Records Lowndes County Tax Assessor/Collector Greg Andrews has obtained regarding Caledonia Energy Partners appear to indicate the company has under-reported its assets to the county for as many as 13 years.
That, Andrews said, has short-changed the county possibly millions in tax revenue over that time, and he plans to reassess the company this year to determine the true value of its assets for 2020. If the reassessment yields what Andrews believes it will, the company’s taxable property value could rise by $56 million or more.
Caledonia Energy Partners stores natural gas in a 3,000-acre underground cavity, buying the gas from third parties and pumping it out to customers. In 2006, Lowndes County supervisors entered a fee-in-lieu agreement with the company, allowing it to pay one-third of its property taxes for up to 10 years on a development valued at $101 million.
Through 2006, that fee generated roughly $500,000 in annual taxes, Andrews said, but after the fee-in-lieu expired, it paid $1.1 million in full taxes in 2017 and 2018 — an amount that factors in the depreciation of its assets over the first 10 years.
Over the past year, though, Andrews said Caledonia Energy Partners has unsuccessfully attempted to drive down its assessed value to $9.5 million, a rate inconsistent with its own documentation.
“The bellyaching didn’t start until they had to pay full taxes,” Andrews said.
Since then, Andrews said, he has gathered evidence the company’s cavity capacity is greater than what it reported to the county and it owns a well that has never been entered on the tax books. On top of that, it has substantial major equipment assets that have not been factored into its assessment.
The company sells, protests its assessment
In October 2018, Andrews said, Enstor sold Caledonia Energy Partners and two other gas storage facilities to its parent company, ArcLight Capital Partners, for about $80 million. ArcLight then leased the Caledonia site back to Enstor.
Of the $80 million sale, ArcLight “allocated” $20.5 million in value to the Caledonia location, although documents the company provided Andrews at the time of the sale showed it valued its own assets at $84.8 million.
Later, the company told Andrews it had sold its “pad gas” — a stabilizing reservoir kept permanently in the bottom of cavity to help make sure the “operational gas” can be pushed through the pipes — to Morgan Stanley. That is when the company asked for a $9.5 million assessment, which Andrews said would have knocked its tax bill down to about $139,000 for 2019.
Instead, Andrews valued the company at $66 million, using the company’s own documentation as the base and accounting for some depreciation, he said. For instance, three of the Caledonia Energy Partners wells are capped, so he valued them at about 40 percent of what the company reported they are worth.
Still, with that assessment, the company would pay about $1 million in property taxes this year.
Caledonia Energy Partners sent written notice to Andrews on July 30 it was protesting the assessment. After that, Andrews sent all his documentation to Sheldon Alston, an attorney from the Brunini Law Firm in Jackson representing the company. On Tuesday morning, when the Lowndes County Board of Supervisors held its annual public hearing for any taxpayer protesting their assessment, no one from Caledonia Energy Partners spoke, meaning its appeal is dead.
“They were protesting their own numbers,” Andrews said. “I sent all that to their attorney, and he hasn’t returned my calls for a month. … Nobody showed up to the hearing either.”
Andrews also noted Sempra, another subsidiary of ArcLight, bought a storage facility in Simpson County — which has a similar capacity to Caledonia — for $173 million in January.
Neither Alston nor Caledonia Energy Partners Operations Manager David Merchant returned calls and messages from The Dispatch by press time.
The 10th well, other under-reported assets
The reassessment for 2020 should hike Caledonia Energy Partners’ tax value in at least three key areas, Andrews said.
The documents the company sent Andrews in 2018 show it has 10 wells — not the nine it has reported to the county since 2006.
Andrews estimated that well, which is used for monitoring natural gas, is worth at least $900,000.
“By state law, we can back tax that well for up to seven years,” he said.
Then there’s the major equipment inventory, which by law the company must submit to the county by April 1 each year with values assigned to each piece, Andrews said.
Caledonia Energy Partners has submitted a major equipment list to Andrews that includes 50 items — ranging from gas heaters, compressors, metering devices and buildings — but that list contains no values, meaning the company is not being taxed for that property.
Where the most value will be added, though, could come from a discrepancy in its cavity capacity between what it reported to the county and what it reported to federal regulators.
The company since 2006 has reported a cavity capacity of 18.5 BCF (billion cubic feet), the amount on which it is taxed. But it reported to the U.S. Federal Energy Commission its capacity was 25.7 BCF, which Andrews said would amount to an additional $56 million in value.
Plus, the company reported to federal regulators it had upgraded seven of its wells in 2017, something else it had not told the county.
“They hadn’t reported much of anything to us,” Andrews said. “… If you want to get down to a $9.5 million assessment, this ain’t the way to do it.”
Zack Plair is the managing editor for The Dispatch.
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