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We Build Alaska

Trial underway for Furie, oil and gas company who doesn’t want to pay property taxes

The trial for Furie’s property tax dispute with the State of Alaska and Kenai Peninsula Borough began yesterday in Anchorage. Judge Herman Walker is presiding over the case. Because it’s an administrative appeal, there is no jury.

John Hendrix, the owner of HEX (who bought the assets of Furie and two debtors, Cornucopia and Corsair out of bankruptcy in 2020), filed the lawsuit in June of 2021.

The dispute stems from the state’s property tax assessment of the Cook Inlet property he is operating. The property was purchased for $15 million in bankruptcy proceedings. The Department of Revenue assessed it at $81.7 million. HEX/Furie says the assessment is excessive due to it being above the bankruptcy purchase price. They initially argued for a $20.5 million assessment, then a $17 million assessment and then $7.8 million assessment – a more than 90% tax reduction.

The current property tax is $1.6 million a year, split between the state and the Kenai Peninsula Borough. The State Assessment Review Board (SARB) ruled twice against Hendrix, first in May 2021 and again in May 2022. Both times, they upheld the $81.7 million assessment. Both were unanimous decisions.

In February, the Senate Resources Committee introduced Senate Bill 50, “An Act relating to the assessment of property for the purposes of the oil and gas exploration, production, and pipeline transportation property tax; and providing for an effective date.” The bill came from Senator Cathy Giessel (R – Anchorage), who co-chairs the committee. The bill was a backdoor attempt by Hendrix to resolve his tax matter politically instead of legally. After this Landmine article came out, the bill was quickly killed.

Hendrix’s lawyer, Steve Mahoney, is the husband of former Revenue Commissioner Lucinda Mahoney. She was conflicted out of the matter because her husband was representing Hendrix. Former Deputy Revenue Commissioner Brian Fechter was given the matter. He refused to settle with Hendrix. Governor Mike Dunleavy (R – Alaska) appointed Adam Crum as his new Revenue commissioner last November. Crum, who did not have a conflict, then had decision making authority over the matter as Revenue commissioner. Fecther resigned his position in February without explanation.

Public calendars show Hendrix held multiple meetings with high level state officials including Attorney General Treg Taylor and former Dunleavy aides Brandon Brefczynski and Akis Gialopsos. Hendrix attempted to apply pressure on the Dunleavy administration for a settlement, which would have been the first property tax settlement of its kind in decades.

Hendrix also made substantial donations to Dunleavy’s re-election campaign and Peter Micciche’s campaign for Kenai Peninsula Borough mayor. Micciche, who was elected mayor, refunded the $1,000 donation from Hendrix, noting on his APOC report, “Refund due to open routine property tax assessment challenge that involves the KPB and Mr. Hendrix. Thankful of John’s support, but could cause the perception of a conflict (although KPB legal finds no direct actual conflict).”

The trial is set to go through next week. This Alaska Public Media article from January says, “The Kenai Peninsula Borough estimates spending approximately $400,000 to cover legal fees on the case through trial. Hendrix said HEX has spent $500,000 on litigation.”

This is a developing story.

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Michael
11 months ago

Furie isn’t an oil company. They only produce natural gas that is sold to local utilities. Hilcorp bailed south central out of a gas shortage when they came into the inlet. That will end soon as investing in Cook Inlet is not competitive with other energy plays. At which time the state will have two options: tax credits for drilling(which they didn’t pay for years the last time) or LNG from Canada.

Julie
8 months ago

So, what was the outcome of the lawsuit?