UNITED STATES OF AMERICA, APPELLANT V. HARRY PTASYNSKI, ET AL.

   No. 82-1066

   In the Supreme Court of the United States

   October Term, 1982

   On Appeal From the United States District Court for the District of
Wyoming

   On appeal from the United States District Court for the District of
Wyoming

            TABLE OF CONTENTS
   Opinion below
   Jurisdiction
   Constitutional provisions and statutes involved
   Statement
          A. The statute
          B. The proceedings below
   The questions are substantial
          1. The background of the Alaska oil exemption
          2. The uniformity clause
          3. The separability clause
   Conclusion
   Appendix

                             OPINION BELOW

   The memorandum opinion of the district court (App. A, infra,
1a-11a) is not yet officially reported.

                             JURISDICTION

   Several of the appellees brought these suits in the United States
District Court for the District of Wyoming, seeking a refund of
windfall profit taxes, a declaratory judgment that the Crude Oil
Windfall Profit Tax Act of 1980, Pub. L. No. 96-223, 94 Stat. 229 et
seq., is unconstitutional, and injunctive relief restraining the
further assessment and collection of such taxes.  On November 4, 1982,
the district court entered a judgment directing that appellees recover
windfall profit taxes plus interest for the taxable periods in
question in unspecified amounts to be later determined by the parties
(App. B, infra, 12a-13a).  On November 12, 1982, the district court
entered an amended order awarding judgment in favor of appellees in
the amounts sought in the pleadings, with interest as provided by law,
and also specifically setting forth the court's holding that the Crude
Oil Windfall Profit Tax Act of 1980 is unconstitutional (App. C,
infra, 14a-15a).  On November 15, 1982, the district court entered a
further amended judgment order limiting its ruling of
unconstitutionality to the provisions of Title I of the Crude Oil
Windfall Profit Tax Act (26 U.S.C. (Supp. V) 4986 to 4998 and related
administrative provisions) (App. D, infra, 16a-17a).  On November 18,
1982, the United States filed a notice of appeal from all three
judgment orders (App. E, infra, 18a).  The jurisdiction of this Court
rests on 28 U.S.C. 1252, which authorizes a direct appeal to this
Court from an interlocutory or final judgment of a court of the United
States holding an Act of Congress unconstitutional in a civil action
to which the United States is a party.  /1/

            CONSTITUTIONAL PROVISIONS AND STATUTES INVOLVED

   Article I, Section 8, Clause 1 of the United States Constitution is
set forth at Appendix F, infra, 19a.  Title I of the Crude Oil
Windfall Profit Tax Act of 1980, Pub. L. No. 96-223, 94 Stat. 229, and
Section 7852(a) of the Internal Revenue Code of 1954 (26 U.S.C.) are
set forth at Appendix G, infra, 20a-63a.

                          QUESTIONS PRESENTED

   1. Whether the exclusion of certain categories of Alaskan oil (26
U.S.C. 4991(b)(3)) from the coverage of the Crude Oil Windfall Profit
Tax Act of 1980, violates the Uniformity Clause (Article I, Section 8,
Clause 1) of the Constitution, which requires that "Duties, Imposts
and Excises shall be uniform throughout the United States."

   2. Assuming the answer to Question No. 1 is in the affirmative,
whether the constitutionality of the remaining provisions of Title I
of the Crude Oil Windfall Profit Tax Act should be upheld, pursuant to
the separability clause of Section 7852(a) of the Internal Revenue
Code of 1954.

                               STATEMENT

                            A. The Statute

   On April 2, 1980, the President signed the Crude Oil Windfall
Profit Tax Act of 1980.  Title I of that Act, 94 Stat. 230 et seq.,
added Sections 4986 through 4998 to the Internal Revenue Code of 1954
(26 U.S.C. (& Supp. V)) together with related administrative
provisions.  /2/ Under Title I of the Act, an excise tax is imposed
(subject to certain exemptions) on the "windfall profit" derived from
the production of domestic crude oil after February 29, 1980 (Sections
4986(a) and 4991(a)).  The "windfall profit" subject to the tax is
determined (on a per barrel basis) by reference to the difference
between the "removal price" (generally the price at which the oil is
sold at the wellhead) and an "adjusted base price" reflecting, with
certain adjustments, the price at which such oil would have been sold
in 1979, under varying assumptions applicable to different categories
of oil (Sections 4988(a), 4988(c) and 4989)).  /3/ An offset, however,
is allowed for state severance taxes attributable to the value of the
oil in excess of its "adjusted base price" (Sections 4988(a)(2) and
4996(c)).  Finally, in no event can the taxable "windfall profit"
exceed 90 percent of the net income attributable to the oil (Section
4988(b)).

   The rate of the tax varies between 30 percent and 70 percent of the
"windfall profit" so determined. The rate depends upon the particular
category of the oil (Section 4987(a)).  The lowest rate (as well as
the most favorable "base price" (see note 3, supra)) is applicable to
"tier 3 oil" (which includes "newly discovered oil," "heavy oil" and
"incremental tertiary oil" (Sections 4991(e) and 4993)).  /4/ The 30
percent rate also applies to "independent producer oil" (Section 4992)
that also qualifies as "tier 2 oil" (which is oil from "stripper well
properties" and from economic interests in National Petroleum Reserves
held by the United States (Section 4991(d)).  The highest rate (as
well as the least favorable "base price") applies to "tier 1 oil"
(which includes all nonexempt domestic oil other than "tier 2" or
"tier 3 oil" (Section 4991(c)) that does not qualify as "independent
producer oil." "Tier 1 oil" that qualifies as "independent producer
oil" and "tier 2 oil" that does not qualify as "independent producer
oil" are taxable at the intermediate rates of 50 and 60 percent,
respectively.

   Section 4991(b) exempts certain classes of oil from the tax.  The
exempt categories are:  (1) oil from "qualified governmental
interest(s)" (Section 4994(a));  (2) oil from "qualified charitable
interest(s)" (Section 4994(b));  (3) certain oil from interests held
by or for Indian tribes or their members or produced by corporations
organized under the Alaska Native Claims Settlement Act, 43 U.S.C.
1601 et seq. (Section 4994(d));  (4) "front-end tertiary oil" (Section
4994(c));  and (5) "exempt Alaskan oil" (Section 4994(e)).  The latter
category includes certain oil produced "(1) from a reservoir from
which oil has been produced in commercial quantities through a well
located north of the Arctic Circle, or (2) from a well located on the
northerly side of the divide of the Alaska-Aleutian Range and at least
75 miles from the nearest point on the Trans-Alaska Pipeline System"
(Section 4994(e)).  Exempt Alaskan oil does not include, however,
"Sadlerochit oil," defined as "crude oil produced from the Sadlerochit
reservoir in the Prudhoe Bay oilfield" (Section 4996(d)(3)).  /5/

   The liability for the windfall profit tax is ultimately placed on
the "producer" of the oil (Section 4986(b)), defined generally as "the
holder of the economic interest with respect to the crude oil"
(Section 4996(a)(1)).  Section 4995, however, requires that the tax be
withheld from the hase price by the first purchaser of the oil, and
further provides that the producer shall thereafter be treated as
having paid the amount so withheld.  /6/

                       B. The Proceedings Below

   Five of the appellees are independent domestic oil producers and/or
royalty holders who alleged that they were subject to the windfall
profit tax.  /7/ They brought this action seeking:  (1) a declaratory
judgment that the Aslaskan oil exemption from the windfall profit tax
violates the Uniformity Clause of Article I, Section 8 of the
Constitution, and that the tax violates the Due Process and Taking
Clauses of the Fifth Amendment to the Constitution;  (2) an
adjudication that all such taxes were illegally assessed and
collected;  and (3) an order directing the government to refund all
such taxes.  /8/

   On cross motions for summary judgment, the district court concluded
that the "exempt Alaskan oil" provision of the Windfall Profit Tax Act
is unconstitutional under the Uniformity Clause.  /9/ It reasoned that
"(t)he Act, on its face, says that one state, Alaska, is not subject
to the same tax, at the same rate as all the other states.  This is a
clear violation of the constitutional requirement of uniformity" (App.
A, infra, 7a).  In so holding, the court rejected the government's
argument that a rational justification for the Alaskan oil exemption
supported its validity.  As the court saw the matter, "(l) egitimate
exemptions from tax can exist, but the exemption must be one which is
not constitutionally forbidden.  The Constitution has unequivocally
set forth a limitation on indirect taxation -- uniformity -- which has
been narrowly, but precisely defined by the judiciary.  Distinctions
based on geography are simply not allowed" (ibid).  /10/

   The court further rejected the government's alternative contention
that, at all events, the remaining provisions of the Act should be
held valid and effective, pursuant to the "separability clause" set
forth in Section 7852(a) of the Internal Revenue Code of 1954, with
respect to all domestic oil production not subject to other valid
exemptions.  In so ruling, the court stated that it would have given
more "deferential consideration" to a separability clause written into
the Windfall Profit Tax Act itself, but held that Section 7852(a) of
the Internal Revenue Code of 1954 (to which the windfall profit tax
provisions were added) did not provide a basis for sustaining the
remaining tax provisions (App. A, infra, 8a).  In the district court's
view, it was "clear that the Alaska exemption was the result of
negotiations and compromise, and that the Act as it exists today would
not have been passed without the invalid Alaska provision" (App. A,
infra, 9a).  Hence, it concluded that applying the "separability
clause" of Section 7852(a) in such a way as to extend the tax to
Alaskan oil would require the court to engage in impermissible
judicial legislation (App. A, infra, 7a-10a).  /11/

                     THE QUESTIONS ARE SUBSTANTIAL

   In holding unconstitutional the windfall profit tax provisions
added to the Internal Revenue Code of 1954 by the Crude Oil Windfall
Profit Tax Act of 1980, the district court has invalidated an
important federal tax statute that Congress enacted as an integral
part of the decontrol of domestic oil pricing.  The amounts at stake
are of enormous magnitude.  It is estimated that the net windfall
profit tax revenues from the inception of the tax through the end of
the 1982 fiscal year are in excess of $26 billion, and that the net
revenues during the next five years will be approximately $50 billion.
 /12/ This Court should note probable jurisdiction in order to resolve
the important constitutional questions presented and to resolve
definitively the validity of the windfall profit tax provisions of the
Internal Revenue Code.

   1. The Background of the Alaska Oil Exemption.  Congress enacted
the windfall profit tax in response to President Carter's decision in
April 1979, to begin phasing out the price controls that had been
imposed on domestic oil since 1971.  Oil price controls had been
extended and made mandatory through May 31, 1979, by the Energy Policy
and Conservation Act of 1975, Pub. L. No. 94-163, 89 Stat. 871.  That
Act gave the President discretionary authority to extend such controls
from May 31, 1979, through September 30, 1981.  At the time domestic
crude oil prices were first frozen in 1971, the price of crude oil had
risen from a prevailing price of about $2.90 per barrel during the
prior decade, to $3.39 per barrel.  By June 1979, the uncontrolled
world price for oil (including transportation costs to the United
States) had risen to nearly $20 per barrel, with "spot market" prices
occasionally exceeding $30 per barrel.  At the same time, the average
controlled price of domestic "old oil" was $5.86 per barrel, and the
average controlled price of domestic "new oil" was $13.06 per barrel.
President Carter's announcement indicated that existing controls would
be phased out over a period beginning in January 1980, and ending on
October 1, 1981, the effective date of expiration of the President's
authority under the Energy Policy and Conservation Act of 1975.  See
H.R. Rep. No. 96-304, 96th Cong., 1st Sess. 4-7 (1980).  /13/

   The President proposed the windfall profit tax as an integral part
of his plan to phase out existing price controls "(i)n order to
prevent oil producers from reaping excessive profits from decontrol *
* * ." H.R. Doc. No. 96-107, 96th Cong., 1st Sess. 1 (1979).  The
President noted that the gradual removal of price controls on domestic
oil would encourage exploration and production, eliminate inequities
and inefficiencies under the existing system of controls, reduce
United States dependency on foreign oil, and reduce the adverse
balance of payments attributable to the importation of oil.  He
further concluded, however, that "deregulation of domestic oil prices
will also provide enormous windfall gains for domestic producers of
oil" as domestic oil prices rise to the prevailing world price, which
had been drastically affected and could continue to be affected by
actions taken by the nations participating in the "OPEC cartel" (id.
at 1-2).

   In favorably reporting on the proposed legislation, the House Ways
and Means Committee similarly noted that decontrol of domestic oil
prices would lead not only to "limited increases in production," but
also to increases in profits to oil producers "far in excess of what
most of them originally anticipated when they drilled their wells and
in excess of what they might now be expected to invest in energy
production." H.R. Rep. No. 96-304, supra, at 7.  Thus, it agreed that
"the additional revenues received by oil producers and royalty owners,
both as a result of decontrol of oil prices and as a result of
increases in world oil prices substantially prevailing in 1978, are an
appropriate object of taxation" (ibid.).  See also S. Rep. No. 96-394,
96th Cong., 1st Sess. 27 (1979).  /14/

   As we have noted (pages 3-4, supra), the tax that Congress
ultimately adopted is imposed at varying rates, and the "windfall
profit" subject to the tax is computed on varying bases, depending on
the type of oil produced, /15/ the nature of the producer, /16/ the
circumstances and manner under which the oil is produced, /17/ and the
time such oil was discovered and went into production.  /18/ While the
pattern of classifications and exemptions was modified in certain
respects as the proposed legislation was considered by both houses of
Congress, the primary objective remained "to impose relatively high
tax rates where production cannot be expected to respond very much to
further increases in price and relatively low tax rates on oil whose
production is likely to be responsive to price." H.R. Rep. No. 96-304,
supra, at 7.  See also S. Rep. No. 96-394, supra, at 7, 9.

   Because of the unique climatological difficulties in oil extraction
in the "North Slope" areas of Alaska, Congress recognized from the
outset that oil produced in that distinct region presented a special
case with respect to both the existence of "windfall profits" and the
determination of the appropriate tax to be imposed.  Under the
original Administration proposal, all oil produced from wells north of
the Arctic Circle would have been exempt from the tax.  H.R. 3919,
96th Cong., 1st Sess. Section 2 (1979).  At that time, because of the
extraordinary transportation costs involved, Alaskan oil was selling
for a wellhead price that was far below what eventually became the
lowest "base price" for computing the taxable "windfall profit."
Moreover, it was expected that the Alaskan wellhead price would remain
$8 to $9 less per barrel than the uncontrolled price of oil in the
lower 48 states.  H.R. Rep. No. 96-304, supra, at 30.  See also Staff
of Joint Comm. on Taxation, 96th Cong., 1st Sess., The Design of a
Windfall Profit Tax 21 (Comm. Print 1979).  Accordingly, the Secretary
of the Treasury expressed the view that "there are no windfalls that
will be gained by the producers of Alaskan crude." Windfall Profits
Tax and Energy Trust Fund:  Hearings Before the House Comm. on Ways
and Means, 96th Cong., 1st Sess. 27 (1979) ("House Hearings").  As the
Secretary explained, "(i)t is easier to exempt Alaskan production from
the tax than to require Alaskan producers to file tax returns solely
for the purpose of showing that no liability has been incurred." House
Hearings, supra, at 19.  /19/

   The House Committee, and the House itself, agreed to the concept of
exempting "new oil" produced from wells north of the Arctic Circle,
but proposed to exclude "Sadlerochit oil" -- which had already gone
into production -- from the scope of that exemption.  The bill as
reported by the Senate Finance Committee would have eliminated the
necessity of providing such a specific exemption for new North Slope
oil by proposing to exempt all "newly discovered oil" from the scope
of the tax.  S. Rep. No. 96-394, 96th Cong., 1st Sess. 2, 42-43
(1979).  /20/ A floor amendment proposed by the Majority Leader
Senator Robert Byrd, and approved by the Senate, however, provided for
the imposition of a 10 percent tax on the "windfall profit" from
"newly discovered oil (other than newly discovered oil produced north
of the Arctic Circle)." 125 Cong. Rec. S18564-S18568, S18863 (daily
ed. Dec. 14 and 17, 1979).  /21/

   Thus, while the bills passed by the House and the Senate differed
on a number of points, both ultimately provided for taxing "newly
discovered oil," but on a favorable basis and subject to an exemption
for new oil (i.e., oil other than Sadlerochit oil) produced north of
the Arctic Circle.  The legislation thereafter took its final form in
the version approved by the conferees assembled to reconcile the
differences between the Senate and House bills.  The conference
version expanded the scope of the Alaskan exemption to include oil
that might be produced in areas south of the Arctic Circle, but north
of the divide of the Alaskan-Aleutian mountain range, if produced from
a well that is at least 75 miles from the nearest point on the
Trans-Alaskan Pipeline System.  The conference report noted that this
exemption "reflects the concern of the conferees that taxation of this
production would discourage exploration and development of reservoirs
in areas of extreme climatic conditions." H.R. Conf. Rep. No. 96-817,
96th Cong., 2d Sess. 103 (1980).  The conference version was approved
without further change, by the House by a vote of 302 to 107 (126
Cong. Rec. H1861 (daily ed. Mar. 13, 1980)) and by the Senate by a
vote of 66 to 31 (126 Cong. Rec. S3151 (daily ed. Mar. 27, 1980)).

   2. The Uniformity Clause.  a. Prior to the decision below, no
taxing statute had ever been held invalid on the ground that it
violated the Uniformity Clause of Article I, Section 8 of the
Constitution.  In ruling that the windfall profit tax violated that
clause, the district court concluded that "(d)istinctions based on
geography are simply not allowed" (App. A, infra, 7a).  Thus, it ruled
that the "exempt Alaskan oil" provisions of Sections 4991(b)(3) and
4994(e) of the 1954 Code rendered the tax unconstitutional per se
without regard to any rational justification that might exist for the
exempt classification.  The court's ruling rests upon a literal
application of this Court's statement in the Head Money Cases, 112
U.S. 580, 594 (1884), that a "tax is uniform when it operates with the
same force and effect in every place where the subject of it is
found."

   But the district court's conclusion that an excise tax is not
uniform and therefore violates Article I, Section 8 where any
geographical considerations are employed in the definition of the
"subject" of or exemptions from the tax, is not supported by the
actual holding of the Head Money Cases.  Nor do the underlying
purposes of the Uniformity Clause compel such a per se rule against
taking any geographic considerations into account in taxing statutes.
As Joseph Story explained in his classic constitutional text:

         The answer to the * * * (uniformity requirement) may be given
      in a few words.  It was to cut off all undue preferences of one
      state over another, in the regulation of subjects affecting
      their common interests.  Unless duties, imposts and excises were
      uniform, the grossest and most oppressive inequalities vitally
      affecting the pursuits and employments of the people of
      different states might exist.

J. Story, Commentaries on the Constitution of the United States,
Section 957, at 673 (2d ed. 1851).

   In short, the Uniformity Clause was designed to prevent
"combinations" that might, through the exercise of the taxing power,
strike at the "vital interests" of one region.  Ibid.  See also
Warren, The Making of the Constitution 587-588, 726-727 (2d ed. 1937).
 Quite the opposite happened here, where substantial congressional
majorities recognized and chose to accommodate special circumstances
confined to a limited geographical area.  The role of judicial review
in our constitutional system ordinarily would not be thought to be at
its zenith where the claim is, at bottom, that the representative
institutions of the federal government should be restrained from
discriminating against 49 states in favor of one.

   2. It is well established that the Uniformity Clause does not
require what might be termed "intrinsic" uniformity.  Rather, it
requires no more than a geographic uniformity.  See Fernandez v.
Weiner, 326 U.S. 340, 359 (1945);  Brushaber v. Union Pac. R.R., 240
U.S. 1, 24 (1916);  Flint v. Stone Tracy Co., 220 U.S. 107, 175
(1911);  Knowlton v. Moore, 178 U.S. 41, 83-109 (1900).  See also
Florida v. Mellon, 273 U.S. 12, 17 (1927).  Moreover, it is likewise
settled that the framers did not intend to require that "duties,
imposts or excises" fall equally on the various states or their
populations.  /22/ Knowlton v. Moore, supra, 178 U.S. at 104.  Thus,
Congress' broad power to choose the appropriate subjects of taxation
encompasses the power to choose subjects that do not exist uniformly
throughout the United States.  Knowlton v. Moore, supra, 178 U.S. at
108;  Head Money Cases, supra, 112 U.S. at 595.  Assuming the subject
chosen by Congress for taxation (or exemption) itself represents a
permissible classification, the Uniformity Clause is not violated
simply because that subject occurs only in a few states, or indeed
only a single state.  "If the classification be proper and legal, then
there is the requisite uniformity in that respect" (Nicol v. Ames, 173
U.S. 509, 521 (1899)).

   To be sure, where no other distinction can properly be drawn
between a "subject" as it exists in different states, the Uniformity
Clause may require the same treatment in each instance.  See, e.g.,
Fernandez v. Wiener, 326 U.S. 340, 361 (1945);  Steward Machine Co. v.
Davis, 301 U.S. 548, 583 (1937);  South Carolina v. United States, 199
U.S. 437, 450-451 (1905);  Heitsch v. Kavanagh, 200 F.2d 178, 180 (6th
Cir. 1952), cert. denied, 345 U.S. 939 (1953).  But while
classifications that operate only in certain areas might be subject to
special scrutiny in light of the purposes of the Uniformity Clause, we
submit that the inquiry cannot be separated from the question whether
the tax classifications drawn by Congress are supported by rational
considerations showing that they are not intended, and do not operate,
either as an "undue preference" in favor of, or an "oppressive"
discrimination against, the affected states.

   b. Contrary to the conclusion of the court below, the holding of
this Court in the Head Money Cases affirmatively supports the power of
Congress to take geographical considerations into account in drawing
legitimate tax classifications.  At issue there was the
constitutionality of a duty levied against transportation companies on
foreign passengers entering the United States by vessel.  The Court
squarely rejected the contention that the duty violated the Uniformity
Clause on the ground that it did not operate with strict geographical
uniformity since, by its terms, it could apply only in states having
sea ports (a matter necessarily determined by considerations of their
geography) and not in landlocked states where foreign passengers might
arrive by railroad or other inland mode of conveyance.  The Court
noted that "the evil to be remedied by this legislation" did not exist
on the inland borders, and that "substantial uniformity within the
meaning and purpose of the Constitution" was achieved by the uniform
application of the statute in those quarters in which that "evil" was
found to exist.  Head Money Cases, supra, 112 U.S. at 595.  Thus, the
Court confirmed that Congress' broad power to pick and choose
appropriate subjects of taxation includes the power to choose subjects
that, as a matter of geographical considerations alone, exist only in
certain states, and to leave untaxed similar "subjects" existing in
other states.  The ultimate question, in the Court's view, was whether
Congress had a reasonable basis for distinguishing between the
activity that was taxed in coastal states and the similar activity
that was untaxed in inland states.  Similarly, in construing the
analogous uniformity proviso applicable to the exercise of the
bankruptcy power, /23/ this Court, citing the Head Money Cases,
concluded that the uniformity requirement "does not deny Congress
power to take into account differences that exist between different
parts of the country, and to fashion legislation to resolve
geographically isolated problems." Regional Rail Reorganization Act
Cases, 419 U.S. 102, 159 (1974).

   Here, as in the Head Money Cases and the Regional Rail
Reorganization Act Cases, the validity of the "Alaskan oil exemption"
from the windfall profit tax should not turn, as the district court
concluded, simply on the fact that Congress took geographical
considerations into account, but on whether the classification based
on those geographical considerations is justified in terms of the
relationship of those considerations to the "subject" of the
regulation or tax.  Put another way, the question is whether in
fashioning the tax, Congress could, on the one hand, favor generally
"newly discovered oil" over "old oil" and accord the most favorable
treatment to "newly discovered oil" located in certain areas (Section
4494(e)).

   There can, of course, be no dispute that the exemptions here at
issue are geographically defined so as to exclude oil located in all
of the 50 states except portions of Alaska.  /24/ It is almost equally
beyond dispute, however, that Congress had a rational basis for
drawing such a classification.  Obviously, this is not an instance in
which "combinations" have drawn taxing legislation in such a way as to
grant an "undue preference" in favor of their own states or to impose
an "oppressive" discrimination against a minority.  Rather, it is an
instance of a broad-based congressional majority (including many
members from other oil-producing states) granting an exemption
applicable to only a portion of the oil production that might be
derived in the future from certain areas that include a part of a
single state.

   Nor could these provisions be characterized as an "undue
preference" in favor of Alaskan producers.  Indeed, the benefit of the
exemption falls on the owners of economic interests in that oil
wherever they might reside or be incorporated.  Moreover, the
"subject" of the tax in question is not the production of crude oil,
per se, but the enjoyment of a "windfall profit" by the holders of
such economic interests as a result of the removal of price controls
on domestic oil and concomitant increase in the selling price of such
oil to the prevailing world price.  The various classifications
adopted with regard to this tax demonstrate that Congress' belief that
the existence and extent of such "windfall profits," as well as the
appropriate tax to be levied, would vary on the basis of a number of
factors including the nature and type of the oil in question, the
nature of the producer and the quality of his interest in the oil, and
the circumstances under which the oil is produced.  As the legislative
history of the Act makes clear, Congress sought to draw tax
classifications that would not deter producers from fully exploiting
existing properties or from exploring and developing new properties.
See H.R. Rep. No. 96-304, supra, at 7, 14;  S. Rep. No. 96-394, supra,
at 2, 6-7.  /25/

   The critical question therefore is whether Congress could carve out
a portion of the "newly discovered oil" that might be produced in
areas north of the Arctic Circle or in areas located north of the
Alaska-Aleutian Range and more than 75 miles from the Trans-Alaska
Pipeline System and accord such oil even more favorable treatment.
/26/ We submit that this exemption serves the legitimate purposes of
the legislation in question, and that it does not violate the
Uniformity Clause, despite the fact that it is defined in terms of the
geographic location of such oil.  Congress had substantial grounds for
concluding that North Slope oil -- particularly North Slope oil that
had not yet gone into production -- presented a special case, distinct
from domestic oil found elsewhere (including other oil found in
Alaska).  First, North Slope oil that was in production at the time
the tax was under consideration brought a substantially lower price at
the wellhead than did equivalent oil produced in other locations of
the United States because of its distance from existing markets and
the necessity of transporting it over the newly constructed
Trans-Alaska Pipeline.  Indeed, the price of such North Slope oil was
only about half the applicable ceiling price for such oil.  H.R. Rep.
No.96-304, supra, at 5, 30.  Moreover, Congress anticipated that the
wellhead price for such oil would continue, in the foreseeable future,
to be $8 to $9 less than the prevailing wellhead prices in other
producing states.

   Second, during the legislative debates, the point was repeatedly
made, without contradiction, that because of its remote location,
fragile environment, and extreme climatic conditions, the production
of North Slope oil involved risks and costs that were far greater than
the risks and costs of developing domestic oil properties elsewhere.
See, e.g., 125 Cong. Rec. S16327 (daily ed. Nov. 8, 1979), S17422
(daily ed. Nov. 28, 1979), and S17478-S17480 (daily ed. Nov. 29, 1979)
(comments of Senators Gravel and Stevens).  Accordingly, Congress had
substantial reason to question whether North Slope oil (other than
that produced from the Sadlerochit reservoir) would, in fact, generate
a "windfall profit" to the same extent as the other categories of oil
subject to this tax, and to conclude that the imposition of even the
relatively small windfall profit tax burden applicable in the case of
other "newly discovered oil" might deter further exploration and
development of North Slope properties.  There was no showing either in
Congress or in the court below that domestic production elsewhere
would involve similar developmental costs and risks or
transportation-related disparities.  /27/

   In sum, Congress should be free to draw an exemption provision
based, in general terms, on the distance of newly-discovered domestic
oil from existing transportation systems and markets, and on unusual
development costs incurred as a result of extreme climatic and
environmental conditions, even though those conditions might be found
to exist only in limited areas and, perhaps, only within a single
state.  For example, if Congress had cast the exemption for North
Slope oil in terms of a location in which the average temperature did
not exceed a particular level, there could be no quarrel with such a
provision under the Uniformity Clause.  An exemption provision that is
designed to achieve precisely the same result and that is justified by
precisely the same considerations, should not be rendered
unconstitutional on the ground that Congress chose to define the scope
of the exemption not in terms of the underlying conditions themselves,
but rather in terms of the only geographic location in which Congress
had reason to believe that those conditions existed, viz., the North
Slope of Alaska.  The purpose of the Uniformity Clause, after all, is
to provide substantive protection to the states, rather than to
require mere niceties of congressional draftsmanship.  Cf. Head Money
Cases, supra, 112 U.S. at 594;  Regional Rail Reorganization Act
Cases, supra.  /28/

   3.  The Separability Clause.  Even on the assumption that the
"Alaskan oil exemption" provisions of Sections 4991(b)(3) and 4994(e)
violate the Uniformity Clause, the district court erred in holding
that the entire tax was thereby rendered invalid.

   Section 7852(a) of the Internal Revenue Code of 1954 (App. G,
infra, 63a), provides that "(i)f any provision of this title (26
U.S.C.), or the application thereof to any person or circumstances, is
held invalid, the remainder of the title, and the application of such
provision to other persons or circumstances, shall not be affected
thereby." Such a provision has been included in the tax laws in terms
virtually identical to those of Section 7852(a) since the Revenue Act
of 1921, ch. 136, Section 1403, 42 Stat. 227.  By means of this
clause, Congress intended to preserve as much of the internal revenue
laws as possible in the event any particular provision was held to be
invalid.  Assuming the "exempt Alaskan oil" provisions are barred by
the Uniformity Clause, the court should have applied the "separability
clause" of the tax statute to strike the invalid provisions, but to
preserve the tax with respect to the windfall profits derived from all
oil production (including that from within the area described in
Section 4994(e)) that is not subject to other, valid exemption
provisions.  At a minimum, the clause should have applied so as to
preserve all of the taxing provisions that are unaffected by the
"exempt Alaskan oil" provisions.

   The district court, however, declined to apply the "separability
clause." It first ascribed significance to the fact that this clause
was set forth only in the Internal Revenue Code and not in the
Windfall Profit Tax Act itself.  It went on to express the belief that
Congress would not have enacted the windfall profit tax without the
Alaskan oil exemption, and that it would be engaging in impermissible
judicial legislation to apply the "separability clause" in such a way
as to deny the benefit of an invalid exemption that Congress had
included in the statute.

   But contrary to the district court's initial rationale, there was
simply no need for Congress to add an independent "separability
clause" to the Windfall Profit Tax Act because those provisions were
directly added to the Internal Revenue Code.  The separability clause
that is part of the Code is applicable to amendments to the 1954 Code
as well as to provisions that were included in the original 1954
recodification of the internal revenue laws.  See Sipes v. United
States, 321 F.2d 174, 178 (8th Cir.), cert. denied, 375 U.S. 913
(1963) (amended provision of the 1954 Code);  United States v. Castro,
413 F.2d 891, 894 (1st Cir. 1969) (original provision of the 1954
Code).  Thus, once the windfall profit tax provisions of Sections 4986
through 4998 were added to the Code, each of those provisions became
fully subject to the "separability clause" of Section 7852(a) to the
same extent any other provision of the Code would be.

   To be sure, the existence of a separability clause is not
conclusive as to whether a statute will be held invalid as a whole or
invalid only as to those specific provisions that directly offend a
limitation imposed by the Constitution.  Rather, the courts must
examine the legislative intention underlying the statute in question
to determine whether and to what extent the statute was intended to
operate in the absence of the invalid provisions.  See, e.g., Dorchy
v. Kansas, 264 U.S. 286, 290 (1924).  Nevertheless, the existence of
such a separability clause creates, at the minimum, a strong
presumption that Congress intended to save as much of a statute as
possible.  As this Court observed in Carter v. Carter Coal Co., 298
U.S. 238, 312-313 (1936):

         Under the statutory rule, the presumption (of validity of the
      remaining portions of the statute) must be overcome by
      considerations which establish "the clear probability that the
      invalid part being eliminated the legislature would not have
      been satisfied with what remains," Williams v. Standard Oil Co.,
      278 U.S. 235, 241 et seq.; or as stated in Utah Power & L. Co.
      v. Pfost, 286 U.S. 165, 184-185, "the clear probability that the
      legislature would not have been satisfied with the statute
      unless it had included the invalid part."

See also Champlin Refining Co. v. Corporation Commission of Oklahoma,
286 U.S. 210, 234 (1932).  /29/

   Despite the district court's assertion that the "legislative
history and spirit remains somewhat of an enigma in this case" (App.
A, infra, 9a), the legislative history indicates that Congress was
specifically aware of the possibility that the Alaskan oil exemption
might be challenged under the Uniformity Clause and understood that
the "separability clause" set forth in Section 7852(a) of the Code
would apply if that exemption were held invalid.  Reservations as to
the constitutionality of the tax were expressed by a number of
Senators.  126 Cong. Rec. S2771, S2773-S2774 (daily ed. Mar. 20,
1980);  S2825-S2828 (daily ed. Mar. 21, 1980), and S2854-S2855 (daily
ed. Mar. 24, 1980) (comments and submissions of Senators Boren,
Stevens, and Schmitt).  In response, Senator Long, then Chairman of
the Finance Committee and the floor manager of the bill in the Senate,
expressed the view that the bill satisfied the requirements of the
Uniformity Clause.  126 Cong. Rec. S3055-S3057 (daily ed. Mar. 26,
1980).  Senator Long further noted, however, that the windfall profit
tax amendments would be subject, in any event, to the "separability
clause" set forth in the Internal Revenue Code itself, and stated that
"it is our intention that in the event the courts should find this
favorable treatment for Alaska * * * should violate the (uni)formity
provision in the Constitution, that provision should be regarded as a
nullity and that Alaska will pay the same 30-percent tax on new oil as
everybody else." Id. at S3056.  /30/ No contrary views were expressed
as to the applicability or the intended operation of Section 7852(a)
by any proponent or opponent of this legislation in either the House
or the Senate.  Thus, there is solid evidence that Congress intended
the separability clause of Section 7852(a) to apply.

   Moreover, even apart from this explicit statement as to the
applicability of the general "separability clause" provided by the
Code itself, there is no basis for the district court's speculation
that Congress would not have imposed the windfall profit tax in the
absence of an Alaskan oil exemption.  As the legislative history of
these provisions makes clear, the adoption of the tax was the quid pro
quo for the decontrol of domestic oil prices.  There is no doubt, of
course, that Congress was concerned that the general imposition of a
windfall profit tax with respect to all "newly discovered oil" could
have a deterrent effect on the future discovery and development of new
North Slope oil.  There is no indication in the legislative history,
however, that this was such a critical consideration that Congress
would have entirely foregone the adoption of this tax, and the $227.3
billion in revenues it was estimated to produce over a 12 to 15-year
period, if it could not have provided an exemption for North Slope
Alaska Oil.  /31/

   Nor, we submit, could a court be considered to be engaging in
impermissible judicial legislation in holding the exemption, but not
the tax itself, invalid.  Indeed, such a result calls for no judicial
"re-writing" of the statute, but precisely accords with the specific
statutory directive provided by Section 7852(a) to give effect to all
provisions that are not themselves invalid.  In applying such
separability clauses, the question is always one of carrying out the
intentions of the Congress.  There may, to be sure, be instances in
which it would be inappropriate, and inconsistent with the apparent
legislative intent, to deny an exemption or other preferential
treatment to a group intended to be benefited thereby.  But there is
no strict rule against applying a separability clause in such a way as
to impose a tax on a class granted the benefit of an invalid
exemption.  Thus, in Utah Power & L. Co. v. Pfost, 286 U.S. 165
(1932), a state tax statute that contained a "separability clause" was
challenged on the ground that an exemption provision was
unconstitutional.  The Court squarely rejected the contention that any
defect in the exemption provisions would render the entire taxing
statute invalid.  In this respect, the Court stated (286 U.S. at 185):

         The primary object of the statute, under review, plainly, is
      to raise revenue.  The exemption * * * and the provisions for
      carrying that exemption into effect are secondary.  We find no
      warrant for concluding that the legislature would have been
      content to sacrifice an important revenue statute in the event
      that relief from its burdens in respect of particular
      individuals should become ineffective.  On the contrary, it
      seems entirely reasonable to suppose that if the legislature had
      expressed itself specifically in respect of the matter, it would
      have declared that the tax, being the vital aim of the act, was
      to be preserved even though the specified exemptions should fall
      for lack of validity.  Field v. Clark, 143 U.S. 649, 696-697;
      People ex rel, Alpha P.C. Co. v. Knapp, 230 N.Y. 48, 60-63;  129
      N.E. 202.

   The same conclusion as to the "vital aim" of the windfall profit
tax, if anything, finds even stronger support in the legislative
history.  Therefore, even if it is assumed that the Alaskan oil
exemption is barred by the Uniformity Clause, the "separability
clause" of Section 7852(a) should save the remaining provisions of the
Act.  /32/

                              CONCLUSION

   Probable jurisdiction should be noted.

   Respectfully submitted.

   LAWRENCE G. WALLACE

      Acting Solicitor General /*/

   JOHN F. MURRAY

      Acting Assistant Attorney General

   STUART A. SMITH

      Assistant to the Solicitor General

   GARY R. ALLEN

   WILLIAM S. ESTABROOK

      Attorneys

   DECEMBER 1982

   /1/ Although the judgment order of November 4, 1982, appears to
have been interlocutory insofar as it did not, by its terms, determine
the amount of taxes to be refunded and it did not pass on all claims
for relief, the orders of November 12 and November 15, 1982 were final
judgments because they determined the specific amounts of the refunds
sought in the pleadings and they contained the requisite determination
that there is no just reason for delay in the entry of final judgment
on the claim addressed.  See Fed. R. Civ. P. 54(b).  At all events,
all three orders are appealable to this Court under 28 U.S.C. 1252.
See United States v. Clark, 445 U.S. 23, 25-26 n.2 (1980).

   /2/ Title II of the Act, 94 Stat. 256 et seq., provides for various
energy expenditure and investment credits, unconventional fuel
production credits, energy related uses of tax-exempt bonds, and
special income tax deductions for "tertiary injectant expenses." Title
III of the Act, 94 Stat. 288 et seq. provides for energy assistance
for certain low income households, and Title IV provides for a number
of miscellaneous amendments to unrelated provisions of the Internal
Revenue Code of 1954 and other statutes.

   /3/ In the case of "tier 1 oil" -- i.e., oil that does not qualify
for the more favorable treatment accorded "tier 2" or "tier 3" oil --
the base price reflects the applicable ceiling price (less 21 cents)
for such oil if it had been sold as "upper tier" oil in May 1979,
prior to the beginning of the phase out of the oil price controls
provided for under the Energy Policy and Conservation Act of 1975,
Pub. L. No. 94-163, 89 Stat. 871.  Such "upper tier" prices under the
then applicable regulations averaged $13.02 per barrel.  H.R. Conf.
Rep. No. 96-817, 96th Cong., 2nd Sess. 92 (1980).  The "base price" of
"tier 2" and "tier 3 oil" is equal to the price at which such oil
would have been sold in December 1979 on the assumptions (1) that the
price of all domestic crude oil was then uncontrolled;  and (2) that
the average prices for domestic crude oil were than $15.20 per barrel
for "tier 2 oil" or $16.55 for "tier 3 oil".  Section 4989(c) and (d).

   /4/ Section 602 of the Economic Recovery Tax Act of 1981, Pub. L.
No. 97-34, 95 Stat. 337, amended Section 4987(b) to reduce the
applicable tax rate in the case of "newly discovered oil" from 30
percent to 15 percent, in gradual steps during the period 1982-1986.

   /5/ Further exemptions were provided for certain oil produced by
independent producers from "stripper well propert(ies)" and specified
portions of a "qualified royalty owner's qualified royalty
production," under amendments made to Sections 4991(b) and 4994 by
Section 601 of the Economic Recovery Tax Act of 1981, (95 Stat.
336-337).

   /6/ The tax is deductible, for income tax purposes, by the producer
under Section 164(a)(5) of the 1954 Code, as added by Section 101(b)
of the Crude Oil Windfall Profit Tax Act of 1980, 94 Stat. 230.
Certain holders of royalty interests, however, are entitled to treat
up to $1,000 of windfall profit taxes paid with respect to their
"qualified royalty production" for 1980 as a creditable or refundable
"overpayment." Section 6429 of the Internal Revenue Code of 1954, as
added by Section 1131 of the Omnibus Reconciliation Act of 1980, Pub.
L. No. 96-499, 94 Stat. 2599.  These provisions were extended to
encompass "qualified royalty production" for the year 1981, and the
amount allowable as a credit for that year was increased to $2,500, by
Section 601 of the Economic Recovery Tax Act of 1981.

   /7/ The remaining appellees are 30 trade associations whose members
are alleged to be oil producers or royalty holders subject to the tax,
and the States of Texas and Louisiana, which were permitted to
intervene in the case.  See note 8, infra.  Two other individual
producers withdrew from the suit.

   /8/ The original complaint did not allege that any of appellees
filed administrative refund claims with respect to the taxes.
However, appellees filed two amended complaints alleging that the
producers and royalty holders had filed refund claims covering taxes
paid for one of more taxable periods in calendar year 1980.  The
amended complaints also sought an order restraining the further
assessment or collection of windfall profit taxes.

   In response to the government's motion to dismiss, urging, inter
alia, that several trade associations lacked standing to join the
action as plaintiffs, the district court dismissed the associations as
plaintiffs but permitted them to remain as permissive intervenors.
Moreover, over the government's objection, the district court
permitted the States of Texas and Louisiana to intervene in the
litigation urging that the windfall profit tax violates the Tenth
Amendment as well as the Uniformity Clause (App. A, infra, 2a).

   Finally, a subsequent suit that was filed by appellee John
Partridge, after filing a new refund claim covering all taxable
periods in calendar year 1980, and which sought identical relief was
consolidated with the original action (App. A, infra, 2a).

   /9/ The district court first ruled that the question of the
constitutionality of the windfall profit tax was ripe for decision
despite the fact that there had been no production of "exempt Alaskan
oil" during the periods in suit (see pages 20-21 note 28, infra).

   /10/ Although its ruling that the Windfall Profit Tax Act violated
the Uniformity Clause obviated the necessity for consideration of
appellees' claim that the Act was barred by the Due Process Clause of
the Fifth Amendment, the court concluded that "(t)he Fifth Amendment
challenge to the windfall profits tax is unfounded, and without merit
* * * " (App. A, infra, 10a).

   /11/ In its final amended judgment, the district court noted that
its ruling was restricted to the provisions added by Title I of the
Crude Oil Windfall Profit Tax Act of 1980 (26 U.S.C. (Supp. V)
4986-4998), and that it did not intend to hold the remaining
provisions invalid as a result of its conclusion that the "exempt
Alaskan oil" provisions could not be severed from the remaining
provisions of the Act (App. D, infra, 16a).

   The district court stayed the effect of its order (App. D, infra,
17a).  Hence, no refunds have been issued to appellees and the
windfall profit tax continues to be collected pendente lite.
Accordingly, the government's arguments that appellees' suit for
injunctive and declaratory relief is barred by the Anti-Injunction Act
(26 U.S.C. (Supp. V) 7421(a)) and the tax exception to the Declaratory
Judgment Act (28 U.S.C. 2201) are not before the Court.

   /12/ The gross revenues from the windfall profit tax through the
end of fiscal year 1982 are estimated to be $50 billion.  The windfall
profit tax, however, is deductible for federal income tax purposes,
under Section 164(a)(5) of the 1954 Code, and the windfall profit
taxes attributable to economic interests owned by the United States
reduce proprietary receipts.  Accordingly, the net budgetary impact of
the statutory provisions in question is smaller than the gross
liability, but nevertheless substantial.

   /13/ The phase-out of price controls on domestic crude oil was
actually completed by Exec. Order No. 12287, 3 C.F.R. 124, issued by
President Reagan on January 28, 1981.

   /14/ Under Section 4990, the windfall profit tax is to be phased
out over a 33-month period, beginning with the later of January 1988,
or the first month (not later than January, 1991) after the Secretary
of the Treasury estimates that the aggregate net revenues from the tax
will exceed $227.3 billion as of the end of that month.  Under Section
102(a) and (b) of the Act, 94 Stat. 255, revenues collected in the
interim are required to be allocated to a separate account in the
Treasury for the following uses:  (1) income tax reductions (60
percent);  (2) low-income assistance (25 percent);  and (3) energy and
transportation programs (15 percent).

   /15/ See, e.g., Section 4991(e)(1)(B) and (e)(3), placing "heavy
oil" in the favorable category of "tier 3 oil".

   /16/ See,e.g., Section 4987(b)(2), providing for reduced tax rates
in the case of "independent producer oil" as defined by Section 4992.

   /17/ See, e.g., Section 4991(d)(1)(A) and (e)(1), providing that
oil from "stripper well" properties and "incremental tertiary oil," as
defined in Section 4993, are to be favorably treated as "tier 2 oil"
and "tier 3 oil," respectively.

   /18/ See Section 4991(e)(1)(A), providing that "newly discovered
oil" is to be favorably treated as "tier 3 oil."

   /19/ As the Joint Committee staff study indicated, (House Hearings,
supra, at 21), the world price of oil would have to rise (as it
ultimately did) to at least $22 per barrel (or the tariff rate for the
Trans-Alaska Pipeline would have to be correspondingly reduced) in
order for the price of the Alaskan oil to rise to its then applicable
ceiling price.  The staff study also indicated, (id. at 22) that the
exemption was intended "to eliminate the possibility of creating a
disincentive for the production of Alaskan oil." Although it concluded
that there was relatively little risk that a tax on Sadlerochit oil
would discourage production, it noted that production costs for the
other two known Prudhoe Bay reservoirs would be higher.  Id. at 22.

   /20/ The Finance Committee proposal, like the provision ultimately
enacted (Section 4991(e)(2)), provided that the term "newly discovered
oil" has the same meaning that the term had in the June 1979 energy
regulations.  Under that definition, the term would encompass all oil
from properties from which no crude oil was produced in calendar year
1978.  See 10 C.F.R. 212.79(b), 44 Fed. Reg. 25828, 25832 (1979).  As
the committee noted, this definition of "newly discovered oil" would
exclude Sadlerochit oil.  S. Rep. No. 96-394, supra, at 42-43.

   /21/ Amendments previously offered by Senators Ribicoff and Bradley
would have taxed the "windfall profit" from "newly discovered oil" at
a rate of 20 percent, but also would have exempted "newly discovered
oil" produced north of the Arctic Circle.  125 Cong. Rec. S18141
(daily ed. Dec. 10, 1979).  Concerns with respect to the high costs
and risks involved in producing North Slope oil and the disincentive
to further exploration and development that would be imposed by
subjecting that oil to tax had been expressed by both Senator Gravel
(125 Cong. Rec. S16327 (daily ed. Nov. 8, 1979)), and Senator Stevens
(125 Cong. Rec. S17422, S17478-S17480 (daily ed. Nov. 28 and 29,
1979)).

   /22/ By contrast, "(d)irect taxes," such taxes on property or
capitation taxes, are required to be apportioned among the states on
the basis of their respective populations.  Article I, Section 9,
Clause 7.  The Sixteenth Amendment eliminated the apportionment
requirement for taxes on income that would be classified, under
Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429, on reargument, 158
U.S. 601 (1895), as "direct taxes" imposed upon the source from which
the particular type of income is derived.

   Two amici curiae in the court below (the American Farm Bureau
Federation and the Wyoming Farm Bureau Federation) contended that the
windfall profit tax was a direct tax that had to comply with the
Apportionment Clause.  We submit, however, that this tax is properly
classified and imposed as an "excise" because it is not imposed on the
ownership of property per se but upon the activity of mineral
extraction.  See Stanton v. Baltic Mining Co., 240 U.S. 103 (1916).
At all events, since it is imposed on the income that is derived from
the exploitation of economic interests in oil, the Sixteenth Amendment
would permit its imposition without apportionment even assuming the
tax were classified as a "direct" tax under Pollock.  To the extent
that the tax is a direct tax, the Uniformity Clause would be
inapplicable.

   /23/ Article I, Section 8, Clause 4 of the Constitution grants
Congress power to establish "uniform laws on the subject of
Bankruptcies throughout the United States."

   /24/ In describing the exemption (App. A, infra, 4a) the district
court characterized it as encompassing "certain oil found only in
Alaska." In fact, it would apply to any oil, including offshore oil,
that might be produced from wells located north of the Arctic Circle.
Offshore oil found farther than three miles from Alaska's coastline
and located on the Outer Continental Shelf is subject to the exclusive
jurisdiction and control of the United States.  Submerged Lands Act,
43 U.S.C. (& Supp. IV) 1301-1315;  see Maryland v. Louisiana, 451 U.S.
725, 730 (1981).

   /25/ Thus, "newly discovered oil" is accorded the most favorable
treatment of all non-exempt categories in terms of both the "adjusted
base price" and the tax rate.

   /26/ The definition of "newly discovered oil" would apply to all
"exempt Alaskan oil" since Sadlerochit oil is excluded from the scope
of that exemption and since no other oil was being produced from the
areas described by Section 4994(e) prior to 1981 (see page 20, note
28, infra).

   /27/ In addition, the Alaskan exemption was granted, in part,
because of Congress' concern that a disproportionate part of the tax
would otherwise fall on Alaskan oil.  As Senator Stevens noted (125
Cong. Rec. S17478 (daily ed. Nov. 29, 1979)), there are no
"independent producers" operating on the North Slope, nor would any of
that oil (including Sadlerochit oil, which represented the largest of
the known reservoirs) fall within any of the other favorably taxed
categories that are found elsewhere.  Thus, Senator Long indicated
that the Alaskan exemption was adopted in order to make the tax apply
with a greater degree of intrinsic uniformity.  126 Cong. Rec. S3056
(daily ed. Mar. 26, 1980).  Though it is settled that intrinsic
uniformity is not required under the Uniformity Clause,the framers of
the Constitution could hardly have intended that the Uniformity Clause
would impede Congress' attempts to distribute the burden of a tax more
equitably among the states.

   /28/ Even on the assumption that the Uniformity Clause prohibits
Congress from drawing a distinction between North Slope "newly
discovered oil" and other domestic "newly discovered oil," there was
still no violation of the Uniformity Clause during the periods
properly in question here.  It was uncontested that there was, in
fact, no production of "exempt Alaskan oil" during the periods covered
by any of the refund claims in issue.  Characterizing the government's
contention on this point as one directed to the "ripeness" of the
uniformity question for decision, the district court concluded that
the fact that production ultimately did occur (starting in December,
1981) rendered it appropriate to resolve that question (App. A, infra,
4a-5a).

   But the question is not simply one of ripeness, as such, but
whether, assuming the district court's reading of the Uniformity
Clause is correct, the Act could be deemed to violate the Clause when,
in fact, during the only periods for which the legality of the tax can
be questioned in this refund suit, the taxing provisions operated with
precisely the "same force and effect in every place where the subject
* * * (was) found." Put another way, all oil falling into each taxable
category established by the Act (including "newly discovered oil") was
subject to tax during these periods on the same basis wherever it was
found.  Since the assertedly defective provisions remained wholly
inoperative during the period for which the taxes in question were
collected, there was not simply "substantial uniformity," but strict
geographical uniformity with respect to the imposition of those taxes
during those periods.

   /29/ Indeed, a presumption in favor of separability would be
appropriate in the case of general revenue measures even without such
a clause.  As this Court noted in Field v. Clark, 143 U.S. 649,
696-697 (1892):

         Unless it is impossible to avoid it, a general revenue
      statute should never be declared inoperative in all its parts
      because a particular part relating to a distinct subject may be
      invalid.  A different rule might be disastrous in the financial
      operations of the government, and produce the utmost confusion
      in the business of the entire country.

   /30/ Senator Long also expressed the view that, in the event the
Alaskan exemption were held unconstitutional and the "separability
clause" employed in this manner, Congress might then attempt to devise
other relief, framed in non-geographical terms, for high-risk,
high-transportation cost production.  Id. at S3055.

   /31/ Indeed, while the district court took pains to make clear its
view that its holding would not affect any of the remaining provisions
of the Act not directly related to the imposition of the windfall
profit tax, what is far more questionable is whether Congress would
have intended to confer the benefits of the energy conservation and
production measures provided by Title II of the Act, the low-income
energy assistance provided for by Title III or, indeed, possibly any
of the relief measures provided by Title IV of the Act, if the
revenues to be generated by Title I would not be forthcoming.

   /32/ Even if the district court was justified in refusing to apply
the separability clause of Section 7852(a) to impose the tax against
holders of economic interests in North Slope oil encompassed by
Section 4994(e), it should have applied the "separability clause" to
preserve both that exemption and, at the same time, so much of the tax
as would be uniformly applied throughout the United States with or
without that exemption.  This could have been accomplished by
upholding the provisions imposing the tax on "old oil" and exempting
all "new oil" including North Slope Alaska oil.  There is no doubt
that Congress would have imposed a tax upon all oil with respect to
which the "windfall profit" element was most apparent even if the
opponents of taxing new oil had ultimately prevailed.  See Welsh v.
United States, 398 U.S. 333, 361-367 (1970) (Harlan, J., concurring):
"Where a statute is defective because of underinclusion there exist
two remedial alternatives:  a court may either declare it a nullity
and order that its benefits not extend to the class that the
legislature intended to benefit, or it may extend the coverage of the
statute to include those who are aggrieved by exclusion.  Cf. Skinner
v. Oklahoma, 316 U.S. 535 (1942);  Iowa-Des Moines National Bank v.
Bennett, 284 U.S. 239 (1931)." There is no requirement, however, that
the benefit be extended to include those who are not directly
aggrieved by the improper classification.

   /*/ The Solicitor General is disqualified in this case.

   Appendix Omitted