Petrogas purchased Alcoa Intalco’s wharf, pier and associated items for $122 million this week, but only $10.2 million of the registered sale was listed as real estate subject to excise taxes.
Had the whole purchase been subject to the tax, the payment lodged with Whatcom County could have been more than $2 million. Tax for sale of the wharf, which was sold for $10.2 million based on an appraisal, according to Petrogas, was $181,655.
For comparison, all of Intalco was valued at $67 million for 2015 taxes, which included the wharf.
The sale was filed with the Whatcom County Treasurer’s Office on Tuesday, Sept. 27, in a real estate excise tax affidavit between Intalco Aluminum LLC and Petrogas Pacific LLC.
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Petrogas already receives, stores and ships liquefied petroleum gas at Cherry Point using the pier, which is shared with Intalco’s use of alumina offloading equipment.
The sale also included an aquatic lands lease with the Washington State Department of Natural Resources, equipment, wharf plans, specifications and drawings, warranties, guarantees, licenses, permits, approvals and other rights.
Intalco will still use the pier to receive alumina, used for making aluminum, and the sale will not affect its ability to operate the aluminum smelter, spokesman Josh Wilund said in an email.
The rest of the sale
“Generally in the state of Washington, only the real estate itself is subject to real estate excise tax,” said Steve Oliver, Whatcom County treasurer. “So if there’s other assets that are also included in the sale that aren’t considered real estate in the state of Washington, they’re not subject to the tax.”
When asked what the other $111 million of the purchase was for, and why it was not subject to the tax, representatives for both Petrogas and Intalco answered in separate emails, “Only sales of real property are subject to real estate excise tax and the wharf is the only real property that Petrogas purchased. The $10.2 million selling price of the wharf was based on an appraisal.”
The companies provided information “involved in this transaction that does help delineate that, but that’s not public information,” Oliver said.
“Typically you do not see a transaction like this where a majority of the sale price is being exempted from excise tax,” Oliver said.
Wilund wrote that Intalco has closed on the portion of the agreement to sell the wharf, pier and DNR lands, along with fire-suppression equipment and an aluminum gangway.
In circumstances like this, it’s really in the county’s interest to make sure that the law is being applied appropriately and we’re using values that are based on some kind of market reality.
Steve Oliver, Whatcom County Treasurer
There is a post-transaction audit and appeal process with these types of sales that the county may take if there is a disagreement between the county, buyer and seller regarding the values, Oliver said.
“That may be an avenue that we may want to consider in this case,” he said. “In circumstances like this, it’s really in the county’s interest to make sure that the law is being applied appropriately and we’re using values that are based on some kind of market reality.”
The pier is one of three such permitted structures allowed at Cherry Point, with a fourth cutout set aside for the proposed Gateway Pacific Terminal pier.
On Sept. 12, DNR announced it will consider incorporating that cutout into the Cherry Point Aquatic Reserve, which would likely prevent a fourth pier from being built.
In 2014, Petrogas Energy Corp. bought the butane/propane storage and distribution facility at the end of Unick Road from Chevron for $242 million, with plans to have exports and imports of up to 30,000 barrels of LPG per day.
The sale of about 42 acres of property meant more than about $4.1 million in local and state excise taxes, making it one of the largest taxable transactions ever filed in the area, Oliver told The Bellingham Herald at the time.
That sale also included a large set of intangibles beyond the property itself, including ancillary assets, inventories, contracts and other considerations.
Neither Petrogas nor Intalco can expand operations at the pier beyond the allowed “maximum of 48 vessel dockings per year for all products (Intalco as well as Petrogas),” according to a letter sent to Whatcom County Council on July 5.