Justia Energy, Oil & Gas Law Opinion Summaries

The Supreme Court affirmed the order of the circuit court affirming the determination of the Board of Equalization and Review that Petitioners Murray Energy Corporation and Consolidation Coal Company's coal interests were properly valued and assessed by Defendants, holding that the circuit court properly concluded that the method of valuing coal properties violated neither the statutory requirement of assessment at "true and actual value" nor the constitutional equality requirements of the West Virginia Constitution and the equal protection provisions of the United States and West Virginia Constitutions.Specifically, the Court held (1) the methodology of valuing Petitioners' coal properties for ad valorem tax valuation purposes, as set forth in West Virginia Code of State Rules 110-1I-1 et seq., does not violate the requirement set forth in W. Va. Code 11-6K-1(a) that natural resources property be assessed based upon its "true and actual value"; and (2) the valuation methodology contained in the Code of State Rules does not violate the equality provision of W. Va. Const. art. X, 1 or the equal protection provisions of the United States and West Virginia Constitutions. View "Murray Energy Corp. v. Steager" on Justia Law

Sunoco blends ethanol with gasoline to create alcohol fuel mixtures. Sunoco filed consolidated tax returns, 2004-2009, claiming the Mixture Credit under 26 U.S.C. 6426 as a credit against its gasoline excise tax liability for the years 2005-2008. In 2013, Sunoco changed its tax position by submitting both informal and formal claims with the IRS to recover over $300 million based on excise-tax expenses for the years 2005-2008, claiming that it erroneously reduced its gasoline excise tax by the amount of Mixture Credit it received, which had the effect of including the Mixture Credit in its gross income. In its view, Sunoco was entitled to deduct the full amount of the gasoline excise tax under section 4081— without regard to the Mixture Credit—and keep the Mixture Credit as tax-free income. In 2015, the IRS issued a statutory notice of disallowance denying Sunoco’s claims. Sunoco filed a refund suit. The Federal Circuit affirmed the Claims Court in upholding the disallowance. The alcohol fuel mixture credit must first be applied to reduce a taxpayer’s gasoline excise-tax liability, with any remaining credit amount treated as a tax-free payment. View "Sunoco, Inc. v. United States" on Justia Law

In 1999, after deregulation of the energy industry in Illinois, Exelon sold its fossil-fuel power plants to use the proceeds on its nuclear plants and infrastructure. The sales yielded $4.8 billion, $2 billion more than expected. Exelon attempted to defer tax liability on the gains by executing “like-kind exchanges,” 26 U.S.C. 1031(a)(1). Exelon identified its Collins Plant, to be sold for $930 million, with $823 of taxable gain, and its Powerton Plant, to be sold for $870 million ($683 million in taxable gain) for exchanges. Exelon identified as investment candidates a Texas coal-fired plant to replace Collins and Georgia coal-fired plants to replace Powerton. In “sale-and-leaseback” transactions, Exelon leased an out-of-state power plant from a tax-exempt entity for a period longer than the plant’s estimated useful life, then immediately leased the plant back to that entity for a shorter sublease term. and provided to the tax-exempt entity a multi-million-dollar accommodation fee with a fully-funded purchase option to terminate Exelon’s residual interest after the sublease. Exelon asserted that it had acquired a genuine ownership interest in the plants, qualifying them as like-kind exchanges.The Commissioner disallowed the benefits claimed by Exelon, characterizing the transactions as a variant of the traditional sale-in-lease-out (SILO) tax shelters, widely invalidated as abusive tax shelters. The tax court and Seventh Circuit affirmed, applying the substance over form doctrine to conclude that the Exelon transactions failed to transfer to Exelon a genuine ownership interest in the out-of-state plants. In substance Exelon’s transactions resemble loans to the tax-exempt entities. View "Exelon Corp. v. Commissioner of Internal Revenue" on Justia Law

The American Recovery and Reinvestment Act of 2009 provides a cash grant to entities that “place[] in service” certain renewable energy facilities. The amount is determined using the basis of the tangible personal property of the facility. Alta placed windfarm facilities into service and sought $703 million in grants. The government awarded $495 million. Alta filed suit, seeking an additional $206 million. The government counterclaimed, asserting that it had overpaid $59 million. The difference was attributable to the calculation of basis. The portion of the purchase prices attributable to grant-ineligible tangible property (real estate, transmission equipment, and buildings) must be deducted: Alta argued that the entire remainder can be allocated to grant-eligible tangible personal property, with none allocated to intangibles. The Claims Court found in favor of Alta, rejecting the government’s argument that basis must be calculated using the residual method of 26 U.S.C. 1060, which applies to the acquisition of a business. The court reasoned that no intangible goodwill or going concern value could have attached to the windfarms at the time of the transaction.The Federal Circuit vacated. The Alta purchase prices were well in excess of their development and construction costs (book value), and the transactions involved numerous related agreements, such as the leasebacks and grant-related indemnities. Goodwill and going concern value could have attached, so those assets constitute a “trade or business” within the meaning of section 1060; the transactions count as “applicable asset acquisitions.” View "Alta Wind v. United States" on Justia Law

The Supreme Court affirmed the district court’s grant of summary judgment in favor of Hiland Crude, LLC in this declaratory action challenging the tax classification of Hiland Crude’s crude oil gathering pipelines in Montana. Hiland Crude owns and operates crude oil gathering and transmission systems in Montana. The Department of Revenue began centrally assessing Hiland Crude’s property in 2013 and classified all of its pipeline systems within the State as class nine property. Hiland Crude filed this suit asserting that gathering pipeline systems should be taxed as class eight property, regardless of whether the property is centrally assessed, because they are “flow lines and gathering lines” under the class eight statute. The district court agreed and granted summary judgment for Hiland Crude. The Supreme Court affirmed, holding that the district court properly granted summary judgment in favor of Hiland Crude. View "Hiland Crude, LLC v. State, Department of Revenue" on Justia Law

The Parker County Appraisal District did not employ a facially unlawful means of appraising Taxpayers’ property, which appeared to derive much of its market value from saltwater disposal wells in which wastewater from oil and gas operations could be injected and permanently stored underground.When valuing for tax purposes Taxpayers’ tracts of land in Parker County, the Parker County Appraisal District assigned one appraised value to the wells and another appraised value to the land itself. Taxpayers argued before the trial court that the Tax Code did not permit the County to appraise the wells separately from the land itself where both interests are owned by the same person and have not been severed into discrete estates. The trial court granted summary judgment for Taxpayers. The court of appeals reversed. The Supreme Court affirmed, holding (1) there was nothing improper in the District’s decision to separately assigned and appraise the surface and the disposal wells, which were part of Taxpayers’ real property and contributed to its value; and (2) the Tax Code does not prohibit the use of different appraisal methods for different components of a property. View "Bosque Disposal Systems, LLC v. Parker County Appraisal District" on Justia Law

In this case regarding the determination of the tax court valuing Minnesota Energy Resources Corporation’s (MERC) natural gas pipeline distribution system for the years 2008 through 2012, the Supreme Court affirmed the decision of the tax court on remand, holding that the tax court followed the Court’s instructions on remand and properly applied the Court’s clarified standard to MERC’s claim of external obsolescence. On remand, the tax court found that MERC failed to demonstrate that external obsolescence affected the value of its property. The Supreme Court affirmed, holding (1) the tax court correctly evaluated whether MERC’s evidence of external obsolescence was credible, reliable, and relevant; and (2) the tax court’s decision was justified by the evidence and in conformity with law. View "Minnesota Energy Resources Corp. v. Commissioner of Revenue" on Justia Law

The Arizona Department of Revenue (ADOR) is not authorized to value solar panels owned by SolarCity Corporation and Sunrun, Inc. (collectively, Taxpayers) and leased to residential and commercial property owners.For tax year 2015, ADOR notified Taxpayers that their panels had been assigned full cash values and that taxes would be assessed. Taxpayers sought a declaratory judgment that the panels were considered to have no value under Ariz. Rev. Stat. 42-11054(C)(2) and were not subject to valuation. The tax court ruled that the panels were “general property” that must be valued by county assessors pursuant to section 42-13051(A) and that the county assessors cannot assign a zero value because applying section 42-11054(c)(2)’s zero value provision to the panels would violate the Exemptions Clause and the Uniformity Clause of the Arizona Constitution. The Supreme Court affirmed the tax court’s judgment to the extent it concluded that ADOR lacked statutory authority to value Taxpayers’ leased solar panels but reversed the remainder of the judgment and remanded for a determination as to whether section 42-13054 authorizes county assessors to value the solar panels and, if so, whether section 42-11054(C)(2) requires a zero valuation. If section 42-11054(C)(2) applies, the tax could should determine whether that provision violates the Exemptions Clause or Uniformity Clause. View "SolarCity Corp. v. Arizona Department of Revenue" on Justia Law

The Arizona Department of Revenue (ADOR) is not authorized to value solar panels owned by SolarCity Corporation and Sunrun, Inc. (collectively, Taxpayers) and leased to residential and commercial property owners.For tax year 2015, ADOR notified Taxpayers that their panels had been assigned full cash values and that taxes would be assessed. Taxpayers sought a declaratory judgment that the panels were considered to have no value under Ariz. Rev. Stat. 42-11054(C)(2) and were not subject to valuation. The tax court ruled that the panels were “general property” that must be valued by county assessors pursuant to section 42-13051(A) and that the county assessors cannot assign a zero value because applying section 42-11054(c)(2)’s zero value provision to the panels would violate the Exemptions Clause and the Uniformity Clause of the Arizona Constitution. The Supreme Court affirmed the tax court’s judgment to the extent it concluded that ADOR lacked statutory authority to value Taxpayers’ leased solar panels but reversed the remainder of the judgment and remanded for a determination as to whether section 42-13054 authorizes county assessors to value the solar panels and, if so, whether section 42-11054(C)(2) requires a zero valuation. If section 42-11054(C)(2) applies, the tax could should determine whether that provision violates the Exemptions Clause or Uniformity Clause. View "SolarCity Corp. v. Arizona Department of Revenue" on Justia Law

In 2011, OXY USA Inc. (“Oxy”), made a mistake that caused it to overpay its property taxes on oil and gas produced from leaseholds. Oxy failed to deduct certain costs it was entitled to deduct. By the time it realized the mistake, the protest period had expired. The company nonetheless contended it was entitled to abatement and refund of the overpayment pursuant to section 39-10-114(1)(a)(I)(A), C.R.S. (2017). The county board of commissioners maintained that the abatement-and-refund provision did not apply because Oxy was the sole source of the error. Relying on Colorado Supreme Court precedent, the court of appeals held that Oxy couldn't receive abatement and refund for overpayment due to its own mistake. The Supreme Court held section 39-10-114(1)(a)(I)(A) gave taxpayers the right to seek abatement and refund for erroneously or illegally levied taxes resulting from overvaluation caused solely by taxpayer mistake. Therefore, Oxy was entitled to abatement and refund for its overpayment of taxes in the tax year at issue in this appeal. View "OXY USA Inc. v. Mesa County Board of Commissioners" on Justia Law