Mississippi River Fuel Corporation v. Cocreham

• Citation: 247 F. Supp. 819
• Decision Date: 30 November 1965
• Docket Number: Civ. A. No. 2898.
• Parties: MISSISSIPPI RIVER FUEL CORPORATION v. Roland COCREHAM, Collector of Revenue of the State of Louisiana.
• Court: U.S. District Court — Eastern District of Louisiana

247 F. Supp. 819

MISSISSIPPI RIVER FUEL CORPORATION v. Roland COCREHAM, Collector of Revenue of the State of Louisiana.

Civ. A. No. 2898.

United States District Court E. D. Louisiana, Baton Rouge Division.

November 30, 1965.

Clyde R. Brown, Shotwell & Brown, C. McVea Oliver, Oliver, Digby & Fudickar, Monroe, La., Clarence L. Yancey, Cook, Clark, Egan, Yancey & King, Shreveport, La., for plaintiff.

Emmett E. Batson, Chapman L. Sanford, Cyrus A. Greco, Attys., Dept. of Revenue, Baton Rouge, La., for Collector of Revenue, State of Louisiana.

WEST, District Judge:

In this suit plaintiff, Mississippi River Fuel Corporation, challenges the right of the defendant, State of Louisiana, through its Collector of Revenue, to levy and collect a severance tax on oil, gas, or other minerals severed from property located within the State of Louisiana but owned by the United States Government, and on which plaintiff, a private corporation, holds an oil and gas lease. In the year 1930, the United States acquired title from the City of Shreveport, the State of Louisiana, and the Board of Commissioners of Bossier Levee District to some 22,000 acres of land in Bossier Parish, Louisiana. During the years 1930, 1931, and 1932, the United States constructed runways, administration buildings, hospitals, barracks, machine shops, hangars, and other facilities required for the operation of an air base known as Barksdale Air Force Base. Since September 1, 1963, plaintiff, through its Natural Gas and Oil Division, has been producing oil and gas from certain portions of this property under and by virtue of certain oil and gas leases granted it by the United States on August 1, 1951, and February 1, 1961. Defendant, acting in his capacity as Collector of Revenue for the State of Louisiana, has demanded that plaintiff pay to the State of Louisiana severance taxes on all oil and gas severed from the property in accordance with the provisions of Louisiana's Severance Tax Statute, LSA-R.S. 47:631 et seq. The defendant contends that severance taxes in the amount of $55,071.40 are due and owing for the month of September, 1963, and that additional severance taxes are due and owing for each month thereafter, the amount thereof to be figured by the quantity of gas and/or oil severed from the land as provided for by said statutes.

Plaintiff argues that the State of Louisiana is without authority to levy or collect this tax for the reason that exclusive jurisdiction over these lands from which the oil and gas is being produced has been lawfully acquired and is being exercised by the United States of America, and that any attempt on the part of the State of Louisiana to levy or collect these taxes constitutes an unlawful intrusion on the exclusive jurisdiction thus vested in the United States of America.

It is agreed by all parties that the State of Louisiana has made no effort to levy or collect severance taxes on the royalty interest of the United States in the oil and gas severed under these leases. The State is attempting only to levy and collect severance taxes on the oil and gas severed for the account of plaintiff.

This matter was argued to the Court, briefs were filed, and the matter submitted on the above stipulated facts. The only question before this Court is whether or not, when the United States acquired title to the land in question, it acquired such "exclusive jurisdiction" over the property as to preclude the State of Louisiana from levying and collecting a severance tax on oil and gas severed therefrom by a third party producing the oil and gas pursuant to a lease acquired from the United States. This Court concludes, for the following reasons, that the State of Louisiana does have the right to collect these taxes from the plaintiff, and that to do so in no way infringes upon the "exclusive jurisdiction" of the United States over the land in question.

The defendant readily concedes that the United States has exclusive jurisdiction over the land comprising Barksdale Air Force Base, but it does not agree that this exclusive jurisdiction extends to the oil and gas actually produced and severed from the land and thus reduced to possession and ownership by one other than the United States of America. It must be borne in mind that the State of Louisiana has not attempted to assess an ad valorem tax against the land owned by the United States, nor has it in any way attempted to assess a severance tax or any other form of tax against the United States. It clearly could not legally do this, and it has not attempted to do so. The only tax it has levied is a severance tax against the plaintiff, a private corporation, producing oil and gas under a lease which it happened to have acquired from the United States. The tax in question is assessed pursuant to the provisions of Article X, Section 21, of the Louisiana Constitution of 1921; LSA-R.S. 47:631; and LSA-R.S. 47:634. Article X, Section 21, of the Louisiana Constitution of 1921, provides, in pertinent part, as follows:

"Taxes may be levied on natural resources severed from the soil or water, to be paid proportionately by the owners thereof at the time of severance; * * * Such natural resources may be classified for the purpose of taxation and such taxes may be predicated upon either the quantity or value of the products at the time and place of severance. No severance tax shall be levied by any Parish or other local subdivision of the State.

"No further or additional tax or license shall be levied or imposed upon oil, gas or sulphur leases * * *."

LSA-R.S. 47:631 provides:

"Taxes as authorized by Section 21 of Article X of the Constitution of Louisiana, are hereby levied upon all natural resources severed from the soil or water, including * * * minerals such as oil, gas, * * *."

LSA-R.S. 47:634 provides:

"* * * (3) `Severed' means the point at which the natural resources are severed from the surface of the earth or water."

No one here in any way questions the right of the State of Louisiana generally to levy and collect severance taxes pursuant to the above mentioned provisions of law. The question presented is whether or not, by virtue of the "exclusive jurisdiction" acquired by the United States over the land from which the oil and gas is severed, the State has lost its taxing authority not only as it pertains to the land involved but also as it pertains to the oil and gas severed therefrom.

It is too well settled in the law of Louisiana to permit of argument that the oil and gas beneath the soil is not subject to ownership until it has been reduced to possession. See Frost-Johnson Lumber Company v. Salling's Heirs, 150 La. 756, 91 So. 207 (1922) and cases cited therein. While plaintiff argues strenuously that several cases both before and after Frost-Johnson establish the fact that the owner of the land also owns the oil and gas beneath it, its argument is not persuasive. Plaintiff apparently confuses the ownership of the oil and gas with the landowner's right to reduce the oil and gas to possession. This latter right does not confer ownership of the oil and gas prior to its severance from the land.

Plaintiff quotes from the case of Rives v. Gulf Refining Co., 133 La. 178, 62 So. 623 (1913), wherein the Supreme Court of the State of Louisiana stated:

"Oil and gas, until severed from the realty, are as much a part of it as coal or stone. So long as they remain in the ground outside of an artificial receptacle at least, as the casing of a well or a pipe line, they must be treated as a part of the realty underneath the surface where they lie. The owner of the surface is the owner of the oil and gas beneath it; but, if they escape into the land of another, he ceases to be the owner of them."

But plaintiff fails to quote what follows in that opinion, wherein the Court said:

"It has been said repeatedly by the courts and writers that the owner of the soil owns the gas and oil beneath its surface; and expressions to this effect will be found in Thornton's work on the Law Relating to Oil and Gas. This is an acknowledgment of the absolute ownership of the gas and oil beneath the surface by the owner of the land. But, under the Indiana decisions, which have met with the approval of the Supreme Court of the United States, the owner of the land has only a qualified right to the oil and gas beneath the surface — the rights to reduce it to possession and to exclude all others exercising the right on the premises — and title in him to it does not vest until he has reduced it to actual possession, either by bringing it into a well or into a pipe line, or into a tank or other receptacle in case of oil. Until that has happened the gas or oil by natural forces may escape from his land, and be reduced to possession by another, and become his property."

The Court then quoted, with approval, from the case of Heller v. Dailey, 28 Ind. App. 555, 63 N.E. 490, as follows:

"The owner of land is not, by virtue of his proprietorship thereof, the absolute owner of the oil and gas in and under it in its free and natural state, not yet reduced to actual control of any person, but he, together with the other owners of land in the gas field, has a qualified ownership, consisting of or amounting to his exclusive right to do what may be done on, through, or under his land (as making of wells) necessary to reduce the minerals to his possession, and, by thus acquiring the exclusive control to become the owner of the mineral substances as his personal property, * * *"

Strother v. Mangham, 138 La. 437, 70 So. 426 (1915), also cited by plaintiff, and also being a case decided before Frost-Johnson, does not stand for the proposition that the owner of the land owns the minerals beneath it, but merely holds that the surface owner has the right to reduce the minerals to possession. Plaintiff further relies on such cases as Federal Land Bank of New Orleans v. Mulhern, 180 La. 627, 157 So. 370 (1934); Gliptis v....