Court Opinion

ID: 4130506
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:05:07.867678+00
Date Added: 2024-06-11T14:32:23.969176
License: Public Domain

THE     ATTORNEY       GENERAL
                         OF TEXAS

                        October 5, 1988

Honorable Stan Schlueter       Opinion No. JM- 963
Chairman
Nays and Means Committee       Re: Whether a proposed delivery
Texas House of                 fee on petroleum products, used
   Representatives             to create a state clean-up fund
P. 0. Box 2910                 to comply with    federal stan-
Austin, Texas 78769            dards, would be subject to the
                               provisions   of article   VIII,
                               section 7-a,     of the   Texas
                               Constitution   (RQ-1449)

Dear Representative   Schlueter:

     Subchapter IX of title 42 of the United States          Code
governs the     regulation   of    underground   storage    tanks
containing "regulated substances"     as defined   in the code,
principally  petroleum   and other substances       defined    as
'*hazardous.1' See 42 U.S.C.    §§ 6991-6991i.   The subchapter
authorizes the administrator of the Environmental Protection
Agency to promulgate rules regarding, inter alia,        "release
detection and release prevention" of such substances arising
from the operation of such tanks, as well as corrective
action to be taken by owners or operators.           It further
confers on the administrator authority       to approve     state
programs that are intended to comply with the federal
statutes and rules. when the state program is approved,        it
is to be enforced    in lieu of the federal program,         with
primary enforcement responsibility     falling upon the state.
See 42 U.S.C. 5 6991c.l

      1. In order to comply with the federal provisions,
Texas has enacted laws governing underground storage tanks,
set forth in subchapter I of chapter 26 of the Water Code.
Section 26.346 of the Water Code provides that, except as
specifically provided, all underground storage tanks must be
registered with the Texas Water Commission.      Pursuant to
rule-making  authority  conferred   by that section,      the
                                         (Footnote Continued)

                               P. 4895
Honorable Stan Schlueter - Page 2       (JM-963)

     Pursuant to subsections 9003(c) and (d) of the Resource
Conservation and Recovery Act, as amended by the Hazardous
and Solid Waste Amendments      of 1984 and the Superfund
Amendments and Reauthorization Act of 1986 (codified at 42
U.S.C. §§ 6991b (c), (a)),2 the Environmental       Protection
Agency has published  proposed rules   that impose   financial
responsibility standards upon the owners and operators      of
underground storage tanks containing petroleum.    See 52 Fed.
Reg. 12,786 and 48,638 (to be codified at 40 C.F.R. 5 280).
The rules establish requirements    to be met by owners or
operators of underground    storage tanks for demonstrating

(Footnote Continued)
commission has imposed a registration  fee of $25 for every
underground   storage tank.   Section  26.352 of the code
confers authority on the commission   to adopt requirements
regarding   financial  responsibility   arising   from  the
operation of such tanks:

               The commission   shall adopt requirements
           for    maintaining    evidence    of   financial
           responsibility for taking corrective      action
           and compensating    third parties    for bodily
           injury and property damage caused by sudden
           and nonsudden     accidental   releases arising
           from operating an underground storage tank.

Section 26.352 was included in Senate Bill No. 779 when
subchapter I was added by amendment in 1987. Acts      1987,
70th., ch. 277, § 1 [hereinafter Senate Bill No. 7791.   The
commission has not yet adopted any rules regarding financial
responsibility.

      2.     Subsection   (d)(l) of section 6991b provides:

        Financial   responsibility    required by this.
        subsection may be established in accordance
        with   regulations       promulgated    by    the
        Administrator by any one, or any combination,
        of the     following:    insurance,    guarantee,
        surety bond, letter of credit, qualification
        as a self-insurer        or any other      method
        satisfactory   to    the    Administrator.     In
        promulgating      requirements      under    this
        subsection, the Administrator is authorized
                                            (Footnote Continued)

                                 P. 4896
    Honorable Stan Schlueter - Page 3   (JM-963)

P

    their financial responsibility,  and giving proof of their
    ability to take corrective action and to compensate    third
    parties for bodily injury and property damage caused by both
    sudden and gradual accidental releases arising     from the
    operation of such tanks. The proposed rule requires cover-
    age in the amount of one million dollars per occurrence.
    You claim that owners and operators of these underground
    storage tanks,  for the most part, are unable to secure
    insurance coverages in this amount for pollution   clean-up.
    You indicate in your request letter that petroleum marketers
    in Texas are promoting   legislation that would create,    in
    effect, a clean-up fund that is intended to satisfy the
    financial responsibility standards set forth in the federal
    rules. 3

         The statute that you propose would provide that funds
    for the pro ram would be administered by the Texas Water
    Commission. %  The funds would derive    from a    proposed
    "delivery fee" of six tenths of a cent ($0.006) per gallon
    on "regulated   substances,l' as defined  in the    federal
    provisions, when they are drawn from the refinery     recess
    and pass into the marketing or distribution system. g    The

    (Footnote Continued)
            to specify policy or other contractual terms,
            conditions, or defenses which are necessary
            or are unacceptable    in establishing   such
            evidence or financial responsibility in order
            to effectuate the purposes of this chapter.

          3. We note that section 6991c of title 42 permits~the
    administrator of the Environmental   Protection  Agency   to
    approve a state program only if the requirements of that
    program  are no less stringent than the       corresponding
    requirements under the federal program. See Water Code, g
    26.357.

          4. You have not asked us to construe any specific
    proposed statute: rather, you ask in general about a statute
    that would create a dedicated clean-up fund.    Accordingly,
    we do not place our imprimatur upon any specific proposed
    statute or any specific proposed language.

          5. We note that the fact that the charge is measured
    by the    amount  of "regulated    substances,"   including
    petroleum, does not mean that the charge      is a tax on
                                           (Footnote Continued)

                                 P. 4897
Honorable Stan Schlueter - Page 4      (JM-963)

proposed   fee would be    treated by the marketers       and
distributors   as a   "Cost of product,"      similar to
transportation charge, that would not be recovered as a taZ
on consumer use.    The revenues thus generated     would be
dedicated to establishing   a back-up    fund for pollution
clean-up costs over and above the $10,000 of liability
coverage to be assumed by the owner/operator for each site.
You do not ask whether     then proposed   legislation  would
satisfy the proposed   federal rule: rather, YOU ask two
questions regarding Texas law and the proposed statute:

           1. Would the fee, as described       above,
        fall within the purview of Texas Constitution
        Article 8, Sec. 7-a, and require use of the
        funds in highway    construction  after    the
        one-fourth allocation to the Available School
        Fund?

           2.  If the answer to No. 1 is *'No," then
        is the Legislature      authorized  to make a
        statutory dedication of the fees to the Texas
        Water Commission    for    regulation  of  the
        clean-up fund?

     We answer your first question in the negative:     such
funds would not fall within the ambit of article VIII,
section 7-a, of the Texas Constitution.     We answer your
second question  in the affirmative;    the legislature   is
empowered to dedicate by statute the funds derived from such
a fee as you propose  for the purpose of securing pollution
clean-up.

     You first ask whether the proposed fee falls within the
ambit of article VIII, section 7-a, of the Texas Constitu-
tion, which provides:

           Subject to         legislative    appropriation,
        allocation and direction, all net revenues
        remaining      after payment      of all    refunds
        allowed by law and expenses of collection
        derived from motor vehicle registration fees,
        and all taxes,     eXCeDt  cross production and ad

(Footnote  Continued)
petroleum.   Because we conclude that the charge is not a tax
in the first instance, we need not determine the incident
upon which the charge is imposed.

                                P. 4898
Honorable Stan Schlueter - Page 5     (JM-963)

        valorem taxes, on motor fuels and lubricants
        used to nr Del motor vehicles             DUbliC
        roadwavs. shOal1 be used for the szy: nurnose
        of accuirinu    riahts-of-wav,
                                  * .    constructina,
        g aintai '                       such      U     ic
        roadwavs. and for the administration of such
        laws as mav be nrescribed bv the Lecislature
        pertainina to the sunervision of traffic       and
        safetv on such roads; and for the payment        of
        the principal and interest on county and road
        district bonds or warrants voted or issued
        prior to January     2, 1939, and      declared
        eligible prior to January      2, 1945,        for
        payment out of the County and Road District
        Highway Fund under existing law: provided,
        however, that one-fourth (l/4) of such net
        revenue from the motor fuel tax shall be
        allocated to the Available School Fund: and,
        provided,   however, that the net       revenue
        derived   from counties from motor vehicle
        registration fees shall never be less than
        the maximum amounts allowed to be retained by
        each County and the percentage allowed to be
        retained by each County under the laws           in
        effect on January 1, 1945. Nothing contained
        herein shall be construed as authorizing       the
        pledging   of the State's credit      for      any
        purpose.   (Emphasis added.)

Tex. Const. art. VIII, § 7-a; see Tax Code, ch. 153.

     The issue is whether the proposed "delivery fee" is a
*'tax*'for purposes of article VIII, section 7-a, of the
Texas Constitution.   If it is, then the funds derived
therefrom may be expended only pursuant to that section of
the constitution.

     Courts in Texas uniformly have held that, in determin-
ing whether  a statutorily  created charge is a tax or a
license fee, the test is that of purpose.    If the overall
primary purpose of the charge is to raise revenues, then it
is a tax; if its primary purpose is regulation, then it is a
license fee. Robinson v. Hill, 507 S.W.2d 521 (Tex. 1974);
Countv of Harris v. Shennard, 291 S.W.2d 721 (Tex. 1956);
Hurt v. Cooner, 110 S.W.2d 896 (Tex. 1937), after certified
cuestions, 113 S.W.2d 929 (Tex. Civ. App. - Dallas 1938, no

                               P- 4899
Honorable Stan Schlueter - Page 6   (JM-963)

writ); Citv of Fort Worth v. Gulf Refinina Co., 83 S.W.2d
610 (Tex. 1935).6 The Texas Supreme Court has declared:

           It is sometimes difficult    to determine
        whether a given statute should be classed as
        a regulatory measure or as a tax measure.
        The principle    of   distinction   generally
        recognized is that when, from a consideration
        of the statute as a whole, the primary
        purpose of the fees provided therein is the
        raising of revenue, then such fees    are in
        fact occupation taxes, and this regardless of
        the name by which they are designated.      On
        the other hand, if its primary        purpose
        appears to be that of regulation, then the
        fees levied are license fees and not taxes.

Hurt v. Coovey, suvra, at 899.

     It is suggested that, under the authority of Conlen
Grain and Mercantile. Inc. v. Texas Grain Sorahum  Producers
Board, 519 S.W.2d 620 (Tex. 1975) [hereinafter Conlen],  the
charge that you propose should be denominated an occupation
tax rather then a license fee. We disagree.   In Conlen, the
Texas Supreme Court held unconstitutional a charge   imposed
upon grain sorghum producers: the court held that the charge
was an occupation tax on an agricultural pursuit, a tax that
article VIII, section 1, of the Texas Constitution explicit-
ly forbids.

     The statute in Conlen authorized a nonprofit  organiza-
tion representing the producers of a particular agricultural

      6. We note that, because the test is purpose and not
effect, a charge may have the effect of raising revenue and
not be a tax., Beckendorff v. Harris-Galveston       Coastal
Subsidence District, 558 S.W.2d 75 (Tex. Civ. App. - Houston
[14th Dist.] 1977), aff'd per curiam, 563 S.W.2d 239    (Tex.
1987); Citv of Fort Worth v. Gulf Refinina      co., m.
Indeed, a license fee imoosed on the orivilese of ooeratina
a certain type of business may be imposed fo;            both
regulation and revenue purposes; if the purpose of the act,
taken as a whole, is primarily regulatory,    the charge   is
denominated a license fee.     House of Tobacco.    Inc. v.
Calvert, 394 S.W.Zd 654 (Tex. 1965): Pavne v. Massey,     196
S.W.2d 493 (Tex. 1946).                                         ---.

                             P. 4900
    Honorable Stan Schlueter - Page 7   (JM-963)

    commodity to petition   the Commissioner  of Agriculture  for
    authority to conduct a referendum, on either a regional or a
    statewide basis, to'determine   whether the producers of the
    commodity would  "levy an assessment     upon themselves   to
    finance programs authorized by this Act." 519 S.W.Zd     620,
    at 621. If the referendum passed, then an election was held
    to determine  the members   of a commodity producers   board.
    The board was charged with formulating and administering
    programs for the purposes stated in the act. The board was
    permitted to expend the money collected as an assessment for
    the purposes of

            developing, carrying out, and participating
            in programs of research, disease and insect
            control, predator control, education,     and
            promotion,    designed ~'to    encourage  the
            production,   marketing,    and use    of the
            commodity   upon which    the assessment   is
            levied.

    519 S.W.2d 620, at 621-622.   In rejecting the claim of the
    board that the charge imposed was not a tax, the court
    stated, inter alia, that: "It also appears that the primary
    purpose of the assessment is to raise revenue."

         The court in Conlen relied in part upon      its prior
    decision of H. Rouw v. Texas Citrus Commission, 247 S.W.2d
231 (Tex. 1952) [hereinafter -1,   which involved a charge
    similar to the one in Conlen. The charge, however, in Rouw
    was nonrefundable and was imposed on those who packed   and
    marketed or processed  and sold citrus fruit grown in the
    state. The court in Rouw concluded that the purpose of ~the
    charge was not regulatory, but rather it simply was to
    promote the citrus industry:

              Applying the above rule to the Act under
           consideration we find the tax levied to be an
           occupation tax. A readina of the Act clearlv
           demonstrates that its nrimarv ournose is to
           raise revenue, and not a reaulation of the
           citrus fruit industrv under the volice vower.
           Laudable as the purpose of the Act may be:
           viz. to advertise and enlarge the markets for
           Texas citrus fruit and its by-products,   and
           for research    beneficial  to   the   citrus
           industry, the primary purpose being       the
           raising of revenues in excess of the amount
P
           needed for regulation   of the industry to
           carry out the above provisions,    under the

                                 P- 4901
Honorable Stan Schlueter - Page 8     (JM-963)

                                                                 --.

           well-established rule of law, the tax must of
           necessity be classed as a occupation     tax.
           (Emphasis added.)

519 S.W.2d 620, at 624.

     Both Conlen and Rouw are consistent with Texas court
decisions that looked to the actual conferral of regulatory
authority   in determining   whether  a charge   imposed    is
intended primarily for the raising of revenue. Texas courts
consistently have characterized as license fees, rather than
as taxes, those charges that were imposed concomitantly with
the actual conferral   of regulatory authority.   See. e.a
Robinson v. Hill, suvra; House of Tobacco Inc., v. Calvert:
suvra: Kadane v. Clark, 143 S.W.2d 197 (Tex. 1940): Citv of
Fort Worth v. Gulf Refinina co., yuvra ; Beckendorff        v.
Harris-Galveston Coastal Subsidence District, suDra; Reed v.
Citv of Waco, 223 S.W.2d~247 (Tex. Civ. APP. - Waco      1949,
err. ref'd).    See also, Prudential Health Care. Plan v.
Commissioners of Insurance, 626 S.W.2d 822 (Tex. APP.
Austin 1982, writ ref'd n.r.e.) (distinguishing     Conlen). ;
Texas courts consistently     have characterized   as taxes,
rather than as license fees, those charges that were imposed     --.
without the concomitant     conferral of  actual regulatory
authority.   See, e.q., Harris Countv v. SheDDard,     suDra:
Pavne v. Massey,   suvra: Hurt v. Coover, suDraL; Ex varte
Dreibelbis, 109 S.W.2d 476 (Tex. Crim. App. 1937): Tavlor v.
State, 513 S.W.2d 549 (Tex. Crim. App. 1974).

     There can be little doubt that, by enacting   subchapter
I of chapter 26 of the Water Code, the legislature   intended
primarily to set up a system to regulate the operations of

      7.    The court of appeals declared:

        We believe, however, we would need a more
        specific declaration  of the Supreme Court,
        overruling the traditional distinctions drawn
        between an occupation tax and a regulatory
        fee, before we would be justified in holding
        the charge assessed by subdivision (a) [under
        article 20A.33 of the Insurance Code] to be a
        Vax@* subject to the "equal and uniform**
        limitations of the Constitution.

626 S.W.2d 822, at 830.

                               P. 4902
Honorable Stan Schlueter - Page 9     (JM-963)

underground   storage tanks that contain hazardous   materials
rather than   a system to raise revenue. The "Bill Analysis"
prepared by   the Senate Committee on Natural Resources     for
Senate Bill   No. 779 sets forth the background of the bill:

            In 1986     the Texas      Water   Commission
        surveyed relevant businesses       and concluded
        that there are at least 120,000 underground
        storage tanks that would come under commis-
        sion purview for regulatory authority.      Tanks
        underneath    gasoline stations account       for
        80-85% of that total. A recent amendment        to
        the    Federal    Resource     Conservation   and
        Recoverv Act mandates the imvlementation of a
        national underaround     storaae tank nroaram.
        which is intended to be administered at the
        state and local levels.          Texas does not
        currentlv   have a      reculatorv vroaram      to
        monitor   and   nrevent   leaks   in  undersround
        storaae tanks which contain vetroleum         and
        toxic chemical vroducts.      (Emphasis added.)

The "Bill Analysis" also sets forth the purpose of the bill:
"This bill would provide  for the resulation of underground
storage tanks by the Texas Water Commission."      (Emphasis
added.) Section 26.341 of the Water Code states the purpose
of the subchapter:

           The    legislature   finds   that   leaking
        underground tanks storing certain hazardous,
        toxic, or otherwise harmful substances have
        caused and continue to pose serious ground-
        water contamination problems   in Texas.    The
        legislature declares that it is the volicv of
        this state and the vurvose of this subchanter
        to maintain    and vrotect the crualitv       f
        aroundwater   resources  in the state      frZm
        substances   in underaround   tanks that mav
        pollute aroundwater resources and to require
        the use     of all    reasonable methods     to
        implement this policy.   (Emphasis added.)

Moreover, it is clear even from a cursory reading of chapter
26 itself that     the legislature    has conferred    broad
regulatory  authority on    the commission   regarding   the
permissible operation of underground storage tanks.     See.
-,    Water Code, 55 26.345 - 26.357. Because the fee that
you propose would be enacted pursuant to the state's police
power and in order to comply with federal statutes and rules

                               P. 4903
Honorable Stan Schlueter - Page 10 (JM-963)

regarding the regulation  of underground storage tanks, we
conclude that it is more closely related to a license   fee
than it is to a tax and that any money derived therefrom
would not fall within the ambit of article VIII,    section
7-a, of the Texas Constitution.

     You next ask whether the legislature is authorized     to
make such a statutory    dedication, creating  a fund to be
administered by the Texas Water Commission for the purpose
of regulating pollution   clean-up. Generally, the legisla-
ture is authorized   to enact any law not in conflict     with
either the state or the federal constitutions.     Jordan v.
Crudsinston, 231 S.W.2d 641 (Tex. 1950); DeShazo v. Webb,
113 S.W.2d 519    (Tex. 1938). We understand     you to ask
whether the creation of such a dedicated      statutory   fund
would be constitutional: however, you do not specify which
constitutional provisions concern you.    We assume that you
fear that article   III, section 51, of the Texas Constitu-
tion, which forbids the state from making grants of public
money to persons or political subdivisions, may be violated
by the fact that money in such a fund would be expended both
for the costs of pollution clean-up and for compensating
third parties damaged by any such accidental leakage,    costs
which, absent the fund, would be borne by the owners/opera-
tors themselves.   We conclude that article III, section   51,
of  the Texas Constitution      would not be violated       by
permitting the expenditure of such money for such purposes.

     In Friedman v. American Suretv Co. of New York,      151
S.W.2d 570 (Tex. 1941), the Texas Supreme Court upheld    the
Unemployment Compensation Act, declaring, inter alia, that
article III, section 51, was not violated thereby.   The act,
codified at    articles 5221b-1 through 5221b-21, V.T.C.S.,
created a fund comprising   "contributions" or taxes imposed
upon employers   for the benefit of employees.     The court
refused to characterize   the plan as providing a gratuity,
asserting that the funds were not state funds. Rather,    the
state acted merely as a trustee.

     Analogously, in the system that you propose, the state
would be     acting   as   trustee with   respect   to   the
administration of the clean-up fund. The beneficiaries     of
the trust would be those persons or political   subdivisions
that are damaged by the sudden or gradual leakage or spill
from underground    storage tanks of regulated    substances
covered by the act. The device of creating a dedicated fund
or a trust fund is one that repeatedly has been used by the
legislature to effectuate a proper public purpose, both with     -_
private persons as beneficiaries,  see. e.a., V.T.C.S.  art.

                             P. 4904
,
     Honorable Stan Schlueter - Page 11      (JM-963)

r-

     ~:~~;  (Wor k er's Compensation and Crime Victims' Compensation
           ; Agric. Code, 55 103.00-.013 (Produce Recovery    Fund),
     and with political      subdivisions  as beneficiaries.     See.
     -,     V.T.C.S. art. 1066~ (Local Sales and Use Tax),      1118x
     (Metropolitan Transit Authorities), 1118~ (Regional Transit
     Authorities),     179d (Bingo Enabling Act), 4366e        (Local
     Government Corporate Banking Franchise Tax Fund): Alto. Bev.
     Code, §§ 202.00-.16.      We conclude that article III, section
     51, of the Texas Constitution     imposes no impediment to the
     creation and eventual disbursement      of the money from the
     fund that you propose.

                             SUMMARY

                The creation of a proposed         pollution
             clean-up fund by the imposition of a fee on
             the owners/operators   of underground   storage
             tanks containing certain regulated substances
             for the purpose of complying with       federal
             statutes and administrative regulations would
             not constitute    a **taxi' for purposes     of
             article VIII, section 7-a, of the Texas
             Constitution.  Article   III, section. 51, of
             the Texas Constitution imposes no impediment
             to the creation and eventual disbursement    of
             the money from such a fund.

                                        It-l- m
                                          JIM     MATTOX       :-
                                          Attorney General of Texas

     MARY KELLER
     First Assistant Attorney General

     MU MCCREARY
     Executive Assistant Attorney General

     JUDGE ZOLLIE STEAKLEY
     Special Assistant Attorney General

     RICK GILPIN
     Chairman, Opinion Committee

     Prepared by Jim Moellinger
     Assistant Attorney General

                                   P. 4905