Statoil Wants Money Back From Local West Virginia Counties

From an Article by Casey Junkins, Wheeling Intelligencer, July 17, 2016

Wheeling,WV — Norwegian shale driller Statoil wants officials in Ohio, Brooke, Wetzel and Marshall counties to refund nearly $6.5 million worth of property tax the company claims it overpaid, but local leaders believe they are under no obligation to return the money.

Marshall County commissioners already denied Statoil’s refund request of $342,000, while commissioners in Ohio County rejected the firm’s claim that it should regain $2.9 million. Commissioners in Wetzel County are still considering whether to refund $1.4 million to Statoil, while Brooke County commissioners are scheduled to hear from the company on Monday about its request for $1.8 million to be returned.

Brooke County Assessor Tom Oughton hopes commissioners deny Statoil’s request, as he said the West Virginia State Tax Department does not require any refund to the company under the circumstances.

“Statoil had plenty of chances to figure this out. They dropped the ball,” Oughton said.

Statoil began operating Marcellus Shale wells in the Northern Panhandle as a minority-interest partner with Chesapeake Energy approximately six years ago.

In Ohio County, Chesapeake owned 71 percent of each operation, with Statoil holding 29 percent. Statoil reduced its interest in local wells to 23 percent upon Chesapeake’s $5 billion sale of its assets to Southwestern Energy in late 2014.

“Statoil USA Onshore Properties filed an exoneration motion in four West Virginia counties, Brooke, Wetzel, Marshall and Ohio, to request a refund for the 2015 property taxes. We are awaiting decisions on the hearings from Brooke and Wetzel counties. Marshall County and Ohio County have denied the request for refund and we are considering our appeal rights,” company spokeswoman Lauren Shane said.

“We maintain that this was a clerical error,” Shane continued. “The clerical error stems from over-reporting of revenue data for tax year 2015.”

However, Northern Panhandle officials do not believe Statoil’s action fits the definition of an unintentional clerical error.

“Statoil sought an exoneration for reduction in tax assessment based upon their failure to properly document various values of the oil and natural gas assets,” Ohio County Solicitor Don Tennant said. “They have to prove it was a clerical error that was unintentional. The commission believes they failed to prove that.”

“It was pure neglect on their part, as far as I could see,” Ohio County Commissioner Orphy Klempa said. Tennant said because the $2.9 million overpaid is property tax money, most of the funding goes toward public education.

In Wetzel County, Statoil is only one of numerous frackers producing oil and natural gas from the Marcellus and Utica shales. However, Assessor Scott Lemley and Commissioner Larry Lemon said the Norwegian driller is the only one asking for money to be refunded.

“The State Tax Department is not changing the value they have set on their working interest in Wetzel County,” Lemley said. “We are just following the law.” “We held a hearing on this June 14. We are still deliberating,” Lemon added. “We hope to make a decision soon.”

Shane said Statoil is considering steps to appeal the unfavorable decisions at the county level. Tennant said the company could appeal to circuit court and, ultimately, to the West Virginia Supreme Court of Appeals if it chooses to do so.

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Wetzel Commission Denies Tax Break to Statoil

From an Article by Chad Turner, Wetzel Chronicle, August 3, 2016

At its Tuesday, July 26 meeting, the Wetzel County Commission denied Statoil’s request of $1,640,104.32 that it claims it overpaid the county in property tax. Wwtzel is one of four local counties that Statoil claims it overpaid.

Previously, Statoil spokeswoman Lauren Shane released the following statement: “Statoil USA Onshore Properties filed an exoneration motion in four West Virginia counties, Brooke, Wetzel, Marshall and Ohio, to request a refund for the 2015 property taxes. We are awaiting decisions on the hearings from Brooke and Wetzel counties. Marshall County and Ohio County have denied the request for refund and we are considering our appeal rights.”

“We maintain that this was a clerical error,” Shane said. “The clerical error stems from over-reporting of revenue data for tax year 2015.”

Wetzel County Assessor Scott Lemley previously stated that Statoil received notice that their values were going up on their wells. Statoil paid the 2015 tax bill but is now claiming they overstated the revenues that they received off the wells.

Lemley noted that Statoil should have realized they overstated their revenues when they received their increase notice.

All stakeholders have been given the opportunity to present witnesses, introduce exhibits, and address the county commission with their respective arguments. After careful deliberation, the commission made the following findings:

1) The taxpayer failed to meet their burden of proof that the assessment was a clerical error as the taxpayer presented testimony from only one witness who lacked personal knowledge of the manner in which the error was committed or the procedures in place to supervise employees and prevent such an error.

2) The evidence presented indicates that the taxpayer was negligent in failing to double check information, supervise employees responsible for providing the information and track and receipt notices sent to them regarding the assessment and respond to the same.

3) The tax payer had a duty to forward accurate information in order for the assessment to be made and negligently failed in the performance of the same.

Wetzel County Commission President Larry Lemon noted that, “essentially, the taxpayer failed to prove that the assessment was a clerical error.”

 Will the business personal property tax deter a cracker plant?

THE FOLLOWING ARTICLE IS FROM THE WEST VIRGINIA CENTER ON BUDGET & POLICY, AND IS REPRODUCED HERE IN COMPLETE FORM TO PRESERVE THE FULL MEANING AND SIGNIFICANCE OF THE ARTICLE.

A recent Charleston Daily Mail article about a proposed tax incentive designed to lure a potential “ethane cracker” to West Virginia was referenced in our last POST. The proposal would reduce the assessment rate for property taxes from 60% to 5% for the cracker facility. This would dramatically lower the facility’s property tax burden, to the tune of about $500 million over the next 25 years.

So why does West Virginia need such a large tax incentive to encourage a cracker facility to come here? According to Commerce Secretary Keith Burdette, it’s West Virginia’s dreaded business personal property tax. According to Mr. Burdette, “One tax that we aren’t automatically competitive in is personal property taxes because other states don’t have them — at least the states we are competing with don’t have them.”

As a refresher, most states have some sort of property tax, usually levied at the local level. While most states tax only real property (land and buildings), West Virginia also taxes business personal property (machinery, equipment, etc). This tax is a so-called job-killer, despite little evidence of that being the case. 

So since West Virginia taxes business personal property and other states don’t, we need to create expensive tax incentives because of that built in disadvantage, right? Well, it turns out that the disadvantage created by business personal property tax is easily cancelled out once you remember that West Virginia has incredibly low real property tax rates. 

The cracker facility has an estimated value of about $2 billion. How much of that value is real property and how much is personal property is uncertain, but statewide property tax collections show that overall, about 63.3% of business property value is real, and about 36.7% is personal (see our property tax primer). Using that ratio, our hypothetical cracker facility would have a real property value of $1.264 billion and a personal property value of $734 million.

So how uncompetitive is West Virginia? Let’s compare to one of our competitors for the cracker, Ohio. Ohio only taxes real property, applying an average tax rate on business property of $90.02 per $1000 of assessed value, which is calculated at 35% of market value. 

West Virginia taxes both real and personal property, applying an average rate of $2.87 per $100 of assessed value, which is calculated at 60% of market value.

The differences in assessment values and levying rates can make direct comparisons tricky, and its easy to assume that since West Virginia taxes both real and personal, rather than just real, that its tax burden is higher. But that is not the case, as the table below shows. 

As the Daily Mail article stated, the business community often complains about the business personal property tax, and if you only look at half of the chart you can see why. It shows the cracker facility paying $12 million in property taxes in West Virginia that it wouldn’t pay in Ohio. But if you look at the total property tax bill, West Virginia’s is lower. Why? The facility would pay an extra $18 million in real property taxes in Ohio.

How uncompetitive can the business personal property tax be when our real property taxes are almost half that of Ohio? The same is true for our other competitor for the cracker, Pennsylvania. Rates and assessments for PA were hard to come by, but on measure like property taxes per capita, as a percent of GDP, and as a percent of personal income, they were all much lower in West Virginia than in Pennsylvania, even though they don’t tax personal property there either.

So, do we really need to give away $500 million to make our property taxes more competitive? Not when you consider all property. Of course that question ignores the facts that taxes do not strongly influence business locations, low taxes don’t create economic growth, and taxes are a minor cost of doing business.