Opinion ID: 1671871
Heading Depth: 2
Heading Rank: 1

Heading: Refinery Gas

Text: All parties argue that our decision in BP Oil I supports their opposing positions. In BP Oil I, a local government was attempting to collect use taxes on refinery gas at a rate higher than the 52 cent formula. The Department argues that in BP Oil I, we held that La. R.S. 47:305D(1)(h) established a value-based exemption from taxation for the value of refinery gas which exceeds the valuation set by the 52 cent formula. BP and Star argue that in BP Oil I, we held that La. R.S. 47:305D(1)(h) was a valuation provision that set the cost price of refinery gas for use tax purposes at the 52 cent formula. In BP Oil I, we held, among other things, that La. R.S. 47:305D(1)(h), which set the maximum value at which local and state governments must assess refinery gas for local and state use tax purposes, did not violate La. Const. art. VI, sec. 29(A) [3] or La. Const. art. III, Sec. 16(B) [4] . BP Oil I, supra at 1328. In reaching this conclusion, we traced the legislative history of La. R.S. 47:305D(1)(h), which bears repeating with some elaboration in this case as it clearly establishes that the provision is not an exemption. La. R.S. 47:305, as originally set forth in the Revised Statutes of 1950, specifically exempted from sales and use tax the following pertinent items: gasoline, steam, water, electric power or energy and natural gas. In 1974, the statute was amended to exempt sales of fuel oil and coal when used for boiler fuel. An amendment in 1979 added wood waste and bagasse to the boiler fuel exemption which was then in paragraph (4). An amendment in 1980 added and any materials and energy sources used to fuel the generation of electric power, substituted all energy sources for fuel oil, wood waste and bagasse and coal, and added except refinery gas when used for boiler fuel. Accordingly, prior to 1985, La. R.S. 47:305(4) provided exemptions for (vii) Natural gas; (viii) All energy sources when used for boiler fuel except refinery gas when used for boiler fuel. Thus we held in BP Oil I that between February 1, 1985, the date the Parish was claiming taxes were due on refinery gas, and July 6, 1985, the effective date of Act No. 258, all refinery gas was taxable ... whether used as boiler fuel or not, because there was no specific exemption of refinery gas [in La. R.S. 47:305(4)(vii)] and the energy sources exemption [La. R.S. 47:305(4)(viii)] specifically excepted refinery gas. BP Oil I, supra at 1332. We explained the legislative history of the 1985 amendments to La. R.S. 47:305 in BP Oil I as follows, Prior to the 1985 legislation fixing the value of refinery gas, there had been a longstanding dispute between state and local taxing authorities and taxpayers on the issue of whether refinery gas was subject to sales and use taxes. In 1972, the state taxing authority and the refining industry reached an administrative resolution of the dispute, agreeing that refinery gas would be taxed at four cents per 1,000 cubic feet. The parties later modified that agreement, effective January 1, 1985, to fix the value at fifty-two cents per 1,000 cubic feet, subject to annual adjustment. By La. Acts 1985, No. 258, the Legislature adopted a formula relative to the value of refinery gas for state and local sales and use taxation. Act 258 amended La.Rev. Stat. 47:305, a statute pertaining to exclusions and exemptions from sales and use taxes, to rewrite Subsection D (then Paragraph [4]) which had previously exempted from sales and use taxes [a]ll energy sources when used for boiler fuel except refinery gas when used for boiler fuel. The amendment changed the present Subsections D(1)(g) and (h) in several ways as discussed hereinafter, but particularly added to the energy sources exemption in the present Subsection D(1)(h) a provision fixing the value of [r]efinery gas when used for any taxable purpose at fifty-two cents per 1,000 cubic feet in 1985, with an adjustment formula for ensuing years. The amendment specifically provided that such values shall be the maximum placed upon refinery gas by any local governmental subdivision or school board under any authority or grant of power to levy and collect sales or use taxes. Id. at 1326. We held that the 1985 amendment, adding refinery gas to the subsection (4)(a)(vii) exemption along with natural gas, provided an exemption for refinery gas when used for any taxable purpose other than when used for boiler fuel. Id. at 1332. We further held that subsection 305(4)(a)(viii), the later provision, merely excluded refinery gas from the exemption of energy sources used as boiler fuel.  Id. (emphasis added). We recognized that while [t]he Legislature in 1985 arguably intended to keep refinery gas subject to sales and use taxes when it amended the original bill, the final bill clearly did not achieve that objective. Id. This holding was based on the fact that [n]othing in the 1985 Act removed Subsection 305(4)(a)(vii)'s general exemption of refinery gas when that property is used for purposes other than as boiler fuel. Id. Accordingly, we affirmed the portion of the trial court judgment which exempted refinery gas when used for purposes other than as boiler fuel between July 6, 1985 and July 18, 1990, denied the energy sources exemption for BP's use of refinery gas and remanded the case to the trial court to determine the value of taxable refinery gas in accordance with La.Rev.Stat. 47:305D(1)(h). Id. at 1332, 1334. The Department points to footnote 6 in the original BP Oil I decision for support of its position that La. R.S. 47:305D(1)(h) created a value-based exemption for refinery gas to the extent that the value of refinery gas exceeds the 52 cent formula. In footnote 6, we were explaining why La. R.S. 47:305D(1)(h) did not violate the Origination Clause. We explained that Act 258 was not a revenue raising bill, but rather adopted a partial exemption from an existing tax and established the method of valuing the non-exempt portion, which was difficult to value because it was not purchased by the refiner or sold on the open market. Id. at 1328, n. 6. When viewed in light of our discussion in BP Oil I of the legislative history of Act 258, wherein we explained that prior to that Act all refinery gas was taxable when used for any purpose, and that after the 1985 amendment, refinery gas used for purposes other than boiler fuel was exempt, it is clear that our reference to a an existing tax referred to an existing tax on all refinery gas, and the partial exemption was the exemption for refinery gas when used for any taxable purpose other than for boiler fuel. The non-exempt portion, refinery gas used for boiler fuel, was valued according to the 52 cent formula because it was difficult to value because it was not purchased by the refiner or sold on the open market. This reading of the BP Oil I decision is further bolstered by the fact that throughout the opinion we referred to the 52 cent formula as a valuation provision, not an exemption, and we remanded the refinery gas issue to the trial court to set the value according to that formula. Further legislative history is also telling. Senate Concurrent Resolution No. 58 of the 1990 Regular Session explained the purpose of Act 258 of the 1985 Regular Session. Resolution 58 referred to the dispute over whether all refinery gas ... is subject to sales and use taxes and the 1972 administrative resolution to the dispute which fixed the value at four cents per thousand cubic feet. The Resolution further explained that the administrative resolution was modified effective January 1, 1985 to take into consideration the current value of such refinery gas and fixed the value of refinery waste gas at fifty-two cents per thousand cubic feet for sales and use tax purposes, subject to annual adjustment; ... Finally, the Legislature expressly declare[d] its intention in enacting Act No. 258 ... was to put into effect the agreement reached by the state and the refining industry establishing that all refinery gas, including refinery gas used as boiler fuel, shall be subject to sales and use tax ... provided that its taxable value is fifty-two cents per thousand cubic feet, subject to annual adjustment as provided in the Act. Had the legislature intended the 52 cent formula to be a value-based exemption, they could have easily said so in this Resolution adopted expressly for the purpose of spelling out the legislative intent behind the statute. Furthermore, the 52 cent formula is subject to annual adjustment; therefore, if the legislature believes the 52 cent formula does not reflect the cost price, it can adjust the formula upward or downward. Further support for the interpretation that La. R.S. 305D(1)(h) does not provide an exemption for refinery gas is the Department's interpretation of the statute. A long settled contemporaneous construction by those charged with administering the statute is given substantial and often decisive weight in its interpretation. Traigle v. PPG Industries, Inc., 332 So.2d 777, 782 (La.1976). It is undisputed that from the enactment of the 52 cent formula in 1985 until March of 1995, the Department considered the 52 cent formula to be a valuation provision and considered it to be unaffected by suspensions of exemptions. In addition, the Department advised taxpayers during that time period to use the 52 cent formula to calculate the use tax for refinery gas. It was not until April of 1995 upon advice of outside counsel that the Department began to claim that refinery gas was exempt to the extent that its value exceeded the 52 cent formula. Because the clear language of the statute excepts refinery gas from the energy sources exemption, the legislative history indicates that the 52 cent formula was not a value-based exemption and the Department itself contemporaneously interpreted the statute as a valuation provision unaffected by the legislative suspensions, we hold that La. R.S. 47:305D(1)(h) is not a value-based exemption which was suspended by the legislature. [5] The 52 cent formula sets the value at which refinery gas can be taxed for the periods in question. [6] Accordingly, the court of appeal's decision in Star regarding this issue is affirmed and the court of appeal's decision in BP, which has since been overruled, is reversed.