Taxing opportunity: Assessors eye La. salt caverns as revenue source

Some Louisiana parishes with salt dome caverns are following Assumption Parish’s lead in trying to bring the massive man-made cavities carved from the giant deposits of salt onto their tax rolls — a move that could result in millions of dollars in tax revenue for the local governments.

Ascension Parish Assessor M.J. “Mert” Smiley Jr. has been taking procedural steps the past few weeks to hire the same auditing firm that helped Assumption Parish Assessor Wayne “Cat” Blanchard identify and value dozens of unreported or undervalued caverns and infrastructure last year in the Napoleonville Dome.

Smiley has been asking Ascension Parish taxing jurisdictions to share in the cost of hiring Pritchard and Abbott Inc., of Texas, to value caverns in the parish.

“Right now they’re paying no taxes, and there’s a considerable windfall that will be made for that, and so we need professional help,” Smiley told the Ascension Parish Council last month.

Sheriff Jeff Wiley, the parish library, School Board and municipalities of Sorrento and Donaldsonville have all agreed to chip in to hire Pritchard and Abbott, Smiley has said.

The Parish Council failed to consider the request for lack of a motion last month but plans to take up it again this month.

Assumption’s assessor, Blanchard, and parish Sheriff Mike Waguespack have said formation of the Bayou Corne-area sinkhole in August 2012 brought to light unreported caverns in the 1-mile-by-3-mile salt dome.

Scientists think the side wall of one of the 53 caverns in the salt dome partially collapsed and caused the sinkhole.

Blanchard, Waguespack and the companies that own the caverns are in a legal fight over whether the taxes were assessed properly. But, after a court ruling last month, the companies had to pay $15.5 million in back taxes under protest. The companies were billed for taxes between 2010 and 2013. The last of the taxes were paid Feb. 24 and placed in escrow, Waguespack said.

Caverns like those in the Sorrento and Napoleonville domes play an important part in supplying the state’s petrochemical industry with salt, a basic building block in plastics, as well as storing other feed stocks for industry.

Smiley and his chief deputy, Justin Champlin, can’t say yet how much the unreported caverns are worth or how much tax revenue they would generate, but they said the caverns’ values can range from a few million to tens of million each, even approaching $100 million.

Champlin said the Ascension Parish caverns, some of which predate 1970, have not been on the rolls in at least 10 years.

Smiley has said he wants the caverns on the 2014 rolls but does not plan to pursue taxes from prior years.

The director of mineral appraisal for Pritchard and Abbott, Rodney Kret, said news about the sinkhole, Assumption Parish’s experience with its caverns and a discussion last summer before the Louisiana Tax Commission about salt dome caverns have all worked to pique interest.

“There have been several other parishes that have come to us and asked us for some idea of the nature of the property and what it would take to get them on the rolls,” he said.

Kret said his company has six parishes under contract and three more in discussions, including Ascension Parish, to look at salt caverns and related improvements.

“We have not been soliciting business in that regard. The parishes have been coming with us,” he added.

Kret said he thinks the salt dome issue “is gathering steam day by day” and he expects to get a better idea about it during a planned discussion at the Louisiana Assessors’ Association’s annual conference in New Orleans later this month.

Champlin said 10 of the 14 parishes in Louisiana with salt dome caverns have them on their rolls and the remaining are looking at the issue.

According to the state Office of Conservation, Ascension Parish has two salt domes: the Darrow and Sorrento domes.

The Darrow Dome, which is near Darrow and the Mississippi River, has four caverns owned by BASF. All have been plugged since 1985, online Conservation records show.

The Sorrento Dome, which is in the McElroy Swamp east of Interstate 10 and Airline Highway, has 23 caverns.

All but three of the active caverns are used for storage of natural gas, liquefied petroleum products and other materials, online Conservation records show. The other three are used to produce brine.

The caverns are owned by ExxonMobil Pipeline Co., Shell Pipeline Co. LP, Motiva Enterprises LLC, Bridgeline Holdings LP, which is owned by Chevron, and Chevron Pipe Line Co.

The legal fight in Assumption Parish is over whether the man-made caverns, which are mined from salt with millions and millions of gallons of freshwater, should be defined as land or commercial improvements.

The distinction has significance in how much tax companies pay and whose responsibility it is to report and value them: the assessor or the companies.

Assessors assess land. Companies report commercial improvements voluntarily. Commercial improvements result in a one-third larger tax bill than assets defined as land.

Blanchard contends the caverns are commercial improvements that were not reported. The companies say they are land.

Dow Hydrocarbons Resources, which has several salt dome caverns in Assumption Parish, contends it has paid its taxes on time and reported its assets under the law.

“What is in dispute is the classification and value of certain Dow assets,” said Stacey Chiasson, Dow spokeswoman.

Recent court rulings have favored Blanchard’s position, and Kret said other states treat caverns as commercial improvements.

A spokesman for the Louisiana Chemical Association, Greg Bowser, declined comment citing the Assumption litigation.

Chevron did not respond to a request for comment, while Destin Singleton, spokeswoman for Shell and Shell-partnership Motiva, said it was too soon to comment.

ExxonMobil spokesman Todd Spitler said his company “will comply with the laws and regulations of the state of Louisiana and the communities where we operate.”

Advocate staff reporter Ellyn Couvillion and Advocate freelance writer Aaron Looney contributed to this story.