U.S. Steel Min. Co., LLC v. Helton, 32528.

Citation631 S.E.2d 559
Decision Date02 December 2005
Docket NumberNo. 32528.,32528.
CourtSupreme Court of West Virginia
PartiesU.S. STEEL MINING COMPANY, LLC, Consolidation Coal Company, Laurel Run Mining Company, McElroy Coal Company, Arch Coal, Inc., Mid-Vol Leasing, Inc., Coastal Coal-West Virginia, LLC, Elk Run Coal Company, Inc., Paynter Branch Mining, Inc., Kingston Resources, Inc. Pioneer Fuel Corporation, Peabody Holding Company, Inc., Petitioners Below, Appellants v. The Honorable Virgil HELTON, West Virginia State Tax Commissioner, Appellee.
Concurring Opinion of Justice Davis December 6, 2005.

Concurring and Dissenting Opinion of Justice Benjamin January 4, 2006.

Concurring Opinion of Justice Albright January 12, 2006.

Syllabus by the Court

1. "`When the constitutionality of a statute is questioned every reasonable construction of the statute must be resorted to by a court in order to sustain constitutionality, and any doubt must be resolved in favor of the constitutionality of the legislative enactment.' Point 3, Syllabus, Willis v. O'Brien, 151 W.Va. 628 (153 S.E.2d 178)." Syllabus Point 1, State ex rel. Haden v. Calco Awning & Window Corp., 153 W.Va. 524, 170 S.E.2d 362 (1969).

2. The coal production severance taxes contained in current and earlier versions of W.Va.Code, 11-12B-3 [2000]; 11-13A-3 [2002]; 11-13A-6 [1997]; 22-3-11 [2005]; and 22-3-32 [1994] do not offend the Import-Export Clause of the United States Constitution, art. I, sec. 10, cl. 2.

Herschel H. Rose, III, Esq., Steven R. Broadwater, Esq., Rose Law Office, Charleston, Steven Harlan Becker, Esq., Paul A. Horowitz, Esq., Suzanne Ina Offerman, Esq. Coudert Brothers, New York, NY, for Appellants.

Darrell V. McGraw, Jr., Attorney General, Stephen Stockton, Senior Assistant Attorney General, Charleston, for Appellee.

Perry McDaniel, Esq., Michael J. Meleady, Esq., Office of Legal Services, WV Department of Environmental Protection, Charleston, for Amicus Curiae West Virginia Department of Environmental Protection.

Dennis R. Vaughan, Jr., Esq., Vaughn Law Firm, Charleston, for Amicus Curiae The West Virginia Municipal League, Inc.

Jack C. McClung, Esq., Charleston, for Amicus Curiae West Virginia Association of County Officials, Inc.

Thomas P. Maroney, Esq., Maroney, Weaver, Williams & Pancake, PLLC, Charleston, for Amicus Curiae The West Virginia Labor Federation, AFL-CIO.

Thomas R. Goodwin, Esq., Johnny M. Knisely, II, Esq., Goodwin & Goodwin, LLP, Charleston, for Amicus Curiae The County Commissioners' Association of West Virginia.

Vincent Trivelli, Esq., The Calwell Practice, PLLC, Morgantown, for Amicus Curiae Affiliated Construction Trades Foundation.

STARCHER, J.

In the instant case we uphold a determination by the Circuit Court of Kanawha County that West Virginia's coal production severance taxes are constitutional.

I.

Facts & Background

A.

The appellants are companies that mine and process coal in West Virginia, and then sell that coal. Some of the coal that is mined and processed by the appellants in West Virginia is sold by the appellants to customers for use outside the United States; that is, the coal is exported.

According to the briefs, after the appellants separate coal from the adjoining earth and rocks at a coal mine site in West Virginia, the coal is typically transported to a nearby "raw storage" area, and then is taken to a preparation plant at or near the mine site where the raw coal is cleaned and sized (and may be otherwise processed, by freeze-proofing, etc.). Then the prepared coal that will be exported is typically loaded onto railroad hopper cars, which are hauled by railroad engines to a coastal port, where the coal is transferred from the railroad cars into a ship and transported to a foreign or export destination.

The appellee West Virginia State Tax Commissioner is responsible for collecting certain coal production severance taxes that are imposed on entities like the appellants that produce coal for sale or other commercial use. These taxes, generally referred to as "coal severance taxes," are the subject of the instant case.

The current statutory provisions authorizing these coal severance taxes are found at W.Va.Code, 11-12B-3 [2000]; 11-13A-3 [2002]; 11-13A-6 [1997]; 22-3-11 [2005] and 22-3-32 [1994].1 The language of each severance tax statute is slightly different. Generally speaking, they impose a tax upon persons or entities exercising the privilege of severing, extracting, reducing to possession or producing coal for sale, profit, or commercial use.2

Two of the taxes at issue in the instant case, codified at W.Va.Code, 11-13A-3 [2002] and 11-13A-6 [1997], are calculated as a percentage of the value of the mined and processed coal. Three of the taxes, codified at W.Va.Code, 11-12B-3 [2000], 22-3-11 [2005], and 22-3-32 [1994], are taxes that are calculated as fixed amounts of money assessed per ton mined.

In both cases, pursuant to the practice and regulations of the appellee Tax Commissioner, either the final sales price or the invoiced tonnage of the coal that is sold is used to calculate the taxes; even though this final price or tonnage measurement may in fact be determined only when the coal is delivered to the export carrier ship.

Notably, for purposes of establishing a sales price and value for severance tax calculation, any transportation costs from the preparation plant to the port and thereafter to the customer, if they are absorbed or paid by the seller, are deducted from the actual sales price. This adjusted sales price used as the coal's value for severance tax calculation purposes is referred to in industry parlance as the coal's "F.O.B. ['Free on Board'] Mine" price.3

B.

The appellants argue that the imposition of coal severance taxes in connection with the appellants' mining and processing of coal that is shipped to an export customer violates the "Import-Export Clause" of the United States Constitution, art. I, sec. 10, cl. 2, which states in pertinent part:

No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection Laws....

The instant case began when the appellants, in accordance with the foregoing statutes, for several years paid severance taxes based on their mining and processing of coal sold for export, and then applied to the appellee Tax Commissioner for refunds. The appellants asserted their claim of unconstitutionality before the Tax Commissioner, who denied the appellants' refund claims. The appellants appealed that decision to the Circuit Court of Kanawha County, which in an order dated May 27, 2004, upheld the Tax Commissioner's decision. The appellants have appealed the circuit court's decision to this Court.

According to the Tax Commissioner, the current total refund liability for the taxes at issue in the instant case (and other related pending cases) could be as high as $360 million dollars, not including interest; additionally, $40 to $50 million dollars annually in legislatively-mandated future severance tax revenue will not be collected if West Virginia's coal severance taxes on mining and processing coal for export are held to be constitutionally invalid.

II. Standard of Review

This case presents questions of statutory interpretation and application, and a determination of the constitutionality of several statutes, all of which are matters that this Court reviews de novo. Additionally, as we stated in Syllabus Point 1 of State ex rel. Haden v. Calco Awning & Window Corp., 153 W.Va. 524, 170 S.E.2d 362 (1969):

"When the constitutionality of a statute is questioned every reasonable construction of the statute must be resorted to by a court in order to sustain constitutionality, and any doubt must be resolved in favor of the constitutionality of the legislative enactment." Point 3, Syllabus, Willis v. O'Brien, 151 W.Va. 628 (153 S.E.2d 178).

III. Discussion

In support of their position that the imposition of coal severance taxes in connection with the appellants' mining and processing of coal that is shipped to an export customer violates the "Import-Export Clause" of the United States Constitution, art. I, sec. 10, cl. 2, the appellants principally rely on the case of Richfield Oil Corp. v. State Board of Equalization, 329 U.S. 69, 67 S.Ct. 156, 91 L.Ed. 80 (1946).

In Richfield Oil, the State of California assessed a retail sales tax on a sale of oil by a California refinery to the government of New Zealand. The Supreme Court found that the California sales tax was imposed when the oil was delivered into the hold of the foreign purchaser's ship and into the control of a foreign purchaser; that the sales tax was therefore imposed on the oil while it was in the export transit process; and the tax was therefore an impost or duty that violated the Import-Export Clause.4

In 1976 the focus of Import-Export Clause analysis took a sharp turn in Michelin Tire Corp. v. Wages, 423 U.S. 276, 96 S.Ct. 535, 46 L.Ed.2d 495 (1976).

Finding the terms "impost" and "duty" to be inherently ambiguous, and recognizing a longstanding difficulty in the case law in determining in a principled fashion when goods were or were not in a stream of export or import at the time of taxation so as to invoke the blanket tax exemption set by the Import-Export Clause, the Court "created a regime in which those terms [impost and duty] are conclusions to be drawn from an examination into whether a particular assessment `was the type of exaction that was regarded as objectionable by the Framers of the Constitution.'" U.S. v. I.B.M. Corp., 517 U.S. 843, 858 116 S.Ct. 1793, 1802, 135 L.Ed.2d 124, 138 (1996) (internal citations omitted).

The Court in Michelin adopted an analysis based on the concerns that prompted the founding fathers to write the Import-Export Clause in the first place:

The Framers of the Constitution thus sought to alleviate...

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