Clock ticking on pipeline tax appeals


By David J. Coehrs - dcoehrs@aimmediamidwest.com



Time is almost up for two natural gas pipeline companies to appeal denials by the Ohio Department of Taxation for tax decreases they say are necessary due to cost overruns.

Requests by both the NEXUS Gas Transmission and Rover pipelines for reductions in their public utility tax valuations were turned down by the state July 10. Both pipeline companies had argued in previous appeals that additional costs inflated the budgeted amounts of their projects in Ohio.

Fulton County Auditor Brett Kolb previously reported that the NEXUS pipeline has appealed its value at approximately 40% of the original determination, and the Rover pipeline at approximately half of the original determination. Had their appeals been approved, pipeline revenue for county entities would have decreased from $6.7 million to $4.1 million for NEXUS and from $3.99 million to $2.28 million for Rover.

Gary Gudmundson, a spokesperson for the Ohio Department of Taxation (ODT), declined to comment about the appeal denials.

Owned by DTE Energy and Canadian-based Enbridge Inc., NEXUS transports approximately 1.5 billion cubic feet of natural gas through 256 miles of 36-inch pipe. In Fulton County, it travels through Amboy, Fulton, and Swancreek townships.

The original $2.2 billion cost of the project ballooned to $2.6 billion due to cost overruns that included an additional $120 million in scope reduction costs to decrease the pipeline size from 42 to 36 inches.

NEXUS Gas Transmission has argued that Ohio’s tax commissioner should use the value estimated in the pipeline project’s appraisal as its true value. The company also argued that contractor costs and conditions and delays set forth by the Federal Energy Regulatory Commission helped caused the project’s cost overruns.

The Ohio portion of the pipeline constitutes approximately 83% of its entire length.

In a 30-page ruling, the Ohio Department of Taxation noted the Ohio Revised Code’s required use of the capitalized cost of taxable property reflects the pipeline’s true value.

Rover pipeline owners Blackstone Group, Energy Transfer Partners, L.P., and Traverse Midstream Partners similarly argued that additional costs are responsible for significantly inflating a budgeted project cost of $4.2 billion to $6.2 billion. The company previously asked Ohio for a reduction in true value due to its additional costs for right of way acquisition and drawing costs, among other overruns.

The ODT similarly denied the company’s appeal in a 20-page ruling.

The 713-mile Rover pipeline wends its way through Chesterfield, Franklin, German, and Dover townships in Fulton County. The 42-inch pipeline daily transports up to 3.25 billion cubic feet of natural gas.

Both pipeline companies have until Sept. 14 to appeal a final determination to the state’s Board of Tax Appeal. As of Friday morning, neither has filed the appeal.

NEXUS spokesperson Adam Parker said the pipeline company is reviewing the ODT’s final determination.

“Consistent with how individuals, homes, and businesses are taxed, our property tax assessment should reflect the accurate value of taxable tangible personal property in Ohio comprising the pipeline,”he said. “While the valuation has been under review, NEXUS has continued to make payments on the full undisputed portion of the tax bill based on the payment schedule in each county.”

Parker said the company is committed to reaching “a mutually agreeable and timely resolution.”

A Rover pipeline representative did not respond to requests for comment.

By David J. Coehrs

dcoehrs@aimmediamidwest.com

Reach David J. Coehrs at 419-335-2010.

Reach David J. Coehrs at 419-335-2010.