Halliburton Co. v. United States, Civ. A. No. 4-82-191-E
| Decision Date | 23 April 1985 |
| Docket Number | Civ. A. No. 4-82-191-E,4-82-300-E. |
| Citation | 611 F. Supp. 1118 |
| Parties | HALLIBURTON COMPANY v. The UNITED STATES of America. |
| Court | U.S. District Court — Northern District of Texas |
Daniel L. Penner, Fort Worth, Tex., for plaintiff.
William W. Guild, Michael E. Green, U.S. Dept. of Justice, Tax Div., Dallas, Tex., for defendant.
Plaintiffs Halliburton Company and Otis Engineering Corporation brought separate refund suits in this Court for manufacturer's excise taxes and interest alleged to be illegally and erroneously assessed by the defendant and paid by Plaintiff Halliburton in the amount of $143,261.851 and by Plaintiff Otis in the amount of $6,604.002 on certain trucks and trailers used by them. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. § 1346(a)(1) and venue is proper in the Northern District of Texas. The cases have been consolidated for trial and were tried before the Court on October 1, 2, 3, and 4, 1984. This Memorandum Opinion is based on evidence presented at trial and the briefs and arguments of counsel and is submitted in lieu of findings of fact and conclusions of law. The sole issue to be decided is whether the various vehicles in issue are "highway vehicles" subject to the manufacturer's excise tax imposed by Section 4061 of the Internal Revenue Code of 1954, 26 U.S.C. § 4061.
Halliburton and Otis are each duly organized and existing corporations with their principal offices in Dallas, Texas and with district offices located in oil and gas producing areas of Texas and other states. They are in the business of providing specialized services utilized in drilling and operating oil and gas wells.
Halliburton's services relevant to this action consist principally of cementing,3 acidizing,4 fracturing,5 logging,6 and perforating7 oil and gas wells at the well site. Otis provides sophisticated electric and non-electric wirelines services for the petroleum industry, by which a variety of jobs are done from the end of a cable (wireline) lowered into the well hole. Both Halliburton's and Otis' oil field servicing equipment is mounted on a truck or trailer chassis in order to provide mobility for the equipment, thus enabling it to be moved to each well site and connected to the well head to be serviced.
The equipment used on a cementing job includes a single HT 400 cementing unit or a twin HT 400 cementing unit, each of which is a pumping unit designed to pump cement that bonds the well casing to the rock down the hole. In an acidizing job, the equipment includes one or more of: a single HT 400 acid pumping unit; a single HT 400 acid pumping unit with low pressure cement mixing equipment; or a single HT 400 acid pumping unit with RCM cement mixing equipment. The acid is pumped down the hole at high pressure and dissolves limestone to enlarge flow channels, thus increasing production. Fracturing, or "frac" jobs require one or more twin HT 400 fracturing units having high pressure pumps, used to force the sand and water mixture down the well and into the formation, and a blender. The blenders mix the "frac" fluid which the pumping unit pumps into the well. For its wireline functions, Otis utilizes a vehicle with sophisticated monitoring equipment on board, and a reel holding the cable to which the tools will be attached. The cement, acidizer, frac unit and blender may be either a bodyload straight truck unit or a tractor-trailer combination unit. Otis' wireline units are all body load units.
Halliburton's units in issue in this case are as follows: (1) Acid Truck; (2) M-50 Blender Truck; (3) Cementing Truck Model 75C3; (4) Cementing Trailer; (5) Fracturing Trailer; (6) Blender Trailer; and (7) Manifold Head Trailer.8 The Acid Truck and M-50 Blender Truck are built on a Model 4070 International Harvester chassis. The Cementing Truck is built on a Model WS 726 LST Mack Chassis. The trailers are all on chassis designed by Halliburton. The Otis units in issue in this case are either built on a Model F-600 Ford Truck or a Model S-1750 International Harvester Truck.
Because this case requires an examination of the nuts and bolts of the chassis upon which plaintiffs' equipment is mounted, it is important to understand the basic framework and operation of these chassis. Structurally and functionally, the chassis consist of four general major component groups—the frame, the drive system, the suspension system, and the cab. The frame consists of two rails, which run parallel to each other from the front of the vehicle to the rear. In the front, the front suspension and the engine are bolted to the frame. The cab covers the engine. Behind the cab, the frame is fully exposed on the top side. Near the rear of the frame, there are two sets of wheels and axles, and the differential, which powers the wheels. This area is called the bogey and the wheels are attached to the frame by means of the rear suspension. At various points along the frame, the individual rails are connected by cross-members. The cross-members perform the function of maintaining the parallelogram of the frame. Cross-members, or something performing the equivalent function, are located in the front of the frame, at the bellhousing near the rear of the engine mounts, at the bogey area, at the rear of the frame, and other areas as required.
The suspension system is the coordinator between the wheels-and-axles combination and the frame. There is a suspension system in the front for the steering axle and a suspension system in the rear, or bogey, area for the driving wheels. The function of the suspension system is to absorb and lessen the vibrations and forces transferred to or on the frame as a result of the physical movement of the vehicle. The drive train is that portion of the chassis which takes the torque created by the engine and transfers it to the driving wheels in the rear. It consists of the engine (which includes the cooling system), transmission(s), and differential. A transmission transfers the torque from the engine to the differential, which, in turn, causes the axle to rotate and thus drives the wheels.
Plaintiffs use the public highways as necessary to move their equipment to the well site or to return to the local office pending the next assignment. The units travel over public highways at an average speed of 30-35 miles per hour although the units are capable of traveling at a maximum speed of 55 miles per hour. Some of the well sites are remotely situated and can be reached only by traveling substantial distances on private roads and off public highways which are often difficult to traverse without specially designed equipment. Approximately 2/3 of the units' time is spent at jobsites and 1/3 is spent in transit. Of the total transit time, 1/3 is spent on the highway and 2/3 is spent on private roads. The average distance to and from a well site is 90 miles round trip with a significant portion of the distance traveled on public highways. Although the chassis engine is necessary for the operation of the deck equipment on each of plaintiffs' units, the deck equipment does not interfere with the operation of the chassis engine on the public highways.9 Neither Halliburton nor Otis hires professional truck drivers to drive the equipment; rather, the truck driver is trained to operate the equipment at the well site.
While the terrain of a typical job may be relatively flat, the equipment is ruggedly constructed in order to meet the exigencies of the extreme conditions of poor lease roads, board roads and mud. In many cases, it is required that the mobile equipment be positioned at the well site by the use of tracked vehicles such as caterpillar equipment. Such positioning is done by either pushing or pulling the unit with a caterpillar from front to rear or rear to front, or, in some instances, by shoving the equipment from side to side. However, the well operator is responsible for providing access roads from the highway to the well site.
Halliburton and Otis each have engineering departments whose function it is to study and develop equipment features necessary to perform most economically and effectively the services rendered by each. The departments are primarily concerned with the special performance of the equipment mounted on the chassis, with the chassis being designed and built by International Harvester, Mack Truck and Ford Motor Company to both Halliburton and Otis' specifications. The chassis, including the special components specified by plaintiffs to accommodate the special needs of their equipment, are delivered to plaintiffs in bare form. Plaintiffs complete the chassis by bolting to the frame the necessary side mounted items, brackets, subframes and additional members, including over-rail cross-members, to be used as equipment mounts. The machinery and well servicing equipment are then bolted and welded to these items.
While plaintiffs' units do use the highway regularly, the units are primarily designed as off-highway vehicles and are predominantly used for an off-highway function. As such, plaintiffs' engineers select the components for a chassis in conjunction with representatives of the chassis manufacturer and the ultimate design incorporates the compromise necessary to satisfy the requisites of highway driving, and offroad use. This is evidenced by the fact that the units are designed to travel on the highway without a special permit, thus avoiding the delays and travel restrictions imposed on the movement of special equipment requiring a special permit.
Many of these chassis components are considered "special" by plaintiffs simply because plaintiffs ordered them but reflect nothing more than customer preference and are found on most heavy duty trucks. Among these standard options are frame supports and cross-member reinforcements, heavy duty bumpers, walking beam suspensions, power take-off units and...
To continue reading
Request your trial
-
Gateway Equipment Corp. v. U.S., 00-CV-51C(SC).
...vehicle's functional time as a factor to be considered in the substantial limitation/impairment assessment. In Halliburton Co. v. United States, 611 F.Supp. 1118 (N.D.Tex.1985), the district court determined that various vehicles used by Halliburton Company and Otis Engineering Corporation ......
-
Worldwide Equipment v. U.S.
...on highways, was primarily designed for off-highway use and fell within the off-highway exception); Halliburton Co. v. United States, 611 F.Supp. 1118, 1121 (N.D.Tex.1985) (holding that vehicles that used the highway on a regular basis were primarily designed for off-highway use and satisfi......
-
Worldwide Equip. Inc v. U.S.A
...than incidental does not necessarily mean the truck was not designed primarily for off-highway use. See Halliburton Co. v. United States, 611 F.Supp. 1118, 1121-22, 1127 (N.D.Tex.1985) (noting that trucks that were primarily designed as off-highway vehicles were not subject to excise tax si......