Filings before the FERC relating to refund of ad valorem taxesimproperly collected by Kansas gas producers during the 1980squestion whether FERC’s authority overrules that of the statelegislature.

Several parties filed at the FERC earlier this month to block amotion by producers seeking a general waiver of their obligation toseek refunds of ad valorem taxes from Kansas royalty owners due topassage of Section 7 of Kansas House Bill No. 2419.

The Missouri Public Service Commission, City Utilities ofSpringfield, NorAm division Innegasco, Proliance Energy, andMissouri Gas Energy are asking the Commission summarily dispose ofthe producers’ motion as it improperly trespasses on Commissionauthority.

The filing is the latest round in the battle in which Kansas gasproducers are on the hook for $500 million for gas they sold in thelate 1980s at prices which – because they included the states advalorem taxes – were above the legal limit allowed by federal law.In January, the Federal Energy Regulatory Commission deniedrehearing of an earlier decision ordering the producers to refundthe $500 million, at least 80% of which is in the form of interest.Refunds are to be passed through by pipelines to mostly LDCcustomers to cover the period between Oct. 4, 1983 and June 28,1988.

“The two sides of this issue present a stark contrast: on oneside, the Commission ordered that producers seek refunds of theunlawfully collected ad valorem tax amounts from royalty owners,while, on the other side, Kansas, through Bill No. 2419, enactedafter the Commission’s orders, would preclude recovery of thosesame refund amounts,” those challenging the producer motion wrotein their filing. “It is quite clear that Bill No. 2419 was passedwith the sole intention of thwarting federal law for the benefit ofKansas royalty owners.”

Enforcement of Bill No. 2419 would invalidate the Commission’sorder to producers to refund the ad valorem taxes collected. “Wherecompliance with both laws is impossible, federal law iscontrolling.”

Elsewhere on the same battlefront, legislation sponsored by twoKansas senators seeks to amend the Natural Gas Policy Act of 1978so that interest and penalties are waived on the ad valorem taxrefunds. However, Leroy Towns, chief of staff for legislationco-sponsor Pat Roberts, said the bill is not expected to advanceout of committee.

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