In a whirlwind vote, the Louisiana Tax Commission swiftly declined Tuesday to make rule changes that could cost the oil and gas industry untold dollars.
The decision, while good news for industry, angered a southeast Louisiana assessor, who accused the commission of bending to political will. Plaquemines Parish Assessor Robert Gravolet, who led the negotiations on behalf of assessors in oil- and gas-producing parishes, seemed to know ahead of time how the commission would act. Gravolet read from typewritten remarks.
At issue was whether to start using the actual age of all surface equipment rather than using the age of wells serviced by the equipment in determining depreciation. The proposed change was one of several items that the commission tackled in a flurry of votes with little discussion.
The oil and gas industry argued that it would cost millions of dollars to determine the age of equipment attached to thousands of oil and gas wells. Parish assessors countered that industry is shrinking its tax bills by relying on rules that allow surface equipment to be undervalued.
The Louisiana Assessors’ Association said the difference in tax dollars could be as much as $257,025.88 in Plaquemines Parish alone. The total represents what the assessor claims he could not collect from the oil and gas industry because of the current wording in rules and regulations.
Two tax commission members sided with the assessors. However, three other members — including the chairman and a former state legislator — voted against any change to the surface equipment rule.
Sitting in the audience at the State Capitol, Gravolet shook his head at the decision and then rose to his feet. Gravolet took a seat at the witness table and leveled charges of political influence.
Gravolet said the commissioners, who are appointed by the governor, do not want to make proper tax adjustments because Gov. Bobby Jindal opposes tax increases. He characterized the panel as the “Jindal Tax Commission.”
“No other chairman and tax commission in my 33-year history have disregarded the principles of (fair market value) more when it comes to fairness in terms of balance between our state’s taxing bodies and industry regarding oil and gas rules and regulations. Other commissions were more independent and strong enough to not allow outside political pressure to totally intimidate them,” Gravolet said.
Gravolet, who is chairman of the Louisiana Assessors’ Association Oil and Gas Committee, threatened possible legal action.
The commission’s chairman, Pete Peters, told Gravolet that he can go to oil and gas companies and ask for the necessary information. He denied bowing to political pressure.
“(I) hadn’t had any pressure from the Governor’s Office or any of those people in any direction, and I know you think that’s not true, but it is, and I want you and your fellow assessors to know that. ... I think you’d rather come here and badger,” Peters said.
Another tax commission member, former state Rep. Kay Katz, started to make a comment at one point and then simply asked how much more time Gravolet needed.
Afterward, Katz — who voted against the rule change — said Gravolet needs to be more polite when he disagrees with someone.
“I wasn’t influenced in my vote. I didn’t have phone calls. I’m cautious about making changes,” she said.
Peters said assessors need to ask taxpayers for the best information available. If a company discounted a $300,000 compressor, then the assessor needs to make the call on what to do about that, he said.
The tax commission added: “Anytime the actual age of a piece of equipment is different from the well, and that age is known, the assessor should know that he can and should use the actual age to determine the appropriate depreciation.”
As he headed out of the State Capitol, Gravolet applied dollars to his quest for a rule change. He said a company might put $1 million in equipment on an 18-year-old well. Under the current rules, he said, it’s only valued at $200,000 because the well is so old.
Gravolet said it is good news that Peters advised him to seek the best information from oil and gas companies. He said he took that to mean he can pursue details about the surface equipment.
Don Briggs, president of the Louisiana Oil and Gas Association, said there are 27,000 wells in Louisiana. Determining the age of equipment would mean visiting every well, scraping the paint off and researching serial numbers, he said.
Briggs disputed that the oil and gas industry pulls out all the bells and whistles when a piece of equipment breaks on an old well. He said the part is most likely to be replaced with used or refurbished equipment.
“We don’t put $1 million on an old well. We put $1 million on a new well,” he said.