a value that declines each year. The state, they say, is now proposing to assess a higher value for the pipeline than the $9.25 billion the Alaska Supreme Court affirmed for the 2009 tax year.<\/p>\n

\u201cIt is fundamentally unreasonable to conclude that a pipeline that is now 17 years older \u2014\u00a0with 17 fewer years of proven reserves to transport and 17 years of additional depreciation \u2014\u00a0has an assessed value significantly greater than the value assessed in tax year 2009,\u201d the oil companies wrote.<\/p>\n

The companies also say that the state\u2019s assessment fails to account for \u201coperational and economic realities\u201d of the pipeline system\u00a0\u2014 including that the flow of oil is eventually projected to resume its longstanding decline after a \u201cshort-term spike.\u201d<\/p>\n

The revenue department, the companies said, also ignored the companies\u2019 own \u201ccomprehensive\u201d report on the pipeline system\u2019s replacement cost that they shared for the 2026 tax year.<\/p>\n

\u201cThe owners furnished the department with a significant volume of information relevant to the proper assessment of the subject property,\u201d the companies said. \u201cThe department\u2019s assessment ignores all of it in favor of reliance on a 17-year-old appraisal report that is outdated, unsupportable, and fundamentally flawed.\u201d<\/p>\n

The board\u2019s hearing on the pipeline system\u2019s value is set to begin Wednesday and finish by the end of the week. Decisions are expected within seven days afterward, according to the board\u2019s support staff.<\/p>\n

Nathaniel Herz welcomes tips at [email\u00a0protected] or (907) 793-0312. This <\/span><\/i>article<\/span><\/i> was originally published in Northern Journal, a newsletter from Herz. Subscribe at this <\/span><\/i>link<\/span><\/i>.<\/span><\/i><\/p>\n<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

This week, a state review board will hold a formal hearing to determine the value of the trans-Alaska pipeline system.<\/p>\n","protected":false},"author":1,"featured_media":7,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-9","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-interesting"],"yoast_head":"\nAfter 10-year truce, a major tax dispute looms over the trans-Alaska pipeline system - Moving to Alaska<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/movingtoalaskausa.com\/?p=9\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"After 10-year truce, a major tax dispute looms over the trans-Alaska pipeline system - 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