Oil and natural gas-rich Kern County in the southern end of California’s San Joaquin Valley went to court last week to uphold Occidental Petroleum Corp.’s past and future property tax bills on the former U.S. Naval Petroleum Reserve at nearby Elk Hills

At stake is up to $73 million of past taxes that Oxy argues should be refunded, along with future tax bills of $7.5 million annually. The producer bought for $3.52 billion in 1998.

In a separate forum Monday, Los Angeles-based Occidental reported lower third quarter earnings attributable to lower California natural gas prices, compared to the same period last year. For the latest quarter, Oxy said net income fell to $402 million, or $1.06/share, compared to $444 million, or $1.18/share, for the same period last year.

Natural gas prices in this most recent quarter averaged $2.94/Mcf, an Oxy spokesperson said, compared to an average price of $4.49/Mcf for the same quarter last year.

So far Oxy is winning its property tax legal battle in which it claims to have been overcharged because the taxes should be based only on the value of proven oil and gas reserves at Elk Hills and not its purchase price for the field that also included the potential, but unproven, reserves. Kern County assessed the Elk Hills property based on the sale price.

A local assessment appeals board, however, sided with the energy company two years ago, and a local judge supported the board last year. The case is now being reviewed by an appeals court, which earlier forced the county to return $27 million to Oxy for its first year of disputed taxes.

The three-judge appeals court last Wednesday questioned both sides.

Local schools stand to lose a lot of support if the county ultimately loses the court battle since the disputed tax revenues for the county already have gone to a number of schools and special districts. The county has been forced to set aside $52 million in case it loses the appeal, and it would then be short another $7.5 million annually from the cut in future tax revenues from Elk Hills.

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