Etchison Drilling Co. v. Flournoy

• Decision Date: 19 June 1912
• Docket Number: 19,443
• Citation: 59 So. 867,131 La. 442
• Court: Louisiana Supreme Court
• Parties: ETCHISON DRILLING CO. v. FLOURNOY, Tax Collector

59 So. 867

131 La. 442

ETCHISON DRILLING CO. v. FLOURNOY, Tax Collector

No. 19,443

Supreme Court of Louisiana

June 19, 1912

Rehearing Denied November 4, 1912. See concurring opinion of Land, J., 59 So. 872.

Appeal from First Judicial District Court, Parish of Caddo; E. W Sutherlin, Judge.

Action by the Etchison Drilling Company against J. P. Flournoy, tax collector. Judgment for plaintiff, and defendant appeals. Affirmed.

Walter Guion, Atty. Gen., and R. G. Pleasant and Harry Gamble, Asst Attys. Gen., and John R. Land, of Shreveport, for appellant.

Thigpen & Herold, of Shreveport, for appellee.

J. C Pugh, of Shreveport, amicus curiae.

OPINION

SOMMERVILLE, J.

The plaintiff corporation alleging itself to be engaged in the business of drilling for and extracting oil in this state during the years 1910 and 1911, and that it is exempt from license taxation on its business, shows that the defendant tax collector had made demand upon it for the payment of a state license tax of $ 53.58 for the year 1911, being two-fifths of 1 cent on each barrel of oil produced by it during the year 1910, the same being demanded under the provisions of the act passed by the General Assembly of 1910, known as Act No. 196. That act is entitled:

"An act creating a conservation fund, by levying, collecting, and enforcing the payment of an annual license tax upon all persons, associations of persons, business firms and corporations for pursuing the business of selling timber and minerals from the soil, and prescribing the mode and method in which such persons subject to license tax shall make report of their business."

Plaintiff then proceeds to allege the unconstitutionality of Act No. 196, declaring it to be in contravention of article 229 of the state Constitution, prohibiting such license tax; secondly, that said act contravenes article 227 of the Constitution, which specially limits the exercise of the taxing power of the state to certain definite purposes therein recited; thirdly, that the act is in violation of article 225 of the Constitution, which commands an equality and uniformity of taxation; fourthly:

"The classifying as one business the severing of timber and minerals from the soil is unconstitutional, null and void, as in violation of section 1 of the fourteenth amendment of the Constitution of the United States, prohibiting the denial by the state to any person within its jurisdiction of the equal protection of the law, and also prohibiting the depriving of any person of property without due process of law."

The petition then proceeds to set forth the inequality of the license based upon the respective prices of oil, sulphur, timber, sawed logs, etc., as bases for the amount of license imposed under the act. (There was no argument, either oral or printed, in support of this allegation; and it is without merit. It will not be further considered.) By an amended petition plaintiff alleged that the said act was in violation of article 229 of the state Constitution, in that the license tax was not graduated.

Defendant answered, admitting:

"That he is demanding of plaintiff the payment of a license tax to the amount of two-fifths of one cent on each barrel of oil produced by it during the year 1910, and to be paid according to, and under the provisions of Act No. 196 of the General Assembly of the state of Louisiana for the year 1910."

"Defendant further avers that said Act No. 196 of 1910 is not unconstitutional, null, and void, either under the constitution of the state of Louisiana or the Constitution of the United States, for any of the reasons alleged in plaintiff's petition."

The following is the agreed statement of facts upon which the case went to trial:

"In this cause it has been agreed by the counsel representing the respective parties, the plaintiff and the defendant, that the following statement of facts shall take the place of evidence in the trial of this cause:

"The Etchison Drilling Company is a corporation under the laws of Louisiana, and is engaged in the business of drilling for oil in the parish of Caddo, and was so engaged during the year 1910.

"The tax collector has demanded, and is demanding, of the plaintiff payment of license tax under Act No. 196 of 1910, as a prerequisite to the conduct of its business during the year 1911.

"That the value of crude oil at the mouth of the well averaged during the year 1910 40 cents per barrel, and that it is now worth 44 cents per barrel.

"That crude sulphur is now worth at the mouth of the mine $ 18 per ton.

"That pine timber cut into saw logs in the country was worth $ 5 to $ 7 per thousand.

"That hardwood timber cut into saw logs is worth on an average $ 10 per thousand.

"That stavebolts are now worth $ 15 per thousand.

"That piling is now worth $ 15.

"That telephone and telegraph poles are worth $ 5 a pole.

"That crude salt is worth at the mouth of the mine from $ 1 to $ 2.

"That gas at the mouth of the well is worth 25 cents for 10,000 cubic feet.

"Or, in other words, it is admitted that the license tax levied by the act in controversy on the business of producing oil, or any other business named in the act, has no reference by comparison, the one to the other, in so far as intrinsic value is concerned.

"It is admitted that there are natural products severed from the soil in the state of Louisiana, such as cutting cross-ties, pine poles other than telegraph and telephone poles and piling, and cordwood, that do not give rise to any license tax under that act.

"That each of these various products is subject to fluctuation in price, and so does fluctuate from time to time.

"The above is agreed upon as a statement of facts. Counsel for the tax collector objected to the admissibility of the testimony as irrelevant, and same was admitted subject to the objection."

The conservation of the natural resources of the state became an object of legislation by the General Assembly in the year 1908; when, by Act No. 144, § 2, provision was made for "the prevention of waste in the extraction of oil, gas and other minerals." This is the first instance called to our attention where the Legislature denominated oil as a mineral. Although it has always been technically so considered, the Congress of the United States, in the year 1897 (section 2333, Revised Statutes), passed an act classing petroleum as a mineral, in the sense of the mining laws of the United States. In the record under consideration is found "the report of the Louisiana Conservation Commission of 1910" to the Governor of this state. That commission was formed under Act No. 144 of 1908, above referred to. In this report is found the declaration of the Governors of states and territories of the United States of America, which had assembled on the request of the President of the United States. In that document we find the following:

"We recommend the enactment of laws looking to the prevention of waste in the mining and extraction of coal, oil, gas, and other minerals, with a view to their wise conservation for the use of the people, and to the protection of human life in the mines."

In the course of the report of the commission, we find the following:

"In the outset the commission agreed that there are two kinds of resources; exhaustible and inexhaustible. Examples of the exhaustible classes are minerals like oil, gas, sulphur, salt and coal."

And, again, under the heading "Minerals," we find the following:

"The mineral resources of Louisiana afford a large, and for the most part, valuable and important variety. Among those which will be hereafter mentioned in detail are oil, gas, sulphur, salt, gravel, and brick clays, all of which are being commercially used, and productive of extensive commercial operations."

And, again, under "Conclusions and Recommendations," we find under the subheading "Minerals" the following:

"There should be strict laws enacted to prevent economic waste in the extraction of minerals, particularly with reference to natural gas."

Acting upon the recommendation or report of the Louisiana Conservation Commission, the General Assembly in 1910 undertook to deal with the subject of the conservation of the natural resources of this state, and adopted several acts referring thereto.

Act No. 154 is the first, and it is a joint resolution proposing an amendment to article 229 of the Constitution by striking therefrom the exemption from licenses of those who may be engaged in mining pursuits, and thus permitting the Legislature to impose license taxes upon persons who follow mining pursuits; clearly intending to include persons who produce oil, gas, and other minerals.

Act No. 172 makes appropriation to defray the expenses of the Conservation Commission.

Act No. 196 creates a conservation fund by levying, collecting, and enforcing payment of an annual license tax upon all persons, associations of persons, or business firms or corporations, pursuing the business of severing timber and minerals from the soil, etc.

Act No. 254 is "to establish a department of mining and minerals, including oil and gas production," etc.

Act No. 261 establishes the "department of forestry," etc.

In the proposed amendment to article 229 of the Constitution (Act No. 154) the Legislature used the following language:

JOINT RESOLUTION.

Proposing an amendment to article 229 of the Constitution of the state of Louisiana.

"Section 1. Be it resolved by the General Assembly of the state of Louisiana, two-thirds of all the members elected to each house concurring. That an amendment to the Constitution of the state of Louisiana be submitted to the qualified electors of the state for their approval or rejection, as required by article 321...