Justia Energy, Oil & Gas Law Opinion Summaries

Gasoline is subject to an excise tax. The combined fuel excise taxes account for more than 80% of the annual revenue collected for the Highway Trust Fund. The 2005 Safe, Accountable, Flexible, Efficient Transportation Equity Act. introduced new credits that fuel producers could use to offset their fuel excise taxes, including one for using “alternative fuels” to create “alternative fuel mixtures” (AFM credit), 26 U.S.C. 6426(e).U.S. Venture buys fuel from various suppliers and combines it with different additives before selling the finished product to retailers. Since 2012 U.S. Venture has commonly added butane to the gasoline it produces and sells. Butane is a type of gas, made from both natural gas and petroleum. It has long been considered a fuel additive, with suppliers adding it to gasoline since at least the 1960s.In 2017. U.S. Venture first sought an AFM tax credit for producing and selling fuel that contained a mixture of gasoline and butane. The IRS rejected its position. The district court and Seventh Circuit affirmed. There is nothing alternative about gasoline containing a butane additive, as indicated by a combination of statutory provisions defining the scope of the alternative fuel mixture tax credit. View "U.S. Venture, Inc. v. United States" on Justia Law

A mining company appealed the borough assessor’s valuation of its mine to the borough board of equalization. At a hearing the company presented a detailed report arguing the borough had improperly included the value of “capitalized waste stripping”when calculating the tax-assessed value of the mine. The assessor maintained its position that waste stripping was taxable, but reduced its valuation of the mine to better reflect the remaining life of the mine. The board approved the assessor’s reduced valuation of the mine and the superior court affirmed the board’s decision. The mine owners argued that waste stripping fell within a statutory exemption from taxation. The Alaska Supreme Court construed municipal taxing power broadly, and read exceptions to that power narrowly. The Court found waste stripping was not a “natural resource,” but an improvement that made it easier for miners to access natural resources. The Court concluded that the value of this improvement, like that of other improvements at the mine site, was subject to tax by the borough. The Court therefore affirmed the superior court’s decision affirming the board’s valuation. View "Fairbanks Gold Mining, Inc. vs. Fairbanks North Star Borough Assessor" on Justia Law

An oil producer challenged an Alaska Department of Revenue advisory bulletin interpreting the oil tax code, arguing that the bulletin violated the Alaska Administrative Procedure Act (APA) and seeking a declaratory judgment that the interpretation was contrary to law. The Alaska Supreme Court determined the advisory bulletin could not be challenged under the APA because it was not a regulation, and that a declaratory judgment was not available because the tax dispute between the parties was not ripe. View "Exxon Mobil Corporation v. Alaska, Department of Revenue" on Justia Law

This dispute involved ad valorem taxes for the tax years 2013 through 2016. In October 2012, D90 Energy, LLC, purchased two gas wells and one saltwater disposal well. The wells were subject to ad valorem property taxation in Jefferson Davis Parish, Louisiana. Relying on a Commission regulation applicable to oil and gas wells, D90 argued that a purchase price in a valid sale is fair market value; therefore, the wells should be valued at $100,000.00 for each of these tax years. For each tax year, the Assessor rejected D90’s documentation of the sale, explaining, in part, that his office never uses the sales price as fair market value for oil and gas wells. Rather, the Assessor used valuation tables provided by the Commission, which take into account age, depth, type, and production of the wells. D90 appealed each assessment to the Commission, presenting documentary evidence and live testimony to establish the $100,000.00 purchase price for the wells and the arms-length nature of the sale. It presented additional evidence to establish that the condition and value of the wells were virtually identical for each tax year. The district court affirmed the Commission’s valuations for all four tax years. Reviewing only what was presented to the Assessor, the court of appeal reversed the district court and reinstated the Assessor’s valuation. The Louisiana Supreme Court granted D90’s writ application to determine the correctness of the assessments, the proper scope and standard of review, and the legal effect of D90’s failure to pay taxes under protest. After review, the Court determined the district court was correct in affirming the Commission, thus reversing the appellate court's judgment. View "D90 Energy, LLC v. Jefferson Davis Parish Board of Review" on Justia Law

In 2015, the owners of a 13,000-acre tract of land known as 70 Ranch successfully petitioned to include their tract in a special district. After 70 Ranch was incorporated into the district, the district began taxing the leaseholders of subsurface mineral rights, Bill Barrett Corporation, Bonanza Creek Energy, Inc., and Noble Energy, Inc. for the oil and gas they produced at wellheads located on 70 Ranch. The Lessees, however, objected to being taxed, arguing the mineral interests they leased could not be included in the special district because neither they nor the owners of the mineral estates consented to inclusion, which they asserted was required by section 32-1-401(1)(a), C.R.S. (2019), of the Special District Act. The Colorado Supreme Court determined that section 401(1)(a) permitted the inclusion of real property covered by the statute into a special taxing district when (1) the inclusion occurred without notice to or consent by the property’s owners and (2) that property was not capable of being served by the district. The Court answered "no," however, 32-1-401(1)(a) required the assent of all of the surface property owners to an inclusion under that provision, and inclusion was only appropriate if the surface property could be served by the district. "Section 32-1-401(1)(a) does not require assent from owners of subsurface mineral estates because those mineral estates, while they are real property, are not territory. Thus, Lessees’ consent was not required for the inclusion of 70 Ranch in the special district." The Court therefore affirmed the court of appeals on alternate grounds. View "Barrett Corp. v. Lembke" on Justia Law

The DC Circuit denied petitions for review challenging FERC's orders concerning SFPP's tariffs. SFPP challenges FERC's decisions to deny SFPP an income tax allowance, to decline to reopen the record on that issue, and to deny SFPP's retroactive adjustment to its index rates. Shippers challenge FERC's disposition of SFPP's accumulated deferred income taxes (ADIT) and its temporal allocation of litigation costs.The court held that FERC's denial of an income tax allowance to SFPP was both consistent with the court's precedent and well-reasoned, and that FERC did not abuse its discretion or act arbitrarily in declining to reopen the record on that issue. Furthermore, FERC reasonably rejected retroactive adjustment to SFPP's index rates. The court also held that FERC correctly found that the rule against retroactive ratemaking prohibited it from refunding or continuing to exclude from rate base SFPP's ADIT balance, and that FERC reasonably allocated litigation costs. View "SFPP, LP v. Federal Energy Regulatory Commission" on Justia Law

The plaintiffs each own a wind farm that was put into service in 2012. Each applied for a federal cash grant based on specified energy project costs, under section 1603 of the American Recovery and Reinvestment Tax Act of 2009. The Treasury Department awarded each company less than requested, rejecting as unjustified the full amounts of certain development fees included in the submitted cost bases. Each company sued. The government counterclaimed, alleging that it had actually overpaid the companies.The Claims Court and Federal Circuit ruled in favor of the government. Section 1603 provides for government reimbursement to qualified applicants of a portion of the “expense” of putting certain energy-generating property into service as measured by the “basis” of such property; “basis” is defined as “the cost of such property,” 26 U.S.C. 1012(a). To support its claim, each company was required to prove that the dollar amounts of the development fees claimed reliably measured the actual development costs for the windfarms. Findings that the amounts stated in the development agreements did not reliably indicate the development costs were sufficiently supported by the absence in the agreements of any meaningful description of the development services to be provided and the fact that all, or nearly all, of the development services had been completed by the time the agreements were executed. View "California Ridge Wind Energy, LLC v. United States" on Justia Law

The Supreme Court affirmed the decision of the Board of Tax Appeals (BTA) affirming a tax assessment against Rockies Express Pipeline, LLC (Rockies), holding that Rockies' gross receipts for tax year 2015 from the transportation of natural gas within the state of Ohio were not excluded from taxation under Ohio Rev. Code 5727.33(B)(1) as "receipts derived wholly from interstate business" and that such taxation does not violate the Commerce Clause.Rockies is an interstate pipeline that transports natural gas for others. For tax year 2015, the Ohio Tax Commissioner assessed Rockies on transactions in which natural gas entered and exited Rockies' pipeline within Ohio. Rockies petitioned the tax commissioner for reassessment, arguing that its receipts derived wholly from interstate business and were thus eligible for exclusion under section 5727.33(B)(1). The tax commissioner upheld the assessment. The BTA affirmed. The Supreme Court affirmed, holding (1) Rockies did not meet its burden of showing that its receipts fall under the exclusion in section 5727.33(B)(1) as "receipts derived wholly from interstate business"; and (2) imposing the tax under these circumstances does not violate the Commerce Clause because Rockies has substantial nexus with Ohio based on its physical presence within the State. View "Rockies Express Pipeline, LLC v. McClain" on Justia Law

In the November 2014 election, a majority of the City of Rialto’s (the City) voters approved Measure U, a ballot measure adopted by the City which imposed an “annual business license tax” of “up to One Dollar [($1.00)] per year for each One (1) cubic foot of liquid storage capacity” on “[a]ny person engaged in the business of owning[,] operating, leasing, supplying[,] or providing a wholesale liquid fuel storage facility” in the City. The four plaintiffs-appellants in these actions, Tesoro Logistic Operations, LLC (Tesoro), Equilon Enterprises, LLC (Equilon), SFPP, L.P. (SFPP), and Phillips 66 Company (P66), owned all of the wholesale liquid fuel storage facilities, also known as tank farms or terminals, in the City. Plaintiffs were engaged in the business of “refining and marketing fuel nationwide.” Gasoline and other fuels were transported from refineries to plaintiffs’ facilities in the City, where the fuels were placed in large storage tanks and mixed with additives before they were are transported to gasoline stations or other purchasers for retail sale. Beginning in 2015, the City assessed Measure U taxes on plaintiffs based on the liquid fuel storage capacity of plaintiffs’ wholesale liquid fuel storage tanks in the City. Plaintiffs paid the taxes under protest and filed these actions challenging Measure U’s validity on statutory and constitutional grounds. Plaintiffs moved for judgments on the pleadings, and for summary judgment or summary adjudication, then the City filed its own motions for judgments on the pleadings. Following a hearing, the trial court concluded there were no disputed issues of fact, that all of the motions presented the same questions of law, and that the Measure U tax was a valid business license tax. The court thus denied plaintiffs’ motions, granted the City’s motions, and entered judgments in favor of the City. In these appeals, plaintiffs renewed their legal challenges to Measure U. After review, the Court of Appeal concluded the Measure U tax was an invalid real property tax. Thus, the Court reversed judgments in favor of the City, and remanded to the trial court with directions to grant plaintiffs’ motions for judgments on the pleadings and to enter judgments in favor of plaintiffs on plaintiffs’ complaints. View "Tesoro Logistic Operations, LLC v. City of Rialto" on Justia Law

Alternative Carbon claimed nearly $20 million in energy tax credits meant for taxpayers who sell alternative fuel mixtures under 26 U.S.C. 6426(e)(1). The Internal Revenue Service determined that Alternative Carbon should not have claimed these credits and demanded repayment, with interest and penalties. Alternative Carbon paid back the government, in part, and then filed a refund suit. The Claims Court decided that Alternative Carbon failed to establish that it properly claimed the credits or that it had reasonable cause to do so and granted the government summary judgment. The Federal Circuit affirmed. Although the product at issue, a feedstock/diesel mixture, was a “liquid fuel,” it was not “sold” by Alternative Carbon; the transaction was more of a transfer for disposal. Alternative Carbon cannot show it had reasonable cause for claiming the alternative fuel mixture credits. View "Alternative Carbon Resources, LLC v. United States" on Justia Law