Court Opinion

ID: 9781704
Source: CourtListenerOpinion
Date Created: 2023-08-30 17:14:33.614878+00
Date Added: 2024-06-11T12:13:17.078312
License: Public Domain

WATT, J.
dissenting:
T1 The majority gives a perfunctory nod to a federal regulation promulgated by the Federal Energy Regulatory Commission (FERC) specifically providing that the transportation of natural gas "includes storage."1 Nevertheless, it ignores the extent to which the same federal regulatory scheme controls the decision of whether the natural gas here is in the stream of interstate commerce. It reasons that the stored gas "is not in transit in such a way as to invoke the Commerce Clause." The majority also determines that Missouri Gas Energy (MGE), a company which the majority acknowledges sells no gas in Oklahoma and maintains no facilities or employees in this state, has a sufficient nexus with the state to support taxation of natural gas temporarily resting within our borders whether or not the natural gas is considered to be in the stream of interstate commerce.2 I can agree with neither of these conclusions.3 Therefore, I dissent.4
T2 FEDERAL LAW MAKES IT CLEAR THAT NATURAL GAS INTENDED FOR INTERSTATE TRANSPORT IS IN THE STREAM OF INTERSTATE COMMERCE WHEN IT IS TEMPORARILY PLACED IN STORAGE.
€3 The majority's argument that federal regulations have little or no credence in determining whether the natural gas stored in an Oklahoma facility is in the stream of commerce is unconvincing. It comports with neither the clear language of the regulation nor with federal precedent.
14 Administrative rules are valid expressions of lawmaking powers having the force and effect of law.5 Administrative rules, like *965statutes, are given a sensible construction bearing in mind the evils intended to be avoided.6 If an administrative rule is clear and unambiguous, there is no need to resort to rules of construction to ascertain its meaning.7
5 Application of constructive tools is unnecessary to determine whether the federal regulatory agency would treat the natural gas here as being in the stream of commerce. The federal regulation specifically states, in clear and unambiguous language, that transportation "includes storage."8 Furthermore, it is unquestioned that the federal regulations control transportation of natural gas in interstate commerce.9 The United States Supreme Court has made it clear that gas storage facilities like the one at issue here are a critical part of the transportation of natural gas for its sale and resale in interstate commerce.10 The High Court has also recognized that "gas crossing a state line at any stage of its movement to the ultimate consumer is in interstate commerce during the entire journey."11
T6 The natural gas MGE purchases and places in the pipeline system is stored in the Oklahoma storage facility but it is never intended for consumption in this state. It is placed with the interstate common carrier, Panhandle Eastern Pipeline Company (Panhandle), for transportation to the state of Missouri. There is no question under the federal regulation that, while in storage in Oklahoma, the gas remains in transportation and that it is intended to be sold in interstate commerce.
17 MGE HAS NO SUBSTANTIAL NEXUS WITH OKLAHOMA TO SUPPORT THE TAXATION OF NATURAL GAS IN INTERSTATE COMMERCE UNDER THE TEACHINGS OF COMPLETE AUTO TRANSIT v. BRADY.
T8 In Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326 (1977), rehearing denied, 430 U.S. 976, 97 S.Ct. 1669, 52 L.Ed.2d 371 (1977), the United States Supreme Court fashioned a four-part test to govern the imposition of state taxes on goods in the stream of interstate commerce.12 A tax may be sustained under Brady against a commerce clause challenge if the tax: 1) is applied to activity with a substantial nexus with the taxing state; 2) is fairly apportioned; 3) does not discriminate against interstate commerce; and 4) is fairly related to services provided by the state.
T9 The trial court concluded its analysis with application of the first condition of the test. It determined that there was no such nexus where MGBE's natural gas was at all times while in storage in the possession and control of the common carrier, Panhandle, and where the gas was committed to being transported out of state for sale and consumption. Although the majority recognizes that "[the nexus requirement ensures that, with respect to goods in interstate commerce, a state will not be able to exact a fee simply for the privilege of passing through a state," it determines that the storage of natural gas for a substantial portion of the year is sufficient to create the nexus requirement under Brady.
[ 10 The fallacy with the majority's logic is that it looks strictly at the generic act of *966storing gas in an Oklahoma facility. An activity which the federal law provides is not static but an integral part of the transportation process.13 Furthermore, although it is unquestioned that some portion of the gas in the storage facility belongs to MGE, it is the common carrier, Panhandle, who directs the storage activity and who ultimately releases the gas into interstate commerce. MGE has no offices in Oklahoma. It owns no property here. It has no employees within the boundaries of our state. MGE's only connection to Oklahoma is its utilization of Panhandle's pipeline system which contains a storage facility. MGE's connection to Oklahoma is too tenuous to subject its natural gas to ad valo-rem taxation in Oklahoma.
CONCLUSION
{11 FERC regulations and the Supreme Court's pronouncements on the same require that we consider the gas MGE stores in Oklahoma to be in the transportation system.14 There is no question that the transportation itself will be interstate. Because there is no substantial nexus between MGE and its activities within Oklahoma, the gas may not be taxed under the commerce clause. The majority holds otherwise. I dissent.

. Title 18 C.F.R. § 284.1 providing:
Transportation includes storage, exchange, backhaul, displacement, or other methods of transportation."

. Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326 (1977), rehearing denied, 430 U.S. 976, 97 S.Ct. 1669, 52 L.Ed.2d 371 (1977) provides that not all goods in interstate commerce are free from state taxation. Taxation is allowed if the tax: 1) is applied to an activity with a substantial nexus with the taxing state; 2) is fairly apportioned; 3) does not discriminate against interstate commerce; and 4) is fairly related to services provided by the state.

. Nothing in the majority's analysis would keep the same gas owned by the same company from being subject to ad valorem tax in more than one storage facility. If natural gas stored in Oklahoma has a sufficient nexus to support the tax, the same gas stored in a Texas facility might well be subject to the same burden. The facts presented here are substantially different than those addressed by the Court in Cities Serv. Gas Co. v. Oklahoma Tax Comm'n, 1989 OK 69, 774 P.2d 468, cert. denied, 493 U.S. 854, 110 S.Ct. 157, 107 L.Ed.2d 115 (1989) in which this Court held that a conservation excise tax would not place an unconstitutional burden on interstate commerce. In Cities Service, this note supra, Oklahoma was the only state which could tax the severance as it was the state from which the natural resource was actually severed.

. The majority discounts the analysis of a Texas Court of Appeals case presenting facts virtually identical to those we deal with here. The Texas Court determined that levying an ad valorem tax on natural gas stored in its state impermissibly infringed on the commerce clause. It did so primarily upon the grounds that the gas remains in interstate commerce while in natural gas storage facilities and that the entity owning the gas lacked a sufficient nexus with the storage state to support imposition of the tax. See, The Peoples Gas, Light, and Coke Co. v. Harrison Central Appraisal Dist., 270 S.W.2d 208 (Tex.App.2008).

. McClure v. ConocoPhillips Co., 2006 OK 42, ¶ 17, 142 P.3d 390.

. Walker v. Group Health Serv., Inc., 2001 OK 2, 127, 37 P.3d 749; Oklahoma Alcoholic Beverage Control Bd. v. Burris, 1980 OK 58, ¶ 13, 626 P.2d 1316, 20 A.L.R.4th 593.

. Coppola v. Fulton, 1991 OK 18, ¶ 12, 809 P.2d 1291; Mayfield v. H.B. Oil & Gas, 1987 OK 106, ¶ 9, 745 P.2d 732.

. Title 18 C.F.R. § 284.1, see note 1, supra.

. Williston Basin Interstate Pipeline Co. v. An Exclusive Gas Storage Leasehold & Easement in The Cloverly Geological Formation, 524 F.3d 1090 (9th Cir.2008).

. Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 308, 108 S.Ct. 1145, 99 L.Ed.2d 316 (1988).

. Maryland v. Louisiana, 451 U.S. 725, 101 S.Ct. 2114, 2134, 68 L.Ed.2d 576 (1981); California v. Lo-Vaca Gathering Co., 379 U.S. 366, 369, 85 S.Ct. 486, 13 L.Ed.2d 357 (1965).

. Cities Serv. Gas Co. v. Oklahoma Tax Comm'n, see note 3, supra.

. Title 18 C.F.R. § 284.1, see note 1, supra.

. Title 18 C.F.R. § 284.1, see note 1, supra; Schneidewind v. ANR Pipeline Co., see note 10, supra. See also, Williston Basin Interstate Pipeline Co. v. An Exclusive Gas Storage Leasehold & Easement in The Cloverly Geological Formation, note 9, supra.