Source: https://supreme.justia.com/cases/federal/us/296/521/
Timestamp: 2019-04-22 20:34:26+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 296 › Oklahoma v. Barnsdall Refineries, Inc.
Oklahoma v. Barnsdall Refineries, Inc.
1. The Act of March 3, 1921, authorizing the Oklahoma to levy a tax upon the gross production of oil from lands in Osage County, as applied to oil produced by lessees of lands of the Osage tribe of Indians in that county, is construed, in the light of its history, as authorizing a tax measured by the gross value of oil produced and to be distributed in part to the county, and not as authorizing a tax at a flat rate per barrel, the proceeds of which are paid into the state treasury and used to defray the expenses of administering the state Oil and Gas Proration Law. P. 296 U. S. 523.
171 Okla. 145, 41 P.2d 918, affirmed.
Certiorari to review a decree enjoining the collection of a tax measured on the oil produced by the plaintiffs as lessees of Indian lands.
the state, c. 132, Oklahoma Session Laws, 1933, when applied to oil produced by lessees of lands of the Osage Tribe of Indians in Osage County, Oklahoma, is within the congressional enactment consenting to a state tax upon the production of such oil. The challenged tax is paid into the state treasury and used to defray the expenses of administering the State Oil and Gas Proration Law. The Oklahoma Supreme Court held that the tax is not within the congressional consent, and accordingly enjoined its collection as imposing an unconstitutional burden on the Indian leases, which are deemed to be instrumentalities of the federal government. 171 Okl. 145, 41 P.2d 918. We granted certiorari to review the judgment of the state court, the case being of public importance because involving relations of the state to the national government.
The Oklahoma Legislature, by Act of February 14, 1916, c. 39, Okla. Session Laws, p. 102, imposed a production tax of 3% of the gross value of all oil produced within the state. The act provides that the tax shall be in lieu of all other taxes upon oil in place in the ground, oil leases, or equipment used for oil production, and that one-third of the tax collected in each county shall be returned to it for the construction of permanent roads and bridges and "for and in aid of" the common schools. The levy is denominated by the taxing act a "gross production tax," a label which this Court and the Supreme Court of Oklahoma have accepted as appropriate. Gillespie v. Oklahoma, 257 U. S. 501, 257 U. S. 504; Barnsdall Refineries, Inc. v. Oklahoma Tax Commission, 171 Okl. 145, 147.
supra; compare Group No. 1 Oil Corp. v. Bass, 283 U. S. 279; Burnet v. Coronado Oil & Gas Co., 285 U. S. 393.
"all taxes so collected shall be paid and distributed, and in lieu of all other State and county taxes levied upon the production of oil and gas as provided by the laws of Oklahoma."
Other sections of the act permitted the extension by an additional 25 years of the period, expiring in 1931, for which mineral leases of the lands of the Osage Indians might be granted by the Secretary of the Interior acting in their behalf.
were located in Osage county, immune from the tax, and that removal of the immunity would benefit the Osage Indians through the return of one-third of the tax to the county. See Hearings before Committee on Indian Affairs, S. 4039 (particularly letters of the Secretary of the Interior and of the Indian Commissioner to the Chairman of the Committee), Part 1, pp. 7, 8; part 2, pp. 108, 109; Report Senate Committee on Indian Affairs, No. 704, 66th Cong., 3rd Sess. As originally introduced, the bill authorized the levy of a gross production tax upon oil produced in Osage county "not to exceed 3 percentum of the value of the same," and directed that it should be "distributed as now provided by the laws of Oklahoma." With the evident purpose of removing the 3% limit but not of otherwise altering the character of the permitted tax, the 3% limitation was stricken from the bill before enactment.
direction that the tax is to be "distributed as now provided by the laws of Oklahoma," since, in the section as amended, the phrase is used to qualify the "lieu" provision of the statute as well as the payment and distribution provisions. The section removing the immunity thus described the gross production tax then on the statute books, which was by the taxing act declared to be in lieu of all other taxes upon the oil leases, with which Congress was particularly concerned. Moreover, the Secretary is directed to pay from Indian funds "the percentum" levied as a gross production tax "to be distributed as provided by the laws of Oklahoma" and to pay to the county for road and bridge construction "an additional sum" equal to 1 percent of the oil royalties received upon the Osage Indian leases; the latter sum evidently being in addition to the amounts to be received by the county upon distribution of the gross production tax.
We think that the cumulative effect of the words of the section, obscure until read in the light of its history and of the situation to which it applied, is persuasive that the permitted tax is, as was the then existing tax, one to be measured by the gross value of the oil produced, and to be distributed in part to the counties, and thus to be of benefit to the Indian owners of lands in Osage county.
and the benefits of proration depending upon the existence of a common source drawn upon by different producers, would not necessarily extend to any particular county.
The Supreme Court of Oklahoma emphasized the fact that the one-eighth of a cent per barrel tax, denominated by the statute an "excise," is an excise tax distinguishable from a property tax in lieu of which the gross production tax is levied, and different from the gross production tax in its temporary character and the method of its computation and distribution, and so concluded that it is not a tax contemplated by the congressional consent. Construing that consent with the strictness appropriate to the interpretation of a waiver of a defined tax immunity of the sovereign, we think the conclusion of the state court was right.
"Sec. 5. That the State of Oklahoma is authorized from and after the passage of this Act to levy and collect a gross production tax upon all oil and gas produced in Osage County, Oklahoma, and all taxes so collected shall be paid and distributed, and in lieu of all other State and county taxes levied upon the production of oil and gas as provided by the laws of Oklahoma, the Secretary of the Interior is hereby authorized and directed to pay, through the proper officers of the Osage Agency, to the State pf Oklahoma, from the amount received by the Osage Tribe of Indians as royalties from production of oil and gas, the percentum levied as gross production tax, to be distributed as provided by the laws of Oklahoma: Provided, That the Secretary of the Interior is hereby authorized and directed to pay, through the proper officers of the Osage Agency, to Osage County, Oklahoma, an additional sum equal to 1 percentum of the amount received by the Osage Tribe of Indians as royalties from production of oil and gas, which sum shall be used by said county only for the construction and maintenance of roads and bridges therein: Provided further, That the proper officials of Osage County shall make an annual report to the Secretary of the Interior showing that said fund has been used for road and bridge construction and maintenance only."

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