Title: Eagerton v. Exchange Oil and Gas Corp.

State: alabama

Issuer: Alabama Supreme Court

Document:

440 So. 2d 1031 (1983)
Ralph P. EAGERTON, Jr., as Commissioner of Revenue of the State of Alabama
v.
EXCHANGE OIL AND GAS CORPORATION, et al.
79-823.

Supreme Court of Alabama.
November 4, 1983.
Charles A. Graddick, Atty. Gen., and B. Frank Loeb, Chief Counsel, and Charles E. Crumbley and John J. Breckenridge, Asst. Counsel, Department of Revenue and Asst. Attys. Gen., for appellant.
Rae M. Crowe and Edward A. Dean of Armbrecht, Jackson, DeMouy, Crowe, Holmes & Reeves, Mobile, and Euel A. Screws, Jr. of Copeland, Franco, Screws & Gill, Montgomery, for appellees Union Oil Co. of California, Getty Oil Company and Exchange Oil & Gas Corp.
C.B. Arendall, Jr. and Louis E. Braswell of Hand, Arendall, Bedsole, Greaves & Johnston, Mobile, for appellee The Louisiana Land and Exploration Co.
BEATTY, Justice.
This case was remanded by the Supreme Court of the United States to enable this Court to determine whether the partial invalidity of the pass-through provisions of Act 79-434 entitled the plaintiff oil and gas producers to a refund of taxes paid by them under protest.
*1032 For a review of the litigation which culminated in that order, see Eagerton, Commissioner v. Exchange Oil and Gas Corporation, 404 So. 2d 1 (Ala.1981); Exxon Corporation v. Eagerton, Commissioner, ___ U.S. ___, 103 S. Ct. 2296, 76 L. Ed. 2d 497 (1983).
In its opinion of June 8, 1983, the Supreme Court of the United States decided that the pass-through provision of Act 79-434 was pre-empted by federal authority "over wholesale sales of gas in interstate commerce, for it barred gas producers from increasing their prices to pass on a particular expensethe increase in the severance taxto their purchasers." The pass-through prohibition was upheld, however, insofar as it applied to sales of gas in intrastate commerce.
The Commissioner of Revenue now concedes the invalidity of the entire pass-through provision, for, as stated in his brief:
And further stated in brief:
The narrow issue before this Court, therefore, is whether the remaining provisions of Act 79-434 are enforceable, absent the statutory proscription against passing on the applicable severance tax by the producer.
On remandment, this Court has been favored with excellent briefs by the parties.
As stated in its title, Act No. 79-434 was an act:
This statement was followed by Section 1, whose language expressly amended Code of Ala.1975, § 40-20-2, which also had imposed a severance tax. The statute as amended by Act 79-434 read:
Section 2 of Act 79-434 amended § 40-20-8, dealing with the allocation and distribution of taxes collected, and made other but like provisions.
The severability clause is found in Section 3:
The purpose of subsection (e), according to the appellees, denotes the express intent of the legislature to include the pass-through prohibition, without which, the entire act fails. This follows, the appellees maintain, because that provision was a material inducement to the remainder of the act, as evidently expressed by the legislature. The purpose of the act, they contend, was to increase the severance tax and to provide certain exemptions from that increase, the increase being linked with the exemptions, with the prohibition being one of the exemptions.
We agree with the appellees, as we must, that the pass-through prohibition was intended by the legislature to be a constituent portion of Act 79-434. However, we cannot agree that its absence requires the remainder of the act to fail.
Severability clauses have found favor in our decisions. Hamilton v. Autauga County, 289 Ala. 419, 268 So. 2d 30 (1972), elaborated upon the effect of such clauses, citing Allen v. Walker County, 281 Ala. 156, 199 So. 2d 854 (1967). This Court stated:
That opinion continued:
Applying this principle to this statute, it is unquestionable that the legislature intended that Act 79-434 increase the severance tax on oil and gas; intended to provide for distribution of the tax receipts; and intended to provide for certain exemptions from the increased rate. Elimination of the pass-through prohibition does not inhibit the effectuation of the remaining portions, however. They are not so intertwined as to render their application meaningless; indeed, it appears that they can be administered without the assistance of the pass-through provision. Only the incidence of the tax is affected by that provision. Its absence does not affect the remaining clear purpose: raising and distributing revenue. Moreover, the presence of the severability clause clearly indicates that the legislature also intended that the exemptions be severable, and thus provided for the survival of the remaining portions should the exemptions later be stricken from the act. It follows that, absent the pass-through prohibition found in Section 1(e) of Act 79-434, which is excised under the severability clause, the remaining portions of Act 79-434 are to be given effect. Accordingly, the plaintiff oil and gas producers are not entitled to a refund of taxes paid by them under protest.
On remand, the judgment of this Court of July 10, 1981, as modified by this opinion, is affirmed.
AFFIRMED.
TORBERT, C.J., and MADDOX, ALMON, SHORES, EMBRY and ADAMS, JJ., concur.