Woods County Excise Board discusses new laws affecting county taxes
January 25, 2023
Two of the three members of the Woods County Excise Board recently attended a meeting in Cherokee about changes in laws affecting county taxes. Joe Shirley and Chris Olson talked at length about what they learned, filling in the third board member Bob Seivert. The excise board meeting was held on Wednesday morning in the commissioners’ office at the Woods County Courthouse in Alva.
First the board took care of agenda items which included approving minutes of the December 21 meeting and monthly appropriations. They acknowledged the transfer of appropriations from Highway CIRB accounts to Highway personal services in the amount of $13,942.85 for District 1 and $13,942.84 for District 2.
“Chris (Olson) and I went to a meeting,” said Shirley. “We’re in deep dodo if we don’t get something done. I should have brought that book with me. They went to court and beat us on these wind towers.”
“My opinion of that was, those attorneys were afraid … they want to pass the buck. Yeah, we lost this but you need to talk to your legislators. Cause I asked a guy, is there a transcript of this? He says, ‘Yeah, we got one in my office if you want to come up and look at it.’ I know what that costs,” said Olson. “My guess is they did not cover that case good. And he did not want to own up to it.”
On Oct. 18, the Oklahoma Supreme Court unanimously held in Kingfisher Wind LLC v. Wehmuller that federal production tax credits (PTCs) are intangible personal property and thus are not subject to property tax. In this case, Kingfisher developed and built two wind farms in Oklahoma that included over 100 wind turbine generators, electrical equipment, a maintenance facility, substation, and transmission lines. The county assessor valued the wind farms at $458 million, while Kingfisher argued that they were worth only $169 million. The sole discrepancy in valuations resulted from the county assessor including – and Kingfisher excluding – the PTCs’ value.
Shirley said, “Anyway it’s the tax on wind farms on their ability to produce. The problem is they promised all these school districts that they’re going to get the tax money when the wind farm starts producing electricity, and they don’t for ten years or however long it is. For example, at Seiling they passed a big new bond issue for a brand new, fancy gymnasium. Right now say their mill levy is 32, their mill levy is going to double to 62, 64, 68 … a whole bunch. Which means their property tax is going to double.”
“I’m sorry. Did you say windmills don’t pay taxes?” asked Seivert
“They’re exempt from their power production for a period of time five or ten years, I’m not sure what it was. But they can’t count that as a taxable entity because the government gave them basically a free ride,” said Olson.
“The problem is, the way the law was written, it didn’t really intend, the legislature didn’t, intend them being exempt from this,” said Shirley. “It’s one word in the dang-gum law.”
He said he’d like to have attorney Luke Adams (who spoke at the meeting) write a letter he could sign and send to legislators who represent this area.
“So in the proposal stage of these windmills, there’s probably a lot of discussion about the benefits to the school system. But when it comes time to pay the piper, that’s five or ten years down the road,” summarized Seivert. “In the meantime, the landowners, the property owners, are going to get hit.”
“At Mooreland, they went in and put all new generators on those towers,” said Shirley. “They’re exempt for five or ten years. And it’s a major deal!”
“Well, it’s going to cut their revenue distribution down by 70 percent,” commented Olson.
“What’s going to be cut?” asked Seivert.
“The tax collection is going to be cut by 70 percent,” said Olson. “The ad valorem,” County Clerk Shelley Reed clarified.
“And these people have passed bond issues thinking that the wind power companies were going to pay their part. Now they’re going to get chopped by 70 percent,” said Olson.
“Somebody dropped the ball,” said Seivert.
“The legislators,” said Shirley. “The smart lawyers for the power companies figured it out.”
The discussion turned to a recent ruling that pipelines carrying salt water to disposal wells are not taxable for county ad valorem (property) tax. Instead, they are now considered as part of the gross production tax.
“The problem that we saw was there were three counties that ruled in favor of the tax people,” said Olson. “But there was one judge that ruled in Alfalfa County for the other side, for the oil companies. So they go to the court of appeals. And I think at that point, it’s just my opinion, I think our attorneys dropped the ball. I don’t think they argued that case correctly.
“Any time your tax assessment leaves that section, 640 acre spacing, anytime it leaves that, you’re on your own. You’re taxable. Well, they agreed that you could have 30 miles of pipeline going to a salt water disposal, and it was exempt. That pipeline was exempt … based on the fact they were paying gross production tax.
“That’s very incorrect, and the reason why it’s incorrect is the liability clause of it. If you make that statement that it’s not taxable, you put the non-interest parties and the royalties parties, you put in jeopardy of liability in that salt water disposal now because you exempt them. You say, ‘Well, okay you don’t have to pay tax on this’ the liability claim passes on … if you claim you’re a working interest or a non-working interest and you don’t pay taxes in that section or even a royalty, then you’re liable for whatever happens at that disposal plant because you claimed ownership of it.”
Olson continued, “You know what happens when a disposal well gets sued for increasing the pressure and causing an earthquake. There’s a lot of those cases on file right now. That just opened up the people that were behind the pipe and those other sections that went to that were tax-free. That just opened them up for liability.”
“Well, the other thing they said that surprised me, and I’ve got to check on it more, that if that well’s been shut in for three years, it then regardless gets to be taxed. If they haven’t torn it down,” said Shirley. He talked about some wells in his part of the county that don’t appear to be in use or even checked. “He says what they do is they open them up and produce one cfm of gas per well in a year, and that makes them exempt for another 3 years,” Shirley added.
Sievert asked who attended the meeting. Shirley said he, Olson, County Clerk Shelley Reed and County Assessor Renetta Benson attended, but none of the Woods County Commissioners were there. He also said the Alva school superintendent was there. Olson noted that the Waynoka mayor and a Waynoka school board member attended the meeting.
Appeals Process Changed
The board members discussed a change in the ad valorem tax protest appeals.
“Well, they said, and this is a bombshell to us, that no longer does our protest go to the district judge. It goes to a special three appointed retired judges,” said Olson.
“The problem is they don’t even have the rules set up, and they’ve asked this Jerry Atkins who’s in charge of it, ‘Have you got it done yet?’”
Olson explained that protests will no longer go to district court. Instead they will go to this special review.
“They were trying to speed the process up. You know how all these appeals go five or six years,” said Shirley.” They tried to speed it up. It just didn’t work or hasn’t so far.”
“And then the other part there, they’re eliminating Jerry (Wisdom of TASC) from being able to …” said Olson.
“Eliminating him from what?” asked Seivert.
“He can’t come to our meeting on appeals,” said Olson.
Third party assessors hired by counties are not allowed to participate in protest hearings and appeals.
The board members discussed difficulties in getting legislators to understand the ramifications of new laws.
In summary, Olson said, “The long term problem is if these school districts like us lose that revenue, then they’re going to be dipping into the state fund. Which when they do that, they have divvy up between all of the state schools which is going to hurt the Tulsa’s and the Oklahoma City’s. “
“It means everybody gets less,” said Shirley. “Everybody gets hit.”