Montezuma County’s assessor Mark Vanderpool deserves praise for challenging the calculations that Kinder Morgan applied to its 2008 tax bill to reduce the amount it owed by about $2 million. His efforts were validated by Colorado’s Board of Assessment Appeals in a decision announced two weeks ago, and as a result the county will be able to retain the approximately $2 million in additional tax that Kinder Morgan paid on the value of the carbon dioxide that it sent to Texas that year.
Vanderpool, working with a outside specialist in gas and oil valuation and taxation, argued that Kinder Morgan – in order to reduce the well head value of the carbon dioxide – had wrongly claimed as an expense a tariff it paid the pipeline company that carried the gas to Texas. That pipeline company, Cortez Pipeline, is largely owned by Kinder Morgan, the assessor’s office claimed, and thus no tariff payment was warranted.
Disallowing the tariff increased the well head price of the CO2, adding about $2 million in taxes.
Gas and oil companies are able to subtract gathering, processing and transportation costs to the point where the gas is priced, in this case Texas, in order to arrive at the well head price that is subject to taxation. Kinder Morgan had gone one step further by claiming the cost of a tariff to use the pipeline, which it claimed was a separate company.
The $2 million represented about 15 percent of Kinder Morgan’s total tax bill in the county in 2008, according to Vanderpool.
Kinder Morgan can appeal the Board of Assessment Appeals’ decision to the Colorado Court of Appeals. The company has until early December to do that.
Vanderpool’s auditing of Kinder Morgan began in 2008, and included a two-person staff trip to Houston to review the energy company’s books. Vanderpool, who was elected assessor in 2002 and is term-limited a year from now, said the support of the county commissioners in 2008 and through the slow-moving court processes has been critical. They supported his hiring of the gas and oil valuation expert and an attorney with similar strengthens with energy issues.
With the Appeals Board’s decision, Vanderpool said that his office is now poised to audit Kinder Morgan’s 2009-13 tax calculations. Kinder Morgan applied a tariff in those years as well, Vanderpool said. How the additional tax amount for those years could compare to 2008 is uncertain, he said, as the volume of gas shipped has likely grown in the interim. Kinder Morgan has added wells in the intervening years.
Kinder Morgan’s CO2 extraction is a significant portion Montezuma County’s tax base, and how to account for its value for taxation purposes can be a challenge. There can be differing interpretations of the statutes. But, the Board of Assessment Appeals’ decision in support of Montezuma County is significant, affirming that the assessor’s office has been on the right track in its claim.
