A 9-year-old tax dispute between Montezuma County and Kinder Morgan has landed in the lap of the Colorado Supreme Court.
The convoluted case revolves around assessed values of the company’s carbon dioxide production within the county and whether tax laws were properly applied.
The case is expected to take up to a year before a ruling.
The tax dispute has a long history.
In 2008, then-county assessor Mark Vanderpool audited the energy company’s reported 2007 production values and disallowed them a transportation tariff deduction involving the Cortez Pipeline that delivers the carbon dioxide.
Vanderpool and an independent auditor determined Kinder Morgan was a 51 percent majority owner of the Cortez Pipeline, and therefore could not claim the transportation tariff deduction because they were a “related party.”
Without the tariff deduction, the company’s assessed valuation increased by $56.7 million, and it owed an additional $2 million in property taxes for 2008.
Kinder Morgan paid the higher tax bill but appealed to the Montezuma County Board of Assessment Appeals (BAA), which upheld the county’s assessed valuation and agreed the firm did not qualify for the tariff deduction.
Kinder Morgan, the nation’s fourth-largest energy company, appealed that decision to the Colorado Court of Appeals, arguing that the retroactive valuation is not authorized by state statute.
In January 2015, Kinder Morgan was awarded a short-lived victory when the Appeals Court ruled in its favor.
The BAA decision was reversed, and the court stated the board “erred in concluding that the statutory scheme allows for retroactive taxation based on the undervaluation of oil and gas leaseholds.”
Dismayed, the county requested a re-hearing – a long shot – but to its delight, it was granted, and on June 4, 2015, the Appeals Court reversed its own decision and ruled in favor of Montezuma County.
“It’s been a lot of up and down,” said county assessor Scott Davis.
“It could be another year before a final decision is made by the Supreme Court, and there will be no more appeals.”
The county has spent $138,000 in legal costs, he said.
The $2 million tax windfall was distributed to various special districts within the Kinder Morgan production area in 2008. Those districts were instructed by the county assessor’s office to not spend the money pending the outcome of the case.
“If we lose, they would have to pay the money back,” Davis said.
The largest beneficiary of the increased tax collection was the Montezuma-Cortez School District Re-1, which reaped $942,000 in 2008.
