Court Opinion

ID: 9666346
Source: CourtListenerOpinion
Date Created: 2023-08-24 01:11:21.565535+00
Date Added: 2024-06-11T14:56:38.777373
License: Public Domain

STEPHENSON, Justice,
dissenting.
The engine that has driven this lawsuit from the beginning to the majority opinion is that out-of-state corporations own large tracts of coal and pay a minimal tax on such property.
I am sure that if it was possible to tax the land-holding corporations at a high rate and leave alone the thousands of relatively small-holding coal owners, we would not have the hue and cry over unmined coal taxes.
Unfortunately, the majority seized upon the “classification of property” issue and did not address the tax rate issue which apparently is the real issue raised in respondents’ briefs.
It is also unfortunate that these cases caught a majority of the court in one of its “we know better than the legislature or anybody else” moods.
The result of the majority opinion is to effectively repeal the 1915 amendment to Section 171 of the Kentucky Constitution. If coal is not a reasonable classification under Section 174, then I submit there cannot be a reasonable classification.
From the Kentucky Geological Survey, I find that Kentucky contains 40,409 square miles. The following counties in Eastern Kentucky contain coal deposits: Lewis, Greenup, Boyd, Rowan, Carter, Montgomery, Bath, Elliott, Lawrence, Powell, Meni-fee, Morgan, Johnson, Martin, Wolfe, Ma-goffin, Floyd, Pike, Madison, Estill, Lee, Breathitt, Rockcastle, Jackson, Owsley, Perry, Knott, Pulaski, Laurel, Clay, Leslie, Letcher, Clinton, Wayne, McCreary, Whitley, Knox, Bell, and Harlan for a total of 10,400 square miles.
The following counties in Western Kentucky contain coal deposits: Union, Henderson, Daviess, Hancock, Crittenden, Webster, McLean, Ohio, Grayson, Hopkins, Muhlenberg, Butler, Edmonson, Warren, Christian, and Todd for a total of 4,680 square miles and a grand total of 15,080 square miles of Kentucky. This is 37% of the total area of the state. A substantial portion of this is in Eastern Kentucky and has multiple seams. If an area of coal this large is not a reasonable classification under Sec. 171, then there cannot be such a classification.
An expert, a geologist from California, filed an affidavit for the respondents, stating that forty Kentucky counties produce coal. I prefer the figures from the Kentucky Geological Survey.
The majority opinion poses the question of whether a separate tax classification for unmined coal treating it differently from all other interests in real estate, including other interests with similar characteristics such as oil and gas in its natural state, is permissible. The question is answered with the statement that there is no difference between unmined coal and other un-mined minerals for purposes of taxation.
This is apparently the basis for the holding of the majority that unmined coal is not a permissible separate classification.
The astonishing conclusion is not based on any argument advanced by the respon*371dents or any authority from this court or geological authority. The parties in the Moore case do not argue the separate classification issue. In the Yount case, the only argument that unmined coal is not a permissible separate classification is that coal is real estate, and real estate is taxed at 31%$. This argument is supported by authorities that have no application to the issue decided. We have said that when an act of the General Assembly has been attacked as violating the Constitution, “the burden is upon one who questions the validity of the Act to sustain his contentions.” Manning v. Sims, 308 Ky. 587, 213 S.W.2d 577 (1948), and cases cited therein. Also Johnson, Governor v. Commonwealth, ex rel. Meredith, 291 Ky. 829, 165 S.W.2d 820 (1942).
We have not been presented with a reasoned argument regarding the separate classification of unmined coal. I suppose that the majority can make up its own argument, stating that oil and gas have similar characteristics to unmined coal and that there is no difference between un-mined coal and other unmined minerals. I am amazed and I am sure that geologists will be amazed at the statement that oil and gas have similar characteristics as coal. As a matter of fact, there are no similar characteristics. The brief in the Moore case makes the statement that unex-tracted oil and gas are both taxed at the same rate as other real property. This may be true in an oil field that has been drilled and proven, or on a tract that producing gas wells have been drilled. However, that is not true as to an undeveloped tract. It is relatively easy to ascertain a tract has coal underlying the surface. The geological surveys have fairly well located the coal measures and the area of the various seams. It is another proposition with oil and gas. Oil and gas do not necessarily remain in place; they are essentially fluids, or like air, that migrate underground. They are affected by rock pressure in the field. While geological surveys can classify large areas as gas or oil fields, if a producing well is not on the property there is no way to accurately tell whether gas or oil is present in an underdeveloped acreage or now much could be present. The numerous “dry holes" on various properties attest to this, including dry holes drilled near producing wells.
First, the assessor cannot say with certainty that any underdeveloped tract has gas or oil. Even if an educated guess can be made that this tract does have gas and oil, there is absolutely no way to accurately assess the amount and value. While theoretically oil and gas in such a state are taxable, the practical effect is that there is no tax at all assessed on oil and gas in a tract with no wells.
So much for the “similar characteristics” and different treatment statements. As to other minerals, we are not advised in the record what other minerals, if any, are mined in commercial quantities in this Commonwealth.
The experts in the Moore case seem to think that it will be easy to accurately assess unmined coal. The most amazing statement is that there have been purchases of large tracts of minerals in Eastern Kentucky and that “no corporation will commit itself to such a purchase without a thorough knowledge and appraisal of the properties.” This expert obviously did not inform himself of all of the financial corpses littering the Eastern Kentucky coal fields after the 70’s coal boom had crashed.
In the coal fields of Eastern Kentucky, there are from one to five or more minea-ble seams underlying the surface; on some tracts the coal of one or more seams are not mineable. The value of the coal seam is affected by thickness of the seam, impurities in the seam, quality of the coal, and mining conditions such as top and bottom formations. It is beyond argument that the above characteristics and quality affect the value of the coal and that the characteristics and quality of a coal seam do change even in small tracts.
I assume that the majority which says that coal must be assessed at the same rate as other real estate would also say that unmined coal is entitled to an accurate assessment as to fair value.
*372If the majority will agree to this, then I predict a mess. Unmined coal has never been accurately assessed in Eastern Kentucky. With all of the variations as set out and which affect value, I predict that for all practical purposes unmined coal cannot be fairly assessed. I do not believe the state has the available resources or will attempt to commit necessary resources for an accurate assessment. Dolan v. Land, Ky., 667 S.W.2d 684 (1984), set out requirements for assessing real property. If this procedure is followed, I do not see how unmined coal on a given tract of land can be accurately assessed. After all, the assessor cannot see under the mountain, nor can he ascertain the quality, etc., which certainly affects value.
I was interested in the amicus briefs filed by the Kentucky Farm Bureau and the Chamber of Commerce. Both organizations have a right to be alarmed and now the majority opinion will effectively invalidate the various properties that the General Assembly has classified separately. They are:
Property Taxed Tax Rate Statute Per $100
Livestock and domestic fowl .001 KRS 132.020(1)
Farm Equipment .001 KRS 132.020(1)
Agricultural Products .015 KRS 132.020(1)
Tobacco .015 KRS 132.020(1) KRS 132.200(6)
Business Inventory .001 KRS 132.020(11)
Distilled Spirits .001 KRS 132.020(10)
Motor Vehicles owned by Religious Organizations .001 KRS 132.020(12)
Domestic Bank Deposits .001 KRS 132.030(1)
Retirement Plans .001 KRS 132.043
Alcohol Production Facilities .001 KRS 132.020(1)
Tangible Personal Property located in a Foreign Trade Zone .001 KRS 132.020(1)
Credit Union Accounts .001 KRS 132.047
Leasehold Interests in Certain Industrial Buildings .015 KRS 132.020(1)
Foreign Business Intangibles .015 KRS 132.020(2)
If unmined coal is an unreasonable separate classification, I do not see much hope for the above.
I see by the newspapers that a thoroughbred stallion is syndicated for $35 million or more. This would produce a tax of $3.50 which does not seem to bother the same citizens who protest here. The same rate of .001 applies to tobacco, etc. I await developments.
Finally, Martin is cited by the majority as authority. As I read Martin the 1915 amendment to Sec. 171 as to classifications is recognized but the case held the right to classify did not give the right to exempt. The statute in Martin contained a specific exemption. Martin just does not furnish any authority for the majority holding at all.
This case represents what I consider to be a disturbing trend. People frustrated with inability to convince the General Assembly come to the courts with their problems. We are not wise enough to solve these problems even if we should. The majority goes off on a theory not briefed or argued and a subject about which it knows little or nothing.
I do not comment on the rate argument advanced in Moore, as the majority seemed to address that issue, but not decide it.
GANT, J., joins in this dissent.