Etc Mktg., Ltd. v. Harris Cnty. Appraisal Dist.
| Decision Date | 13 January 2015 |
| Docket Number | NO. 01-12-00264-CV,01-12-00264-CV |
| Parties | ETC MARKETING, LTD., Appellant v. HARRIS COUNTY APPRAISAL DISTRICT, Appellee |
| Court | Texas Court of Appeals |
On Appeal from the 127th District Court Harris County, Texas
OPINION ON MOTION FOR REHEARING
Appellant ETC Marketing, Ltd. protested the appraisal of its natural gas stored in Harris County and the resulting assessment of ad valorem taxes. In the district court, ETC Marketing moved for summary judgment, arguing that itsnatural gas was in interstate commerce and therefore exempt from ad valorem taxation. Appellee Harris County Appraisal District (HCAD) also moved for summary judgment, arguing that the natural gas was not in interstate commerce, but even if it were, it was nevertheless subject to ad valorem taxation.
The court denied ETC Marketing's motion for summary judgment and granted the appraisal district's competing motion. ETC Marketing appealed the rulings. In our opinion dated October 2, 2014, we held that the stored gas was subject to ad valorem taxation, and we affirmed the trial court's judgment. ETC Marketing filed a motion for rehearing. We grant the motion for rehearing, withdraw our prior opinion and vacate our prior judgment, and issue this opinion and judgment in their stead. Our disposition remains the same.
Background
ETC Marketing and its affiliate, Houston Pipeline Company, conduct business and maintain offices in multiple locations throughout Texas. Both entities have offices and employees in Houston and Dallas.
Houston Pipeline operates an intrastate natural gas pipeline. Its system is located entirely within Texas, although it connects to interstate pipelines. It owns and stores natural gas in the Bammel reservoir, a depleted oil reservoir in Harris County. As such, both Houston Pipeline and its contractual partners who store gas at Bammel rely upon and benefit from local emergency and law enforcementservices provided by Harris County. Houston Pipeline pays ad valorem taxes to the county based on the appraised value of the land, the equipment used to operate the Bammel reservoir, and the "cushion gas," which is natural gas stored for the purpose of maintaining pressure in the reservoir and which is not sold or intended for sale.
Natural gas is often traded across state lines, and title to the gas transfers to whomever the seller "causes [the gas] to be delivered" and at the point where it is delivered. Because natural gas is fungible, the point of sale does not necessarily correspond to a physical location associated with any particular seller's natural gas. Put another way, the natural gas that a marketer offers for sale is not identifiable as any particular molecules of gas that will be delivered to the purchaser. Instead, the marketer offers gas for sale, and the purchaser receives a corresponding amount of gas at the location where it is accepted.
Gas owned by various marketers is physically commingled in the pipeline system. For example, within the Bammel reservoir, gas destined for sale in Texas is physically commingled with gas destined for sale in interstate commerce. Distinct volumes of gas are segregated by paper allocation, which is used for verifying compliance with contracts and pipeline requirements, reporting to the Texas Railroad Commission, and payment of tariffs. The pipeline system controls the physical movement of natural gas, and storage facilities such as the Bammelreservoir are necessary for the efficient movement of the gas and for the regulation of pipeline capacities so that sufficient quantities can be supplied to users during peak demand periods.
ETC Marketing is a natural-gas marketer, which buys, sells, and markets natural gas. It buys natural gas from multiple sellers, principally at the "Katy Hub," which is a central delivery and distribution point for natural gas into and out of Texas. Because of the nature of the operation of the Katy Hub, ETC Marketing is unable to determine whether the natural gas it purchases there originated in Texas.
When ETC Marketing purchases natural gas, it is "immediately entrusted" to its affiliate Houston Pipeline for storage, and ultimately for transportation to purchasers through the pipeline system. ETC Marketing's storage agreement with Houston Pipeline allows it to buy gas and "time the market" by holding it for delivery at a later time.1 Accordingly, ETC Marketing has stored gas in the Bammel reservoir for several months at a time, buying it during warmer monthsand selling it to northern markets in the winter months. The length of time the gas is stored depends on the volume, time of year, and demand for the gas.
ETC Marketing takes the position that all of its gas stored in the Bammel reservoir is in interstate commerce, because its business plan is to sell all of the gas to out-of-state customers. Daniel Hyvl, senior counsel to both ETC Marketing and Houston Pipeline, testified that ETC Marketing was created for the purpose of buying and selling gas in the interstate market, as contrasted with the intrastate business of Houston Pipeline. He explained that all of ETC Marketing's gas "is being sold in interstate commerce, because that's the business they're in, to market the gas . . . and not in competition with the pipeline who's selling in intrastate marketing." However, while ETC Marketing generally has a profit-maximizing motivation to sell its gas only in interstate commerce, there is no legal requirement that it do so. Rather, Hyvl explained that ETC Marketing is "free to sell" its gas wherever it could "get the best price." He also said: its gas stored at Bammel "anywhere it wants to sell it."
HCAD appraised the value of approximately 33 billion cubic feet of natural gas owned by ETC Marketing and stored in the Bammel reservoir for the calendar year 2010, and it assessed ad valorem taxes on the value of that gas. ETC Marketing has admitted that it owns the natural gas that was stored in the Bammelreservoir and was the subject of HCAD's appraisal.2 Yet ETC Marketing protested the tax to the Harris County Appraisal Review Board (ARB), challenging it, in part, on the legal basis that the gas was entirely exempt from taxation because it was in interstate commerce. The ARB upheld the inclusion of the natural gas on the appraisal rolls, and ETC Marketing appealed to the district court. The appeal was premised entirely on the legal argument that the gas was exempt from taxation because it was in interstate commerce. CR 3-8 (original petition); CR 23-32 ().
In the district court, the parties filed competing motions for summary judgment. As summary-judgment evidence, ETC Marketing attached to its motion several affidavits, explaining the facts relating to the storage and transportation of the natural gas at issue and establishing the amount of ad valorem property tax paid by Houston Pipeline for the 2009 and 2010 tax years. HCAD took positions opposite from ETC Marketing: that the gas was not in interstate commerce, but even if it were, it would nevertheless be subject to taxation under the standard of Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S. Ct. 1076 (1977). After considering the arguments made by the parties, the trial court denied ETCMarketing's motion for summary judgment, and it rendered a final judgment in favor of HCAD. ETC Marketing appealed.
Analysis
On appeal, ETC Marketing contends that the trial court erred by denying its motion for summary judgment and by granting HCAD's motion for summary judgment. To prevail on appeal, ETC Marketing must demonstrate both that its natural gas was in interstate commerce, and that the trial court erred in its determination that the gas was subject to ad valorem taxation. We conclude that even if ETC Marketing's stored gas was in interstate commerce, it has presented no compelling legal argument that the gas was immune from local taxation. Accordingly, we will address that issue directly, and we need not separately resolve whether the gas was actually in interstate commerce (including a subsidiary evidentiary issue relevant to that issue3). See TEX. R. APP. P. 47.1.
We review de novo the trial court's ruling on a motion for summary judgment. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). When both sides move for summary judgment, and the trial court grants one motion and denies the other, reviewing courts consider both sides' summary-judgment evidence, determine all questions presented, and render the judgment the trial court should have rendered. Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd's London, 327 S.W.3d 118, 124 (Tex. 2010). Each party moving for traditional summary judgment bears the burden of showing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c); see Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215-16 (Tex. 2003). When a plaintiff moves for summary judgment on its own claim, it must conclusively prove all essential elements of its cause of action. See Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 223 (Tex. 1999); City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979). A defendant moving for summary judgment must conclusively negate at least one essential element of each of the plaintiff's causes of action or conclusively establish each element of an affirmative defense. Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. 1997).
The Texas Constitution provides that "all . . . tangible personal property in this State, unless exempt as required or permitted by this Constitution . . . shall be taxed in proportion to its value, which shall be ascertained as may be provided by law." TEX. CONST. art. VIII, § 1(b). Under the Tax Code,...
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