Eog Resources v. State Bd. of Equalization

• Decision Date: 21 October 2008
• Docket Number: No. 105,860.,105,860.
• Citation: 2008 OK 95,196 P.3d 511
• Parties: EOG RESOURCES MARKETING, INC., Plaintiff/Appellee, v. OKLAHOMA STATE BOARD OF EQUALIZATION and Oklahoma Tax Commission, Defendants/Appellants.
• Court: Oklahoma Supreme Court

196 P.3d 511

2008 OK 95

EOG RESOURCES MARKETING, INC., Plaintiff/Appellee, v. OKLAHOMA STATE BOARD OF EQUALIZATION and Oklahoma Tax Commission, Defendants/Appellants.

No. 105,860.

Supreme Court of Oklahoma.

October 21, 2008.

As Corrected October 24, 2008.

APPEAL FROM THE DISTRICT COURT OF OKLAHOMA COUNTY; Honorable Noma D. Gurich, Trial Judge

¶ 0 Appellee, EOG Resources Marketing Inc., (EOGRM) filed an action seeking a declaratory judgment that the Oklahoma State Board of Equalization and the Oklahoma Tax Commission (collectively, the Board of Equalization) had erroneously classified it as a public service corporation and that it was without jurisdiction to assess EOGRM for the purposes of ad valorem taxation. The trial court granted summary judgment to EOGRM. The Board of Equalization appealed, and we retained the cause. We affirm the trial court, and hold that: 1) the district court was the proper forum for the action; 2) Title 68 O.S. Supp.2002 § 2851.3 is violative of the Okla. Const. art. 5, § 46 and art. 10, §§ 5(B), 14(A), and 21(A); and 3) EOGRM is not a public service corporation as defined by the Okla. Const. art. 9, § 34.

TRIAL COURT AFFIRMED.

Michael E. Smith, Sharon T. Thomas, Oklahoma City, OK, for Appellee.

Larry D. Patton, Lynn C. Rogers, Oklahoma City, OK, for Appellee.

KAUGER, J.:

¶ 1 The issue presented is whether the trial court erred in granting summary judgment to EOG Resources Marketing, Inc., (EOGRM) concerning whether: 1) the district court was the proper forum for the cause; 2) the State Board of Equalization and the Oklahoma Tax Commission had jurisdiction to assess EOGRM for ad valorem taxes; and 3) EOGRM is a public service corporation. We find that it did not.

FACTS

¶ 2 EOGRM is a subsidiary of EOG Resources Inc. EOGRM owns and operates natural gas gathering facilities. The purpose of these facilities is to move natural gas from wells owned by EOG Resources Inc. to the point of sale.

¶ 3 On December 14, 2006, EOGRM brought an action in Oklahoma County District Court seeking a declaratory judgment that the State Board of Equalization and the Oklahoma Tax Commission (collectively, the Board of Equalization) had erroneously classified it as a public service corporation for the purposes of ad valorem taxation for the 2006 tax year, and that the Board of Equalization was without jurisdiction to assess EOGRM's property.¹ On February 9, 2007, the Board of Equalization filed its answer disputing EOGRM's claims and asserting that injunctive relief is barred by 68 O.S.2001 § 2885(A).²

¶ 4 All non-exempt property is taxed ad valorem unless the legislature provides a substitute tax.³ The Oklahoma Constitution authorizes the legislature to classify property for purposes of taxation.⁴ The legislature has classified property into five types for the purposes of ad valorem taxation: 1) real property; 2) personal property; 3) personal property exempted pursuant to the Okla. Const. art. 10, § 6(b); 4) public service corporation property; and 5) railroad and air carrier property.⁵ Generally, the county assessor has the duty of locally assessing ad valorem taxes.⁶ However, public service corporation property and railroad and air carrier property are centrally assessed by the Board of Equalization.⁷ The Oklahoma Constitution fixes the rate for locally assessed real property at 11%-13.5%, but it does not fix the rate for public service corporation property.⁸

¶ 5 This cause is the most recent link in a long chain of related causes that begins with an unpublished Court of Civil Appeals opinion promulgated on April 5, 1996 — Texaco Exploration & Prod., Inc., v. State Bd. of Equalization, No. 85,256 (1996) cert. denied. There, the sole issue was whether Texaco Exploration, a gas gathering company, was a public service corporation for the purposes of ad valorem taxation. Before 1994, Texaco Exploration had been assessed locally, but when the Board of Equalization learned that Texaco Exploration owned and operated gas gathering pipelines, it ordered the company to file reports with the Board of Equalization for the purpose of central assessment. Texaco Exploration filed an action for declaratory and injunctive relief asserting that it was not a public service corporation. The trial court and Court of Civil Appeals agreed, and Texaco Exploration continued to be assessed locally.

¶ 6 On July 1, 1997, the legislature responded to Texaco Exploration by amending 68 O.S. Supp.1997 § 2808(C) to provide that any gas gathering system assessed centrally after January 1, 1997, would continue to be assessed centrally through the 1998 tax year.⁹ This created a brief status quo among existing gas gathering companies.

¶ 7 On December 28, 2001, we addressed the issue of the valuation of the property of gas gathering companies in: In re Assessment for the Year 2000 of Certain Property Owned by Oneok Field Servs. Gathering, LLC, 2001 OK 116, 38 P.3d 900. There, the question presented was whether pipeline rights of way owned by a gas gathering company were to be classified as real property or personal property for assessment by the county assessor. We found that the rights of way were classified by the legislature as real property.

¶ 8 On May 17, 2002, the legislature responded to Oneok by creating the Task Force on Valuation of Gas Gathering Systems Assets (Task Force) to address whether gas gathering systems should be centrally or locally assessed, and how the companies' property should be valued.¹⁰ The Task Force, consisting of three Senators and three Representatives, was to study the issue and make recommendations in a study to be released not later than December 31, 2003.¹¹ This deadline was extended to December 31, 2005, and re-extended to December 31, 2007.¹² The study has yet to be released. At the same time that the legislature created the Task Force, it imposed a moratorium on changes in the valuation or method of assessment of gas gathering assets at 68 O.S. Supp. 2002 § 2851.3.¹³

¶ 9 On June 15, 2007, the Court of Civil Appeals again addressed the issue of whether a gas gathering company was to be centrally or locally assessed for ad valorem taxes in Chesapeake Energy Mktg., Inc. v. State Bd. of Equalization, 2007 OK CIV APP 79, 167 P.3d 446. There, the appellate court found that because the corporation had been assessed locally for the 2002 tax year, 68 O.S. Supp.2002 § 2851.3 was controlling, the status quo was to be preserved, and the Board of Equalization could not assess the corporation.¹⁴ The issue of the constitutionality of § 2851.3 was not addressed in the Court of Appeals' opinion.

¶ 10 On October 26, 2007, the Board of Equalization filed a motion for summary judgment noting that for the years 1994-2005, EOGRM, and/or its predecessor, were centrally assessed without objection. The Board of Equalization argued that because EOGRM was centrally assessed for the 2002 tax year, the Board of Equalization was legislatively mandated by 68 O.S. Supp.2002 § 2851.3¹⁵ to continue assessing EOGRM centrally.

¶ 11 On November 27, 2007, EOGRM responded and moved for summary judgment, arguing that § 2851.3: 1) should be construed to apply only to gas gathering companies which were lawfully assessed as public service corporations in 2002; 2) is a special law in violation of the Okla. Const. art. 5 §§ 46, 59 and art. 10 § 14(A);¹⁶ 3) violates the Uniformity Clause of the Okla. Const. art. 10, § 5(B);¹⁷ 4) violates the Okla. Const. art. 10 § 21(A)¹⁸ by impermissibly extending the jurisdiction of the Board of Equalization; and 5) violates the Equal Protection Clauses of the United States and Oklahoma Constitutions.¹⁹

¶ 12 On April 16, 2008, the trial court granted EOGRM's motion for summary judgment, finding as a matter of law, that: 1) EOGRM is not a public service corporation; 2) Title 68 O.S. Supp.2002 § 2851.3 is an unconstitutional statute; and 3) the Board of Equalization unlawfully assessed EOGRM's property for ad valorem taxes for the years 2006 and 2007. The Board of Equalization filed its petition in error and motion to retain on May 13, 2008. We retained the cause on June 4, 2008.

I.

THE DISTRICT COURT WAS THE PROPER FORUM IN WHICH TO BRING AN ACTION CHALLENGING THE JURISDICTION OF THE BOARD OF EQUALIZATION TO ASSESS EOGRM FOR AD VALOREM TAXES.

¶ 13 Summary judgment is properly granted when there are no disputed questions of material fact and the moving party is entitled to judgment as a matter of law.²⁰ When summary judgment involves only legal questions, the standard of review of a trial court's grant of summary judgment is de novo.²¹ The burden is on EOGRM, as the moving party in this cause, to show beyond a reasonable doubt that 68 O.S. Supp.2002 § 2851.3 is unconstitutional.²² A legislative act is presumed to be constitutional and will be upheld unless it is clearly, palpably and plainly inconsistent with the Constitution.²³

¶ 14 Before addressing EOGRM's arguments on the constitutionality of § 2851.3, the Board of Equalization first argues that under 68 O.S.2001 § 2885(A),²⁴ EOGRM may not seek equitable remedies in district court because jurisdiction over its claim rests with the Court of Tax Review. EOGRM argues that because it is challenging the jurisdiction of the Board of Equalization to assess ad valorem taxes against it, the district court is the proper forum for the action under 68 O.S.2001 § 2886.²⁵

¶ 15 This question was raised in United Airlines, Inc. v. State Bd. of Equalization, 1990 OK 29, 789 P.2d 1305. There, United Airlines brought an action in district court seeking a declaratory judgment that it was not a public service corporation for the purposes of ad valorem taxation, and the Board of Equalization argued that the district court was without subject matter jurisdiction to hear the cause. We determined that the kinds of actions contemplated by § 2885(A) were those in which a taxpayer brings a complaint requesting a correction of equalizations or assessments...