High Court Rejects Kansas Tax Case
The Supreme Court last week refused to review a case in which
Kansas gas producers could wind up paying millions of dollars in
customer refunds for selling gas in the 1980s at prices that,
because they incorporated the state's ad valorem tax, may have been
above the allowed legal limit.
BP Amoco Plc, Occidental Petroleum, Exxon Mobil and Union
Pacific Resources Group asked the high court to address the narrow
issue of whether producers should have to pay interest on any
refunds they might be liable for if they sold Kansas gas at prices
that exceeded the legal levels of the Natural Gas Policy Act
(NGPA). The issue is an important one, given that about 80% of the
refund amounts potentially owed by producers are said to be
The producers' request stems from a 1998 decision in which FERC
directed Kansas producers to pay refunds to LDC customers who
purchased gas produced in Kansas between 1983 and 1988 at illegal
prices. At the time, it was estimated that the refunds could total
For many producers, both major and small, the FERC ruling was
the ultimate irony since it required them to pay big time for a
mistake that its predecessor, the Federal Power Commission, made in
1974 when it held the Kansas ad valorem tax could be recovered by
producers as an add-on under the NGPA. A lawsuit was filed
challenging the 1974 decision, and the U.S. Court of Appeals for
the D.C. Circuit remanded the case to FERC, which reversed itself
on the recoverability of the tax in 1998. Producers asked the
Commission to give them an across-the-board waiver of the interest,
but FERC rejected their request.
What now? The ball is in FERC's court, says one Washington D.C.
lawyer close to the case. "The Commission better start some
hearings now, and figure out who owes what," he said. He estimated
that FERC will have to decide refund claims in about 1,000 separate
cases or more.
©Copyright 2000 Intelligence Press, Inc. All rights
reserved. The preceding news report may not be republished or
redistributed in whole or in part without prior written consent of
Intelligence Press, Inc.