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California and the West

Firm Backs Down, Sends Money, but Inyo County Dispute Isn't Over

Taxes: Energy company pays $8.69 million, but it still intends to appeal the assessment on its geothermal operations.


Thursday was a big day for Inyo County. The East Coast energy company that had defiantly withheld tax payments finally blinked and wired $8,693,979.82 to the county treasurer.

But the payment does not end a dispute that reached from the tax collector's office in dusty Independence to Manhattan and Washington and had Lone Pine school administrators lying awake at night, worrying about financial ruin.

The disagreement involves taxes on three geothermal plants operated on federal land by Caithness Energy LLC of New York City, the county's second-largest taxpayer after the Los Angeles Department of Water and Power.

There is a difference of millions between what Caithness and the county assessor think the geothermal operations are worth. In April, Caithness decided not to pay the second installment of its $6.4-million tax bill while it appealed.

Thursday was the deadline for another round of tax payments, and Inyo County was threatening to go to court to seize the company's facilities if it didn't pay up.

Caithness did, but it is still appealing the assessment.

If the county loses, it will wind up owing the firm millions; that's no small matter in a region where industry is scarce, the government owns most of the land, and Caithness contributes 28% of Inyo's annual property taxes.

The issue has also strained relations between the county and the Navy, which owns the land where two of the geothermal plants are.

"This is the most protracted and most complex dispute I've ever experienced," said John Treacy, who has been Inyo County treasurer for two decades and worked in the office for five years before that.

That it is not yet resolved leaves local officials on shaky financial ground.

Treacy says he is going to recommend that the agencies sharing in the tax revenue put aside half of the contested amount in case they have to repay it.

The 410-pupil Lone Pine School District, which gets about a quarter of the Caithness tax payments, had been contemplating extensive cuts, including teacher layoffs.

Now that the money is in the bank, Supt. John Triolo is breathing more easily. But because he may yet lose a good chunk of it on appeal, he remains in a budget-cutting mood.

"Before, we were going to use an ax," he said. "Now we're down to maybe a knife. But it can't be business as usual, because that money is not guaranteed."

Caithness officials did not return repeated telephone calls. County officials say the company has appealed last year's assessment and has signaled that it will appeal this year's $5-million bill.

The taxes have been as high as $9 million in the past, but that was before Caithness became a majority partner in the plants, which generate electricity sold to Southern California Edison.

The privately held energy firm says its tax bill should be less than half of what it is, Treacy said. County Assessor Tom Lanshaw says he's confident of his valuation, which he derived partly from the price Caithness paid to increase its ownership share last year.

The first of the geothermal facilities went on line in the late 1980s. Two are on the China Lake Naval Air Weapons Station, which sprawls across 1.1 million acres in Inyo, Kern and San Bernardino counties. The third is on federal Bureau of Land Management property within the base boundaries.

When April 10 came and went without a check, the county turned to the Navy to pressure the company into paying, because the firm's contract with the government calls for it to obey all laws.

The Navy, which gets a 20% discount on its Edison electricity bill because of the location of the geothermal wells, refused, saying it did not want to get involved while the matter was on appeal.

County officials, incensed at the Navy's stand and Caithness, fired off letters to the White House, naval headquarters and legislators.

The Navy finally sent out a mediator last month to promote an agreement.

Whether because of that or because of the threat of a court fight and penalties, Caithness relented last week, paying its overdue taxes, a penalty and the new bill.

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