Pursuit started for $2M in taxes

County hires oil and gas attorney

Keywords: Poll question,

Montezuma County Commissioners on Monday hired a Denver oil and gas attorney to represent them in Kinder Morgan’s appeal of $2.02 million in taxes from 2008.

The commissioners voted unanimously to approve spending up to $125,000 for Phillip Barber.

Kinder Morgan earlier had appealed the assessor’s 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 couldn’t be reached.

County Assessor Mark Vanderpool said he doesn’t expect to have to use all of the $125,000, but wanted a cushion. Barber agreed to lower his hourly rate from $330 to $280, Vanderpool said. He also agreed to lower staff costs and not charge a retainer.

Fees for the state Board of Assessment Appeals hearing in mid-February should run between $36,800 and $77,000, with the lower end of the range more likely, Vanderpool said.

Vanderpool plans on meeting Barber during a trip to Denver on Oct. 25.

After a question from incoming commissioner Keenan Ertel, who has no opponent in general election, Vanderpool said the Board of Assessment Appeals does not award attorney’s fees. The ruling by the state board could be appealed to the state Court of Appeals.

Barber has encountered Kinder Morgan in the past and has prevailed. “He believes they know his name,” Vanderpool said.

Kinder Morgan produces 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 old wells to produce more oil.

In February, the Cortez Journal reported that Kinder Morgan’s Tax Manager Walker 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 double the company’s operational expenses of $48 million.

Vanderpool has 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.

Any increase in the local property taxes Kinder Morgan pays would be largely offset by an 87-percent deduction on its state severance taxes, Vanderpool has said.

He believes the county’s chances are good, but added, “It’s a crapshoot no matter how strong you feel.”

If the county loses the appeal, it is liable for interest on the $2.02 million at a rate of 12 percent per year. This represents at least $727,200 in interest that the county would have to pay Kinder Morgan, even though county government only received 39 percent of the tax. Other county entities received the remaining 61 percent of the tax, which Kinder Morgan already paid.

All of the entities stand to lose their portion of the $2.02 million, however.

Kinder Morgan appealed the assessment in December 2009, which would represent at least three years of interest since the hearing is in February.