Assessor: Cos. underreported production

Two ConocoPhillips subsidiaries owe Terrebonne Parish millions of dollars in property taxes because the companies underreported the value of production units operating in the parish, according to federal lawsuits filed on behalf of assessor Gene Bonvillain.

Lawsuits are likely against other oil and gas production companies operating in the parish who underreported the value of property they own, said Don Richard, attorney for the Metairie law firm Chehardy, Sherman, Ellis, Murray, Recile, Griffith, Stakelum & Hayes.

Louisiana Land & Exploration Company and Burlington Resources misrepresented the amount of oil and gas produced by their wells or failed to report existing production units, Richard said.

LL&E, which operates approximately 147 wells and three production units in Terrebonne, owes the parish $4.5 million, he said. Burlington, which has approximately 16 wells and four production facilities in the parish, owes $1.5 million. Both would also owe interest and penalties.

Property taxes on units operating up to three miles offshore are collected by the sheriff of Terrebonne.

Because the assessor’s office lacks sufficient staff to examine the more than 1,500 production units in the parish, oil and gas companies self-report their resources to the assessor, Richard said.

The origins of the lawsuit began around five years ago after the Louisiana Independent Oil and Gas Association successfully lobbied the state to raise the amount companies could depreciate on their production units – a move opposed by Bonvillain, Richard said.

A tax consultant hired by Bonvillain conducted a study and found that oil and gas production companies operating in Terrebonne were underreporting around $15 million in taxes they owed the parish, he said. Approximately 50 oil and gas companies are producing in Terrebonne.

“They found a lot of property underreported,” Richard said. “He (Bonvillain) saw this was big.”

Bonvillain then hired the Oklahoma-based property appraisers Visual Lease Services to assess all oil and gas production units in Terrebonne.

“He was relying on them self-reporting but he had to hire VLS because he didn’t have the manpower,” Richard said.

All producers in Terrebonne could eventually be sued, he said.

“We had to start somewhere,” Richard said. “These two companies were the most logical place.”

The amount of property tax paid by companies depends on the amount of oil and gas produced by a unit.

Non-producing units pay no tax. “Stripper” units that produce less than 10 barrels of oil a day or a set amount of natural gas per day pay less tax. Units producing over those levels pay the same amount of tax.

Companies formerly reported individual units for tax purposes. To make property assessment more manageable, in 1998 companies began reporting the output from fields of production units using a single number for an entire area.

The lawsuit seeks to collect delinquent taxes going back to 1998.

The suit alleges that LL&E and Burlington have been reporting units as non-producing that have in fact been active.

Richard’s firm is also suing two individual employees of LL&E and Burlington under fraud Racketeer Influenced and Corrupt Organization Act violations. He said a successful suit against the two individuals would triple the amount paid by Burlington and LL&E.

According to Richard, the suits will come to trial within two years in the Louisiana Eastern District courtrooms of judges Sarah Vance and Ginger Berrigan.