[Federal Register Volume 63, Number 98 (Thursday, May 21, 1998)]
[Notices]
[Pages 27941-27942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-13487]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission
[Docket No. SA98-83-000]


The Trees Oil Company; Notice of Petition for Adjustment

May 15, 1998.
    Take notice that on May 7, 1998, The Trees Oil Company (Trees) 
filed a petition, pursuant to section 502(c) of the Natural Gas Policy 
Act of 1978, for relief from making Kansas ad valorem tax refunds to 
Northern Natural Gas Company (Northern). The refunds are required by 
the Commission's September 10, 1997 order, in Docket No. RP97-369-000 
et al.,\1\ on remand from the D.C. Circuit Court of Appeals,\2\ that 
directed First Sellers to make Kansas ad valorem tax refunds, with 
interest, for the period from 1983 to 1988. Alternatively, if it is not 
relieved from making the subject refunds, Trees requests that the 
Commission permit Trees to amortize its refund obligation over a 5-year 
period. Trees petition is on file with the Commission and open to 
public inspection.
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    \1\ See 80 FERC para. 61,264 (1997); Order Denying Rehearing 
issued January 28, 1998, 82 FERC para. 61,058 (1998).
    \2\ Public Service Company of Colorado v. FERC, 91 F.3d 1478 
(D.C. 1996), cert. denied, Nos. 96-954 and 96-1230 (65 U.S.L.W. 3751 
and 3754, May 12, 1997).
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    Trees states that Northern sent Trees a Statement of Refunds Due 
for $192,815.47 in principal and $301,471.37 in interest, computed 
through December 31, 1997, for a total of refund liability of 
$494,286.84. Trees states that the Northern Statement covers seven 
wells, from which Trees made sales to Northern from 1983 to July 1, 
1987. Trees asserts that the Statement includes an amount that Trees 
previously refunded to Northern \3\ and Kansas ad valorem tax 
reimbursements on one well (the Warner well) that did not result in a 
price in excess of the applicable maximum lawful price (MLP).
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    \3\ Trees explains that Northern's Statement includes a payment 
of $26,083.44 that Northern made to Trees on April 7, 1989, for 1988 
taxes, an amount that Trees subsequently refunded, with interest, on 
July 1, 1994.
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    Trees also states that during the applicable 1983-1987 period, 37.5 
percent of the working interest in these wells was owned by a 
Pennsylvania Trust which was subsequently terminated, liquidated, and 
closed in 1991. Trees asserts that the Kansas ad valorem tax 
reimbursements distributed to this trust are unrecoverable, and that, 
once the necessary revisions are made to remove (a) the previously 
refunded principal and interest, (b) the Kansas ad valorem taxes that 
did not exceed the applicable MLP, and (c) the unrecoverable 
Pennsylvania Trust reimbursements, Trees refund liability consists of 
$99,611.52 in principal and $162,013.50 in interest, computed through 
December 31, 1997.
    Trees also suggests that this $99,611.52 amount should be further 
reduced because it: 1) includes the principal and interest on pre-
October 1983 production, the liability for which has been disputed 
before the U.S. Court of Appeals for the Fifth Circuit in Anadarko 
Petroleum Corporation v. FERC and Union Pacific Resources Company v. 
FERC, Case No. 98-60043; and (2) includes unrecoverable royalty 
amounts. Trees asserts that when the reimbursements attributable to 
pre-October 1983 production are excluded, along with the royalties 
attributable to the Pennsylvania Trust's working interest, the 
principal amount of its refund obligation to Northern is $80,538.82.
    Trees also states that it is a small ``mother and daughter 
operation'' with no other administrative personnel. Trees explains that 
the subject wells were priced at the relatively low, NGPA section 104, 
flowing gas rate, which provided Trees with little, if any, income 
during the period from 1983-1987. Trees includes condensed December 31, 
1983-1987 income statements to support its assertions, and states that 
the revenues shown on these statements include revenues from Trees' 
other oil and gas interests, and that the expenses include (a) its own 
share of the operating costs, (b) intangible drilling costs, (c) 
administrative costs, including salaries, rent, payroll taxes, and 
other office expenses, and (d) other expenses, including travel costs, 
seminars, licenses, and legal fees. Trees contends that, because these 
estimates show losses for four of the five years, despite small 
salaries and little, if any, drilling and exploration expense, they 
demonstrate how important the tax reimbursements were to Trees' 
economic viability and survivability during that period.
    Trees also provides another condensed income statement for the year 
ending December 31, 1997, and notes that it plans to drill five wells 
in 1998 and convert a well to salt water disposal. Trees states that it 
is pursuing this drilling program in part out of consideration of the 
implied obligations of the leases for further development and to 
protect against drainage. Trees contends that this drilling program 
will tax its cash flow and financial resources, regardless of whether 
Trees is required to make Kansas ad valorem tax refunds. Trees adds 
that two of the committed wells have already been drilled, and that the 
total cost to drill and equip all five wells (if they are successful), 
and to convert the other, will be approximately $1,900,000, of which 
Trees' share of the costs will be $475,000. Trees contends that it has 
no monetary cushion to pay its drilling costs and also pay the Kansas 
ad valorem tax refunds.
    Therefore, Trees contends that it should be relieved from having to 
refund any of these tax reimbursements. In the alternative, Trees 
requests permission to amortize its refund obligation over a 5-year 
period.

[[Page 27942]]

    Any person desiring to be heard or to make any protest with 
reference to said petition should on or before 15 days after the date 
of publication in the Federal Register of this notice, file with the 
Federal Energy Regulatory Commission, 888 First Street, N.E., 
Washington, D.C. 20426, a motion to intervene or a protest in 
accordance with the requirements of the Commission's Rules of Practice 
and Procedure (18 CFR 385.214, 385.211, 385.1105, and 385.1106). All 
protests filed with the Commission will be considered by it in 
determining the appropriate action to be taken but will not serve to 
make the protestants parties to the proceeding. Any person wishing to 
become a party to a proceeding or to participate as a party in any 
hearing therein must file a motion to intervene in accordance with the 
Commission's Rules.
Linwood A. Watson, Jr.,
Acting Secretary.
[FR Doc. 98-13487 Filed 5-20-98; 8:45 am]
BILLING CODE 6717-01-M