KS Case Pits State Law Against FERC
Filings before the FERC relating to refund of ad valorem taxes
improperly collected by Kansas gas producers during the 1980s
question whether FERC's authority overrules that of the state
Several parties filed at the FERC earlier this month to block a
motion by producers seeking a general waiver of their obligation to
seek refunds of ad valorem taxes from Kansas royalty owners due to
passage of Section 7 of Kansas House Bill No. 2419.
The Missouri Public Service Commission, City Utilities of
Springfield, NorAm division Innegasco, Proliance Energy, and
Missouri Gas Energy are asking the Commission to summarily dispose
of the producers' motion as it improperly trespasses on Commission
The filing is the latest round in the battle in which Kansas gas
producers are on the hook for $500 million for gas they sold in the
late 1980s at prices which - because they included the states ad
valorem taxes - were above the legal limit allowed by federal law.
In January, the Federal Energy Regulatory Commission denied
rehearing of an earlier decision ordering the producers to refund
the $500 million, at least 80% of which is in the form of interest.
Refunds are to be passed through by pipelines to mostly LDC
customers to cover the period between Oct. 4, 1983 and June 28,
"The two sides of this issue present a stark contrast: on one
side, the Commission ordered that producers seek refunds of the
unlawfully collected ad valorem tax amounts from royalty owners,
while, on the other side, Kansas, through Bill No. 2419, enacted
after the Commission's orders, would preclude recovery of those
same refund amounts," those challenging the producer motion wrote
in their filing. "It is quite clear that Bill No. 2419 was passed
with the sole intention of thwarting federal law for the benefit of
Kansas royalty owners."
Enforcement of Bill No. 2419 would invalidate the Commission's
order to producers to refund the ad valorem taxes collected. "Where
compliance with both laws is impossible, federal law is
Elsewhere on the same battlefront, legislation sponsored by two
Kansas senators seeks to amend the Natural Gas Policy Act of 1978
so that interest and penalties are waived on the ad valorem tax
refunds. However, Leroy Towns, chief of staff for legislation
co-sponsor Pat Roberts, said the bill is not expected to advance
out of committee.
Joe Fisher, Houston
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