State Wins Longstanding Dispute with Oil Producers Worth $500 Million
December 27, 2016
“This is a great result for the State,” said Attorney General Lindemuth. “Not only from a fiscal point of view, but it also recognizes the expertise of Department of Revenue in interpreting tax laws.”
The producers’ lawsuit arose out of the Department of Revenue (DOR’s) decision to group several oil fields together in determining the tax rate on the oil produced from these fields. Under the tax regime at the time, called the economic limit factor or “ELF,” the production tax rate depended on the size of the oil field. Large fields were taxed more heavily and small fields taxed more lightly under the assumption that small fields required the same costly infrastructure as large fields and thus were more expensive to produce from. But if multiple fields were “economically interdependent” and shared common production facilities, the ELF statute permitted DOR to aggregate the production from multiple fields in determining their tax rate. In 2005 DOR decided to aggregate several smaller fields with the larger Prudhoe Bay field because the fields, which used the same production facilities, were highly integrated.
The oil producers sued the State, arguing that Alaska Department of Revenue could not lawfully aggregate the fields without first undertaking a rulemaking process under the Administrative Procedure Act. The Court determined that a rulemaking was not required because DOR’s decision to aggregate the fields in determining their tax rate was “a commonsense interpretation of the statute.”
If the State had lost, it may have been required to refund an estimated $500 million in taxes and interest to the oil producers.
Reporting & Editing by Mary Kauffman, SitNews
Source of News:
Representations of fact and opinions in comments posted are solely those of the individual posters and do not represent the opinions of Sitnews.