Ptasynski v. United States
| Decision Date | 04 November 1982 |
| Docket Number | C82-050.,No. C80-302,C80-302 |
| Citation | 550 F. Supp. 549 |
| Parties | Harry PTASYNSKI, John Partridge, Berton W. Avery, Goldie Avery, Frederick S. Johnson, and Calvin Petroleum Corporation, Plaintiffs, v. UNITED STATES of America, Defendant. Independent Petroleum Association of America, et al., Intervenors. John PARTRIDGE, Plaintiff, v. UNITED STATES of America, Defendant. |
| Court | U.S. District Court — District of Wyoming |
Robert F. Nagel and Stephen Williams, University of Colorado, School of Law, Boulder, Colo., William H. Brown and Mike Sullivan, Brown, Drew, Apostolos, Massey & Sullivan, Casper, Wyo., for taxpayer plaintiffs and Ass'n intervenors.
Harold Scoggins, Washington, D.C., for intervenor Independent Petroleum Ass'n of America.
Mark White, Atty. Gen. and Stuart Fryer, Asst. Atty. Gen., Austin, Tex., for intervenor State of Texas.
George J. Domas, Liskow & Lewis, New Orleans, La., for intervenor State of Louisiana.
Gale Norton, Mountain States Legal Foundation, Denver, Colo., co-counsel for intervenors State of Tex. and State of La.
Richard L. Krause, Park Ridge, Ill., for amicus curiae American Farm Bureau Federation.
Brent Kunz, Hathaway, Speight & Kunz, Cheyenne, Wyo., for amicus curiae American Farm Bureau Federation and amicus curiae Wyoming Farm Bureau Federation.
Robert Livingston and Robert L. Baker, Dept. of Justice, Washington, D.C., for defendant United States of America.
The question for consideration in this case is the constitutionality of the Windfall Profits Tax on Domestic Crude Oil. The tax is imposed pursuant to the Crude Oil Windfall Profits Tax Act of 1980, 26 U.S.C. § 4986 et seq. (Act), one provision of which, namely the Alaska oil exemption, 26 U.S.C. § 4994(e) provides the focus of this challenge. This Court has jurisdiction in accordance with 28 U.S.C. § 1346(a)(1) and 28 U.S.C. § 1331(a).
The plaintiffs are taxpayers, made up of independent domestic oil producers and/or royalty owners. The original filing also included the Independent Petroleum Association of America and more than thirty other associations of oil producers and royalty owners as plaintiffs. Though the association plaintiffs were dismissed pursuant to defendant's motion, they were allowed to remain in the action as permissive intervenors. Motions to intervene filed by the states of Texas and Louisiana were also granted. The American Farm Bureau Association and the Wyoming Farm Bureau Association were permitted to file an amicus curiae brief.
The original complaint has been supplemented and amended several times. Presently pending before the Court is the Second Amended and Supplemental Complaint, filed June 29, 1981, to which the defendant has responded.
A subsequent suit filed by plaintiff Partridge (C82-050) for a refund of windfall profit taxes paid in 1980 has been consolidated with the original action.
Plaintiffs, intervenors and defendant have all filed motions for summary judgment. The issue involved is one of law and there are no facts in dispute — the action is appropriate for disposition by summary judgment.
The Act imposes an excise tax on the oil producer for the removal of domestic crude oil. The profit subject to tax is the difference between the removal price and the statutory adjusted base price (with severance and inflation adjustments). The rate of tax is determined based upon the "tier" into which the type of oil and the type of producer is categorized. A more complete picture of the categorization is presented below.
Category Base Price Rate of Tax
See § 4991 See § 4989 See § 4987
Exempt: Not Applicable No Tax
1. Oil owned by Governments
or charities
2. Indian oil
3. Certain Alaska oil
4. "Front-end" oil, meaning
oil the proceeds of which
are used, subject to complex
restrictions, to finance
tertiary recovery
projects
Tier 3
1. Newly discovered oil $16.55, with 30%
2. Heavy oil various
3. Incremental tertiary oil adjustments
Tier 2
1. Stripper oil $15.20, with Independents-30%
2. National Petroleum Reserve various Others-60%
Oil
Tier 1
All other oil Approximately the May 1979 Independents-50%
ceiling price for "upper tier" Others-70%
oil under the price control
system, or about $13
Of particular import to the question of constitutionality is the exemption of certain Alaska oil. Any crude oil (other than that produced from the Sadlerochit Reservoir) which is produced from a well north of the Arctic Circle, or from a well north of the Alaska — Aleutian Range divide which is 75 miles or more from the Trans-Alaska Pipeline System is exempt from the tax. This exemption involves certain oil found only in Alaska and thus is termed "exempt Alaskan oil."
A logical presentation of the issues in this case requires that consideration first be given to the jurisdictional issue of ripeness. Defendant's allegation is that the entire issue is not ripe, at least as to these plaintiffs, because there was no oil produced to which the Alaska oil exemption could be applied during the period of time for which the refund is requested. Therefore, defendant reasons, the tax was uniformly applied during the time period involved in the suit.
Upon a finding by this Court that the issue is ripe for judicial determination, plaintiffs challenge the constitutionality of the Act on two separate theories. One theory is that the existence of the Alaska exemption makes the Act violative of the uniformity clause of the United States Constitution — art. 1, § 8, cl. 1. If the Alaska oil exemption violates uniformity, plaintiffs argue, the remedy is not simply to sever the Alaska exemption, but to invalidate the entire Act.
Plaintiffs' second constitutional challenge involves two related theories based on the fifth amendment to the United States Constitution. Plaintiffs allege that the Act as a whole is unconstitutional because one, it involves confiscation or "taking" of property requiring just compensation, and two, the tax is not rationally related to the goals which the Act seeks to achieve.
The refund period involved in this suit is 1980. No oil was produced in 1980 which was subject to the Alaska exemption. On the basis of these facts, defendant alleges that the tax was uniformly applied in 1980 and thus no claim for relief exists.
The absence of production in the exempt portion of Alaska during 1980 is not relevant to this Court's determination regarding the constitutionality of the Act. There is no allegation by plaintiffs that the Act is unconstitutional simply in its application, i.e. only when production in the Alaska exemption area begins and uniformity is actually in question. The contention is that the Act is unconstitutional on its face and thus, actual production in Alaska aside, plaintiffs have been and are being subjected to an invalid tax.
A matter is not ripe for adjudication when the question involved "emphasizes a prospective examination of the controversy which indicates that future events may affect its structure in ways that determine its present justiciability...." Tribe, American Constitutional Law, § 3-13 at 61 (1978). The only future event involved in this controversy is the actual exemption of Alaska oil. The lack of uniformity, in the Act itself, exists now, and has existed since the Act was passed. This alone is sufficient for a finding that the controversy before the Court is now appropriate for adjudication. However, further support for this decision can be found from the Supreme Court of the United States. Even if the question of uniformity were not actually at issue until the Alaska exemption had been effectuated, plaintiffs were subjected to a tax which was sure to become invalid. Their interest was substantial and the threatened unconstitutionality was certain to occur. "If the injury is certainly impending, that is enough." Carter v. Carter Coal Co., 298 U.S. 238, 56 S.Ct. 855, 80 L.Ed. 1160 (1936); see also Pennsylvania v. West Virginia, 262 U.S. 553, 43 S.Ct. 658, 67 L.Ed. 1117 (1923); Pierce v. Society of Sisters, 268 U.S. 510, 45 S.Ct. 571, 69 L.Ed. 1070 (1925). It shall be noted here, that since 1980 the Alaska exemptions have been applied, and no purpose would be served by forcing the plaintiffs to refile a challenge to this Act.
The issue is disposed of by this Court's finding that the challenge to the constitutionality of the Act is ripe for adjudication, and shall be decided on its merits.
Article 1, § 8, cl. 1 of the United States Constitution provides:
The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States. (Emphasis added)
The power of Congress to tax is very extensive. It has been termed "necessarily unlimited" Austin v. The Aldermen, 7 Wall. 694, 19 L.Ed. 224 (1868), "unfettered" Pacific Insurance Co. v. Soule, 7 Wall. 433, 19 L.Ed. 95 (1868), and without judicial remedy if it is merely "unwise or injurious." Champion v. Ames, 188 U.S. 321, 23 S.Ct. 321, 47 L.Ed. 492 (1903). Of course, constitutional guidelines must be followed, but within the framework of that limitation Congress "is supreme in its action." Pacific Insurance Co. v. Soule, supra 7 Wall. at 443; McCray v. United States, 195 U.S. 27, 57, 24 S.Ct....
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