Title: EOG RESOURCES MARKETING v. OKLAHOMA STATE BD. OF EQUALIZATION
Citation: 196 P.3d 511, 2008 OK 95
Docket Number: 
State: Oklahoma
Issuer: Oklahoma Supreme Court
Date: October 21, 2008

EOG RESOURCES MARKETING v. OKLAHOMA STATE BD. OF EQUALIZATION Annotate this Case EOG RESOURCES MARKETING v. OKLAHOMA STATE BD. OF EQUALIZATION 2008 OK 95 196 P.3d 511 Case Number: 105860 Decided: 10/21/2008 THE SUPREME COURT OF THE STATE OF OKLAHOMA EOG RESOURCES MARKETING, INC., Plaintiff/Appellee, v. OKLAHOMA STATE BOARD OF EQUALIZATION and OKLAHOMA TAX COMMISSION, Defendants/Appellants. APPEAL FROM THE DISTRICT COURT OF OKLAHOMA COUNTY Honorable Noma D. Gurich, Trial Judge ¶0 Appellee, EOG Resources Marketing Inc., (EOGRM) filed an action seeking a declaratory judgment that the Oklahoma State Board of Equalization and the Oklahoma Tax Commission (collectively, the Board of Equalization) had erroneously classified it as a public service corporation and that it was without jurisdiction to assess EOGRM for the purposes of ad valorem taxation. The trial court granted summary judgment to EOGRM. The Board of Equalization appealed, and we retained the cause. We affirm the trial court, and hold that: 1) the district court was the proper forum for the action; 2) Title TRIAL COURT AFFIRMED. Larry D. Patton, Lynn C. Rogers, Oklahoma City, Oklahoma, for Appellants. Michael E. Smith, Sharon T. Thomas, Oklahoma City, Oklahoma, for Appellee. KAUGER, J.: ¶1 The issue presented is whether the trial court erred in granting summary judgment to EOG Resources Marketing, Inc., (EOGRM) concerning whether: 1) the district court was the proper forum for the cause; 2) the State Board of Equalization and the Oklahoma Tax Commission had jurisdiction to assess EOGRM for ad valorem taxes; and 3) EOGRM is a public service corporation. We find that it did not. FACTS ¶2 EOGRM is a subsidiary of EOG Resources Inc. EOGRM owns and operates natural gas gathering facilities. The purpose of these facilities is to move natural gas from wells owned by EOG Resources Inc. to the point of sale. ¶3 On December 14, 2006, EOGRM brought an action in Oklahoma County District Court seeking a declaratory judgment that the State Board of Equalization and the Oklahoma Tax Commission (collectively, the Board of Equalization) had erroneously classified it as a public service corporation for the purposes of ad valorem taxation for the 2006 tax year, and that the Board of Equalization was without jurisdiction to assess EOGRM's property. ¶4 All non-exempt property is taxed ad valorem unless the legislature provides a substitute tax. ¶5 This cause is the most recent link in a long chain of related causes that begins with an unpublished Court of Civil Appeals opinion promulgated on April 5, 1996 --- Texaco Exploration & Prod., Inc., v. State Bd. of Equalization, No. 85,256 (1996) cert. denied. There, the sole issue was whether Texaco Exploration, a gas gathering company, was a public service corporation for the purposes of ad valorem taxation. Before 1994, Texaco Exploration had been assessed locally, but when the Board of Equalization learned that Texaco Exploration owned and operated gas gathering pipelines, it ordered the company to file reports with the Board of Equalization for the purpose of central assessment. Texaco Exploration filed an action for declaratory and injunctive relief asserting that it was not a public service corporation. The trial court and Court of Civil Appeals agreed, and Texaco Exploration continued to be assessed locally. ¶6 On July 1, 1997, the legislature responded to Texaco Exploration by amending ¶7 On December 28, 2001, we addressed the issue of the valuation of the property of gas gathering companies in: In re. Assessment for the Year 2000 of Certain Property Owned by Oneok Field Servs. Gathering, LLC, ¶8 On May 17, 2002, the legislature responded to Oneok by creating the Task Force on Valuation of Gas Gathering Systems Assets (Task Force) to address whether gas gathering systems should be centrally or locally assessed, and how the companies' property should be valued. ¶9 On June 15, 2007, the Court of Civil Appeals again addressed the issue of whether a gas gathering company was to be centrally or locally assessed for ad valorem taxes in Chesapeake Energy Mktg., Inc. v. State Bd. of Equalization, ¶10 On October 26, 2007, the Board of Equalization filed a motion for summary judgment noting that for the years 1994-2005, EOGRM, and/or its predecessor, were centrally assessed without objection. The Board of Equalization argued that because EOGRM was centrally assessed for the 2002 tax year, the Board of Equalization was legislatively mandated by ¶11 On November 27, 2007, EOGRM responded and moved for summary judgment, arguing that §2851.3: 1) should be construed to apply only to gas gathering companies which were lawfully assessed as public service corporations in 2002; 2) is a special law in violation of the Okla. Const. art. 5 §§46, 59 and art. 10 §14(A); ¶12 On April 16, 2008, the trial court granted EOGRM's motion for summary judgment, finding as a matter of law, that: 1) EOGRM is not a public service corporation; 2) Title I. THE DISTRICT COURT WAS THE PROPER FORUM IN WHICH TO BRING AN ACTION CHALLENGING THE JURISDICTION OF THE BOARD OF EQUALIZATION TO ASSESS EOGRM FOR AD VALOREM TAXES. ¶13 Summary judgment is properly granted when there are no disputed questions of material fact and the moving party is entitled to judgment as a matter of law. ¶14 Before addressing EOGRM's arguments on the constitutionality of §2851.3, the Board of Equalization first argues that under ¶15 This question was raised in United Airlines, Inc. v. State Bd. of Equalization, II. TITLE ¶16 EOGRM has challenged the constitutionality of 68 O.S. Supp. 2002 §2851.3 on several grounds. The Board of Equalization generally contends that §2851.3 is not violative of any provision of the United States or Oklahoma Constitutions. The Constitution is the bulwark to which all statutes must yield.28 In construing and applying constitutional provisions, the intent of the framers and the people adopting it must be given effect.29 Absent an ambiguity, the intent is settled by the language of the provision itself, and the courts are not at liberty to search beyond the instrument for meaning.30 The primary goal of statutory construction is to ascertain and follow the intent of the legislature.31 The words of a statute will be given their plain and ordinary meaning unless it is contrary to the purpose and intent of the statute when considered as a whole.32 The legislature has plenary power to tax, subject only to constitutional restrictions and the will of the people expressed through elections.33 A. Title ¶17 EOGRM argues that §2851.3 is an unconstitutional special law. The Oklahoma Constitution contains several provisions regarding special laws for taxation and assessment. The most broadly applicable prohibition on special laws may be found at the Okla. Const. art. 5, §59, which provides that where a general law can be made applicable, no special law may be enacted.34 To determine whether a statute violates art. 5, §59 we apply the following three pronged test: 1) Is the statute a special law or a general law? 2) If the statute is a special law, is a general law applicable? and 3) If a general law is not applicable, is the statute a permissible special law?35 ¶18 The Oklahoma Constitution also contains two other pertinent prohibitions on special laws. The Okla. Const. art. 5, §46 enumerates twenty-eight areas in which the legislature is absolutely prohibited from passing special laws unless it is otherwise allowed to do so elsewhere in the Constitution. One of these areas is relieving the assessor of taxes from official duties.36 The Okla. Const. art. 10, §14 (A) absolutely prohibits the legislature levying or collecting taxes by special laws unless it is otherwise allowed to do so elsewhere in the Constitution.37 ¶19 For the Okla. Const. art. 5, §46 and art. 10, §14(A), our analysis consists only of determining whether the statute is a general law or a special law. ¶20 A statute relating to all persons or things of a class is a general law; one relating to particular persons or things of a class is a special law. ¶21 EOGRM's contention is that similarly situated gas gathering companies are taxed differently. Gas gathering companies which were centrally assessed in 2002 are now centrally assessed, and gas gathering companies which were locally assessed in 2002 are now locally assessed. The Board of Equalization responds that EOGRM has failed to provide any evidence that gas gathering companies that are locally assessed are similarly situated. ¶22 EOGRM has provided an affidavit from James C. Johnson, President of Chesapeake Energy Marketing, Inc. (CEMI). In the affidavit, Johnson states that CEMI is a gas gathering company which functions in a way substantially similar to EOGRM. ¶23 The Board of Equalization has not demonstrated any pertinent dissimilarity between gas gathering companies which are assessed centrally and those which are assessed locally. The classification made by §2851.3 boils down to nothing more than choosing a date. The method by which a gas gathering company was assessed in 2002 is not a distinctive characteristic upon which different treatment is reasonably founded. ¶24 The Board of Equalization argues that because §2851.3 was intended as a temporary measure, the statute is nothing more than the lawful action of the legislature engaged in its constitutionally mandated duty to work out a systematic and fair taxation policy. Although it is not clear from the plain language of §2851.3 that it is a temporary measure, when read together with §2851.2, it seems likely that the statute was intended as a temporary moratorium until the Task Force releases its findings. However, as was noted in Claremont Sch. Dist. v. Governor, 744 A.2d 1107, 1113 (N.H. 1999): All as citizens are aware, there is nothing permanent about any piece of legislation; its terms and conditions are subject to change at the will of the political process. The intended legislative life of a statute has no bearing on the requirement that it pass constitutional muster. B. Title ¶25 EOGRM next objects to §2851.3 by arguing that the law violates the Uniformity Clause of the Oklahoma Constitution by assessing members of the same class at different assessment ratios. The Okla. Const. art. 10, §5(B) provides that taxes must be uniform on the same class of subjects.48 The assessment percentage rate on one class or subclass of subjects must be uniform.49 However, the State has a wide range of discretion to distinguish, select, and classify objects of taxation, as provided by the Okla. Const. art. 10, §22.50 In order for a tax classification to pass constitutional muster, there must be a reasonable classification and a reasonable opportunity for uniform or equal incidence upon the class created.51 Because tax classifications are presumptively valid, the burden is on the challenger to prove that a classification does not rest upon a reasonable basis, and a statute will not be disturbed in the absence of unreasonable, discriminatory, or arbitrary action.52 ¶26 The Board of Equalization argues that §2851.3 does not create any new classification, but simply requires a gas gathering company to remain in the tax classification which it occupied in 2002. We do not find this argument convincing. Prior to the enactment of the statute, a gas gathering company could either be classified as a public service corporation or as a non-public service corporation. This classification could be contested by the company. With the enactment of §2851.3, two new classifications were created: 1) gas gathering companies which were classified as public service corporations in 2002; and 2) gas gathering companies which were not classified as public service corporations in 2002. By freezing a gas gathering company in its 2002 classification, the statute prevents the company from contesting its status as a public service corporation. ¶27 Just as it is the responsibility of the legislature to make law and the executive to carry those laws into effect, it is for the judiciary to interpret the law.53 The judiciary is the independent department of government charged with the responsibility of protecting the Constitution.54 Clearly, the legislature may answer the question of whether a gas gathering company is a public service corporation for the purposes of ad valorem taxation of law, but it may not refuse to do so and also effectively forbid taxpayers from seeking legal redress in the courts. It is the attempt to forestall any judicial review of the classification of similarly situated gas gathering companies that makes the new classifications created by §2851.3(B) an unreasonable and arbitrary action. C. Title ¶28 EOGRM's third argument is that §2851.3 law requires the Board of Equalization to continue to centrally assess non-public service corporation property as long as it was centrally assessed in 2002. Conversely, the law requires county assessors to locally assess public service corporation property as long as it was locally assessed in 2002. This, EOGRM argues, requires the Board of Equalization and county assessors to act outside constitutionally established jurisdictional boundaries. ¶29 The Okla. Const. art. 10, §21(A) requires the Board of Equalization to assess all public service corporation property.55 The Board of Equalization did not directly address EOGRM's contention that §2851.3 violates the Okla. Const. art. 10, §21. Instead, the Board of Equalization argues that because it determined that EOGRM was to be centrally assessed in 2002 and EOGRM did not object at that time, the determination is final, has the same effect as a judgment not subject to further appeal,56 and that it may not be challenged by EOGRM in this action. EOGRM responds that it is not challenging its 2002 assessment, but its 2006 and 2007 assessments. ¶30 A taxpayer may bring an action in district court challenging the jurisdiction of the Board of Equalization to assess it for ad valorem taxes.57 A taxpayer is entitled to challenge a tax law or assessment in subsequent tax years, even when the taxpayer has not previously challenged the assessment. In Ladd Petroleum Corp. v. Oklahoma Tax Comm'n, 1989 OK 5, ¶2 fn. 1, 767 P.2d 879 , the corporation alleged that the additional gross production, petroleum excise, and conservation excise taxes it was assessed were in violation of the Fourteenth Amendment. Although Ladd had failed to make timely objections to the assessments in previous years, we decided its appeal for the years it timely filed objections. In United Airlines, Inc. v. State Bd. of Equalization, 1990 OK 29, ¶3, 789 P.2d 1305 , United Airlines argued that it was not a public service corporation for the purposes of ad valorem taxation. We heard the appeal despite the fact that the Board of Equalization had centrally assessed airline companies for forty-two years at the time United Airlines sought to challenge its central assessment. The Board of Equalization has not alleged that EOGRM's challenges for tax years 2006 and 2007 were not timely, and the undisputed finality of the Board of Equalization's 2002 determination is not germane to our analysis of the constitutionality of §2851.3. ¶31 The Okla. Const. art. 10, §21(A) unambiguously divides the types of property to be assessed centrally by the Board of Equalization from the types of property which are to be assessed locally by county assessors. The Board of Equalization may not lawfully assess non-public service corporation property. If there is property which was erroneously designated as public service corporation property in tax year 2002, §2851.3, on its face, requires the Board of Equalization to reach beyond its constitutionally established jurisdiction to continue to assess the property. Conversely, if there is property which was erroneously designated as non-public service corporation property in 2002, §2851.3 requires county assessors to reach beyond their constitutionally established jurisdiction to continue to assess the property. ¶32 Furthermore, taxpayers who allege that their property has been erroneously designated are left without recourse. This is another way whereby §2851.3 purports to divest the judiciary of its constitutional responsibility of adjudicating a justiciable question of law, in this case ---- whether a gas gathering company is a public service corporation for the purposes of ad valorem taxation. The legislature may answer this question of law, but it may not refuse to do so and also forbid taxpayers from seeking legal redress in the courts. Because §2851.3 seeks to extend the constitutionally established jurisdiction of the Board of Equalization and county assessors, it is an unconstitutional statute in violation of the Okla. Const. art. 10, §21(A). D. We Need Not Consider Whether ¶33 EOGRM's final objection to §2851.3 is that the statute violates the Equal Protection Clauses of the United States58 and Oklahoma59 Constitutions by arbitrarily and capriciously using different methods to tax property within the same classification. The Equal Protection Clause of the Fourteenth Amendment to the United States Constitution is applicable to state exercise of taxing power.60 The Equal Protection Clause protects a taxpayer from state action which selects it out for discriminatory treatment by subjecting it to taxes not imposed on others of the same class.61 ¶34 EOGRM's basic contention is that similarly situated gas gathering companies are taxed differently. Gas gathering companies which were centrally assessed in 2002 are now centrally assessed, and gas gathering companies which were locally assessed in 2002 are now locally assessed. The legislature is given especially broad latitude in creating classifications and distinctions in tax statutes.62 Unless a classification jeopardizes the exercise of a fundamental right or characterizes based upon an inherently suspect characteristic, the Equal Protection Clause requires only that the classification rationally further a legitimate state interest.63 In other words, if the classification is neither capricious nor arbitrary, and rests upon some reasonable consideration of difference or policy, there is no denial of the equal protection of the law.64 This standard is especially deferential in the context of classifications made by complex tax laws.65 When determining whether a class or subclass has been created, it is the intent of the legislature to create a class which controls.66 ¶35 Because III. EOGRM IS NOT A PUBLIC SERVICE CORPORATION. ¶36 EOGRM argues that it is not a public service corporation, and the Board of Equalization is without jurisdiction to assess it for ad valorem taxation. The Board of Equalization responds that even if A. EOGRM May Not Exercise the Power of Eminent Domain. ¶37 The legislature has differentiated gas gathering companies from intrastate pipeline companies and intrastate transmission pipeline companies. Title ¶38 The Natural Gas Act, at 15 U.S.C.A. §717(b), explicitly does not apply to gas gathering companies. B. EOGRM Does Not Possess a Right to Occupy Streets, Highways, or Rights of Way in a Manner Not Available to the General Public. ¶39 The Board of Equalization argues that under ¶40 Title ¶41 The Pipelines Act of 1907, specifically ¶42 Because EOGRM may not exercise the power of eminent domain and does not possess the right to occupy any right of way, street, or highway in a manner not permitted to the general public, it is not a public service corporation for the purposes of ad valorem taxation. Because EOGRM is not a public service corporation, under the Okla. Const. art. 10, §21(A), the Board of Equalization was without jurisdiction to assess it for the purposes of ad valorem taxation for the tax years 2006 and 2007. CONCLUSION ¶43 This Court does not correct the legislature, nor do we legislate by judicial fiat. Nonetheless, we must apply Oklahoma's Constitution. ¶44 The Okla. Const. art. 9, §34 clearly sets out the criteria for determining which entities are public service corporations. EOGRM is not a public service corporation because it may neither exercise the right of eminent domain nor does it have a franchise to use or occupy any right of way, street, alley or public highway in a manner not permitted to the general public. Pursuant to the Okla. Const. art. 10, §21(A), the Board of Equalization may only assess public service corporation property and railroad and air carrier property. The Board of Equalization was without jurisdiction to assess EOGRM's property for the tax years 2006 and 2007. Instead, county assessors have jurisdiction to locally assess EOGRM's property. ¶45 The trial court did not err by granting EOGRM's motion for summary judgment and declaring that: 1) EOGRM is not a public service corporation; 2) TRIAL COURT AFFIRMED. WINCHESTER, C.J., EDMONDSON, V.C.J., HARGRAVE, KAUGER, WATT, TAYLOR, COLBERT, and REIF, J.J. - concur. OPALA, J.- concurs in judgment. FOOT