Tax bill fails
Published 10:44 am Monday, March 31, 2008
By By Kerry Whipple Bean – publisher
County officials are disappointed that a House committee voted against a proposal to change the state's severance tax law - a law invoked in an ExxonMobil court case that could cost Escambia County $3.37 million.
While the proposed law would not necessarily affect the court case, county officials had supported the legislation because it could affect the area's revenue in the future.
Gov. Bob Riley urged residents to contact the appropriations committee members who voted against the proposal.
Escambia County Commission Chairman David Stokes said he believes the committee's action kills the bill for the current legislative session. “From what I know, for this session, it's gone,” he said.
Stokes said the Alabama Association of County Commissions was also backing the bill.
State law allows oil and gas companies to remove natural gas from state waters without paying taxes.
Last year, an administrative law judge ruled that companies like Exxon can deduct their direct and indirect costs for extracting natural gas - meaning Exxon's severance tax liability was less than zero. That same ruling ordered the state to refund a total of $41 million to Exxon - including $3.37 million from Escambia County.
Mobile, Baldwin, Jefferson and Tuscaloosa counties were also affected by the ruling, along with Dauphin Island and other cities.
The total impact to local governments is $14.32 million.
The proposed law would have changed the way the severance tax is assessed - from a value-based tax to a volume-based tax, which Sanks said would simplify the issue.
While hope for the legislation may be over for the time being, county officials are hoping that the ExxonMobile lawsuit ruling will be overturned and the county will not owe the money.
But how quickly a decision could come is not known. “We have not been advised of any movement at all,” Sanks said. “It's such a big case, we're not expecting it to move really quickly.”
In the meantime, interest is adding up on the money the county would owe. “I have no estimate as to what it could be, but it will grow,” Sanks said.