Rather than proposing to change state law at the request of one company, Giessel should have held a hearing to examine the Cook Inlet natural gas quandary

I have no doubt that Sen. Cathy Giessel regrets the introduction of Senate Bill 50.

I take it as a good sign that she withdrew the week-old bill, which was written at the behest of a single gas company in Cook Inlet.

The bill came about because of Furie Operating Alaska, a small company that provides a relatively small amount of natural gas to Cook Inlet utilities. John Hendrix, the president of the company, contends his $1.6 million annual property tax bill is far too high, does not reflect what the property is worth, and the state won’t budge.

Rather than introduce a bill to change state law, Giessel should have called a public hearing on the broader tax question and allowed Hendrix as well as local governments and others who support the current tax assessment process to have their say.

Hendrix bought the company out of bankruptcy for about $20 million in 2019 and has been trying to get his taxes cut through administrative means, a court process and now the legislative process.

“In recent weeks, he has tried to find lawmakers to introduce the bill to benefit his business,” wrote Sean Maguire, who provided the best coverage of this situation in the Anchorage Daily News. The Alaska Landmine first reported on the bill and the link to Hendrix.

“After the bill was introduced last week, oil-producing municipalities leapt into action behind the scenes to kill it. Tax experts said that if the proposed changes were applied statewide, the North Slope Borough, the Kenai Peninsula Borough and the City of Valdez — and all local governments across Alaska that collect property taxes from oil and gas production — would see a significant revenue hit,” Maguire wrote.

“Giessel said Wednesday that she was approached by Hendrix to introduce the bill, which is ‘kind of typical’ in the state Capitol. She said she was unaware at the time that he was involved in a lawsuit with the state over Furie’s tax burden,” Magure wrote.

“Hendrix acknowledges that he knew Furie’s taxable value before he bought the company. But he says that the current tax rates are stifling growth and more production — and he thought the state would change them.”

Hendrix told KDLL reporter Sabine Poux last month that he thought the state would reduce his taxes because the facilities are not worth anything close to what the state assessment says they are.

“To me, naively, I thought it was a no-brainer,” Hendrix said.

The Alaska Journal of Commerce reported in 2020 that “Furie officials estimated the value of the company’s assets at between $10 million and $50 million in their initial bankruptcy filings.”

The state has contended that Kitchen Lights property is worth about $81 million.

Hendrix told Petroleum News last summer that his property tax bill is “more than four times what the IRS allowed the KLU (Kitchen Lights Unit) assets to be depreciated from.”

“How can the state turn around and value it four times more than the IRS will allow me to depreciate? And it’s been audited. This is the kind of stuff that kills you. I must pay $1.6 million every year in property taxes until this is settled.”

Even with the withdrawal of the bill by Giessel, the Senate Resources Committee should examine this matter in the context of future gas supplies from Cook Inlet and warnings of gas shortages.

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