Opinion ID: 2924407
Heading Depth: 2
Heading Rank: 1

Heading: Power Resources

Text: On appeal, taxpayers first contend that that this court wrongly decided Power Resources because the underlying Tax Court decision in that case had been based on the taxpayer’s “incomplete and inaccurate and, therefore misleading” stipulation that its contract with BPA had given it the right to “use” a portion of the Intertie. According to taxpayers, that ill-advised stipulation led this court to incorrectly “assume” that the taxpayer in Power Resources possessed an “exclusive right to a definable part” of the Intertie. Taxpayers set out to rectify that claimed error by arguing that the COAs at issue here vest taxpayers only with “Scheduling Rights,” i.e., the right to add to and/or withdraw from the electricity being transmitted on the Intertie. Cite as 357 Or 718 (2015) 727 Consequently, taxpayers assert that their contracts with the BPA are simply transmission agreements that provide taxpayers with services no different from the untaxed transmission services available to noncapacity owning utilities under the federal government’s Open Access Transmission Tariffs (OATTs).5 According to taxpayers, under both taxed and untaxed transmission agreements, their only role in transmitting power over the Intertie is to tender a request for that service to BPA and then either (1) make electricity available to the agency for transmission from Washington State, or (2) ready the facilities needed to receive electricity transmitted to Washington State. That limited degree of use, taxpayers argue, is inconsistent with any kind of possessory interest in a system that is, they claim, “owned, used, and controlled exclusively by its owners—BPA, Portland General Electric Company, and PacifiCorp.” A central premise underlying taxpayers’ arguments is that use of the Intertie is the sine qua non of possession for purposes of establishing taxation under ORS 307.060. Indeed, taxpayers’ position appears to be that establishing the fact of the taxpayer’s Intertie use in Power Resources was somehow central to this court’s decision in that case. A brief discussion of Power Resources, however, demonstrates why taxpayers’ position in that regard is not well taken. In Power Resources, the taxpayer was a Portland- based cooperative that owned shares in a number of electrical generation facilities, among them, the Boardman Coal Plant near Boardman, Oregon. In 1992, the taxpayer entered into a long-term agreement to sell electricity from the Boardman plant to a California irrigation district. Among other things, that agreement required the taxpayer 5 In 1996, pursuant to the Federal Energy Regulatory Commission’s (FERC) statutory authority to remedy unduly discriminatory or preferential rates, practices, or contracts affecting public utility rates for transmission in interstate commerce, the agency issued Order No. 888 requiring all public utilities owning and/or controlling transmission facilities to offer nondiscriminatory, open access, transmission services. As part of that order, FERC required every transmissionowning public utility to file nondiscriminatory OATTs that were either consistent with or superior to the pro forma OATT set out in Order No. 888. FERC’s pro forma OATT contains the minimum terms and conditions for nondiscriminatory electrical transmission service, and every transmission-owning public utility is required to abide by that tariff in providing transmission services for itself and others. 728 City of Seattle v. Dept. of Rev. to use its “best efforts” to transmit the power it sold over the Intertie. To meet that obligation, the taxpayer entered into a COA with the BPA in 1994. Under that agreement, the taxpayer received 50 megawatts (MW) of transmission capacity for the physical life of the Intertie in exchange for a lump sum advance payment of approximately $10.75 million and the promise to pay a proportionate share of the Intertie’s operating, maintenance, and replacement expenses. The agreement expressly defined taxpayer’s resulting capacity share in terms of transfer capability on the Intertie that was “owned by [taxpayer] pursuant to this agreement.” Under that COA, BPA retained all rights to oper- ate, maintain, and manage the Intertie. Although taxpayer was entitled to 50 MW of Intertie capacity, it was required to schedule its electrical transmissions with BPA in advance and to abide by BPA’s scheduling procedures. An amendment to the COA subsequently clarified that the taxpayer had a right to use its capacity share to “wheel”—i.e., transmit—electricity for other entities. The agreement also permitted BPA to use any other capacity unscheduled by the taxpayer, but required the agency to compensate the taxpayer for its use. In 1996, the department assessed the total value of the taxpayer’s properties at over $45 million, an amount that included nearly $11 million as the assessed value of the taxpayer’s Intertie share. In upholding that assessment over the taxpayer’s challenge, the Tax Court concluded that, because the taxpayer had exclusive control, subject to reasonable limitations, over a part of the Intertie, the taxpayer “held” that part of the Intertie within the meaning of ORS 307.060 (1995).6 Then, as now, ORS 307.060 (1995) sets out 6 In that regard, the Tax Court observed: “Although Plaintiff shares the Intertie with others, it retains exclusive control over a portion of it. Also, much like the owner of a time-share property, when Plaintiff uses the property it uses it to the exclusion of others. Plaintiff’s characterization of control would require that it have exclusive control over the entire Intertie. This is unreasonable. Such a construction would similarly require that the ranchers have exclusive control over all federal grazing land or that the summer home owners have exclusive control of the National Forest. This definition of control is too broad and does not take into account the character of the property. Here, Plaintiff has exclusive use Cite as 357 Or 718 (2015) 729 an exception to ORS 307.040, the statute that generally exempts all property of the United States from taxation in Oregon. ORS 307.060 (1995) provided, in relevant part: “Real and personal property of the United States or any department or agency thereof held by any person under a lease or other interest or estate less than a fee simple    shall be assessed and taxed as for the full assessed value thereof subject only to deduction for restricted use.” On appeal to this court, the taxpayer in Power Resources argued that, as used in ORS 307.060 (1995), the phrase “held by any person” should be construed to mean some degree of actual physical possession and occupation of a property. Under that construction, the taxpayer continued, only BPA could be said to physically “hold” the Intertie, a circumstance that effectively prevented anyone else, including the taxpayer, from “holding” it in the same sense. This court disagreed. In doing so, the court articulated two salient points: “(1) [A]lthough a ‘possessory’ interest always is marked by some degree of control and some degree of exclusivity, neither absolute control nor absolute exclusivity is required; and (2) the test for the existence of a possessory interest necessarily varies with the nature of the property at issue.” Power Resources, 330 Or at 31. The court recognized that, among the indicia of exclusivity and control evident in the taxpayer’s agreement with BPA, the 50 MW of electrical transmission capacity allotted to the taxpayer: (1) constituted an “exclusive right to a definable part” of the Intertie; (2) could be used—or not used—in any way that the taxpayer wished; and (3) existed as an irrevocable right for the life of the Intertie, a right that could not be diminished by adding other capacity owners to the system. Id. After noting that the transmission of electricity over the Intertie constituted its only apparent beneficial use, the court concluded: “The property involved in this case—an electric transmission grid—cannot physically be divided usefully among of a portion of the premises; that is, its capacity ownership share. While it shares the total capacity with eight others, so does the rancher share the grazing land and the summer home owner share the forest.” Power Resources Cooperative v. Dept. of Rev., 14 OTR 479, 485 (1998). 730 City of Seattle v. Dept. of Rev. its owners. However, that limitation has not prevented taxpayer from investing in the expansion of the system, sharing the costs of its upkeep, and thereby obtaining an exclusive right to use and control the system to the extent necessary to permit transmission of 50 MW of electricity for taxpayer’s own benefit. In this context, that is sufficient; taxpayer’s 50 MW capacity ownership share in the Intertie is a possessory interest in that entity. Put differently, taxpayer ‘holds’ a share of the property that makes up the Intertie and may be assessed and taxed for that share to the extent provided in ORS 307.060.” Id. at 32 (internal citation omitted) (emphasis added). Given the importance of stare decisis to the judicial decision-making process, taxpayers shoulder a substantial burden in attempting to persuade us that Power Resources was incorrectly decided. As we observed in Farmers Ins. Co. v. Mowry, 350 Or 686, 698, 261 P3d 1 (2011): “Few legal principles are so central to our tradition as the concept that courts should ‘[t]reat like cases alike,’ and stare decisis is one means of advancing that goal. For those reasons, we begin with the assumption that issues considered in our prior cases are correctly decided, and ‘the party seeking to change a precedent must assume responsibility for affirmatively persuading us that we should abandon that precedent.’ ” (Internal citations omitted.) Taxpayers have not persuaded us that we should abandon Power Resources as precedent. Nor have taxpayers persuaded us that Power Resources is not controlling precedent in this case. As our discussion in Power Resources makes clear, the features of exclusivity and control—not use—supported our conclusion that the taxpayers in that case held a possessory interest in the Intertie. That the fact of usage was stipulated to by the parties in Power Resources is not helpful to taxpayers here. In this case, those same features of exclusivity and control of transmission capacity are present under facts that are virtually identical to the facts in Power Resources. In addition, the record shows that taxpayers’ agreements with BPA allows them to (1) assign their capacity rights as security for financing purposes, (2) engage in certain capacity transfers with other capacity owners and Cite as 357 Or 718 (2015) 731 select Pacific Northwest utilities, and (3) with BPA consent, sell their capacity rights outright. Consequently, we hold that the degree of exclusivity and control enjoyed by taxpayers here with regard to their capacity shares in the Intertie establishes the taxability of those shares under Power Resources.7