High court to hear Valdez tax case

Posted: Wednesday, February 18, 2009

ANCHORAGE - The city of Valdez and an oil tanker operator will face off before the U.S. Supreme Court over the city's right to assess property taxes on ships coming to Valdez to pick up cargo.

The stakes are high for this town of 4,500 residents who rely on the money to fund government services and schools.

The city and Polar Tankers Inc. will take their arguments before Supreme Court justices April 1, about one year after an Alaska Supreme Court ruling favored Valdez.

Polar, which operates five double-hulled tankers for parent company Conoco Phillips, appealed to the high court and the justices agreed to hear the case in December.

Tanker operators such as BP, Exxon Mobil and Tesoro already have long-term settlements on the tax with Valdez.

But Houston-based ConocoPhillips has paid the tax under protest for several years while pushing their legal arguments to kill it.

Company spokesman Bill Tanner said he could not comment on the case.

Valdez sits at the southern terminus of the trans-Alaska oil pipeline.

The town started taxing tankers and other large vessels in 2000 so it could offset declining property tax revenue from depreciating Alyeska oil storage and loading complex.

Lawyers for Polar Tankers argue against the tax on several constitutional and fairness grounds, according to court filings.

The tax violates the Constitution's "tonnage clause." This "bars state and local governments from taxing the privilege of using ports and harbors."

The Valdez tax discriminates because it's aimed at essentially one vessel type - oil tankers - as well as tugs and other vessels that escort or assist the tankers, Polar's lawyers write.

The tax applies to vessels that are more than 95 feet long; it also exempts large commercial fishing boats. The tax pushes the cost of commerce essential to people in other states, Polar's lawyers write.

But Valdez lawyers argue that the tax does not violate the tonnage clause because it is not truly a tonnage duty, which taxes vessels, based on its tonnage, for entering or leaving a port.

The city's lawyers contend the tax is "an unremarkable property tax," and is based on the vessel's market value. It's tempered and in line with the number of days the ship spends in port.

They claim the tax to be minor because Polar Tankers have paid "well under $2 million in the tax years at issue on vessels worth hundreds of millions of dollars, carrying cargo worth billions of dollars."

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