Attorneys continue fight for back taxes

Attorneys for Terrebonne Parish’s assessor are digging in for a long fight as no settlement appears likely in their lawsuit against oil companies doing business in the area.

Terrebonne Parish Assessor Gene Bonvillain filed lawsuits against 29 oil and gas companies that operate in the parish for allegedly cheating the parish out of more than $93 million in local property taxes over the last 10 years. The suit also includes civil actions under the Racketeer Influenced and Corrupt Organization act, better known as RICO, against top corporate officers of these companies.

These suits are on top of two similar lawsuits against two ConocoPhillips subsidiaries filed in May that allegedly owe an additional $6 million to the parish. If the parish wins any RICO claims, all judgments are automatically tripled. This would mean the parish could see a payout of roughly $300 million.

The discrepancy revolves around a self-reporting system that was enacted because parish assessors lack the manpower to assess each of the production units within parish jurisdiction, which includes an area up to three miles offshore.

Oil companies are required to report the number of wells they have in the parish and their production status in the Louisiana Ad Valorem Tax form 12, or LAT-12. A more productive well pays more in taxes than a low-producing well or an inactive well. The LAT-12 is then used by the assessor to determine how much each company owes to the parish.

“Bonvillain was suspicious that something was going on out there, but he didn’t have the manpower to go to every well in the parish,” said Don Richard, a lawyer hired by the assessor’s office to handle these suits.

Bonvillain contracted Visual Lease Services out of Holdenville, Okla., a specialist in assessing oil properties, to conduct an audit of all 1,546 oil production units in the parish. After visually inspecting every piece of property in the parish and comparing that with tax records. Visual Lease came back with a report that showed “vast and pervasive underreporting and false reporting of tax liability,” according to the language of the lawsuit filed by Bonvillain.

Visual Lease Services has also been contracted by St. Mary’s, Plaquemines and Iberia parishes, according to Gary Mask, the chief financial officer of VLS.

Mask said that early indications were that similar discrepancies were found in those parishes as well, although their field work was not complete.

Apache Corporation, a Houston-based oil and gas company, allegedly owes $16.4 million in back taxes, and they’re not happy about it.

“We pay our taxes, and we will defend ourselves,” said Bill Mintz, the director of public relations with Apache. “We think it’s pretty outrageous that people are trying to reinterpret the law at this point.”

Don Briggs, of the Louisiana Oil and Gas Association, an oil industry trade and advocacy group, was similarly outraged.

“We have a process in Louisiana for determining disputes over taxes, and for the Terrebonne tax assessor to allege in a federal court, RICO charges against the executives of these companies is an embarrassment to the state of Louisiana, and it should be an embarrassment to the assessor,” he said.

In response, Richard said that although he plans on taking these cases to court, “That doesn’t mean we can’t continue to negotiate. If they want to negotiate, we’re always open to that.”

Briggs cited the RICO charges as particularly egregious, although Richard was quick to point out that these are not criminal charges and they’re not trying to put anyone in jail.

By filing the charges in federal court, Bonvillain could go back as far as 10 years for back taxes, rather than the three years allowed in Louisiana state courts.

Both Briggs and Richard confirmed that Richard has already released 10 companies from the suit.

These lawsuits and ongoing investigations in nearby parishes gave Mintz and Briggs concern for the health of the oil and gas industry in southern Louisiana.

“There’s always competition for capital,” said Mintz, who added, “A company has an obligation to its shareholder to invest where it can make the best return.”

Briggs was less veiled in his threats, saying that as many as six oil companies have said they will not drill another well in the state, although he refused to name the companies.

“It drives business out of state,” he said.

Richard, on the other hand, believes that even if some companies are driven off by these lawsuits, someone else will take their place.

“Give me a break,” he said. “You think with the price of oil going up again, that somebody isn’t going to drill a well in Louisiana?”