Opinion

Opinion issued January 26, 2006

In The

Court of Appeals

For The

First District of Texas

NO. 01–04–01277–CV

____________

Jim Wells County and Premont Independent School District, Appellants

v.

El Paso Production Oil and Gas Company; El Paso Production Oil and Gas

USA, L.P.; El Paso CGP Company; Coastal Oil and Gas Corporation; The

Coastal Corporation; Coastal States Trading, Inc.; Coastal States Crude

Gathering Company; Coastal Gas Marketing Company; Coastal Limited

Ventures, Inc.; and El Paso Merchant Energy Company, Appellees

On Appeal from the 79th District Court

Jim Wells County, Texas

Trial Court Cause No. 03–08–41749

Appealed to the Court of Appeals for the Fourth District of Texas

Appellate Cause No. 04–04–00725–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01278–CV

____________

Brooks County and Brooks County ISD, Appellants

v.

El Paso Production Oil and Gas Company; El Paso Production Oil and Gas

USA, L.P.; El Paso CGP Company; Coastal Oil and Gas Corporation; The

Coastal Corporation; Coastal States Trading, Inc.; Coastal States Crude

Gathering Company; Coastal Gas Marketing Company; Coastal Limited

Ventures, Inc.; and El Paso Merchant Energy Company, Appellees

On Appeal from the 79th District Court

Brooks County, Texas

Trial Court Cause No. 03–08–11950CV

Appealed to the Court of Appeals for the Fourth District of Texas

Appellate Cause No. 04–04–00726–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01279–CV

____________

Brooks County and Brooks Independent School District, Appellants

v.

Texaco E&P, Inc. and Shell Western E&P, Inc., Appellees

On Appeal from the 79th District Court

Brooks County, Texas

Trial Court Cause No. 03–08–11943

Appealed to the Court of Appeals for the Fourth District of Texas

Appellate Cause No. 04–04–00727–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01280–CV

____________

Duval County; San Diego Independent School District; and Freer

Independent School District, Appellants

v.

Shell Western E&P, Inc., Appellee

On Appeal from the 229th District Court

Duval County, Texas

Trial Court Cause No. DC–03–313

Appealed to the Court of Appeals for the Fourth District of Texas

Appellate Cause No. 04–04–00728–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01281–CV

____________

Duval County; San Diego Independent School District; and

Freer Independent School District, Appellants

v.

Conoco, Inc.; Continental Oil Company; Brandywine Industrial Gas;

ConocoPhillips Company; Phillips Petroleum Company; El Paso Production

Oil and Gas Company; El Paso Production Oil and Gas USA, L.P.; El Paso

CGP Company; Coastal Oil and Gas Corporation; The Coastal Corporation;

Coastal States Trading, Inc.; Coastal States Crude Gathering Company;

Coastal Gas Marketing Company; Coastal Limited Ventures, Inc.; and El

Paso Merchant Energy Company, Appellees

On Appeal from the 229th District Court

Duval County, Texas

Trial Court Cause No. DC–03–320

Appealed to the Court of Appeals for the Fourth District of Texas

Appellate Cause No. 04–04–00729–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01282–CV

____________

Jim Hogg County and Jim Hogg Independent School District, Appellants

v.

Chevron U.S.A., Inc. a/k/a Chevron Products Company, Appellee

On Appeal from the 229th District Court

Jim Hogg County, Texas

Trial Court Cause No. CC–03–115

Appealed to the Court of Appeals for the Fourth District of Texas

Appellate Cause No. 04–04–00730–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01283–CV

____________

Jim Wells County and Premont Independent School District, Appellants

v.

Anadarko Petroleum Corporation and Anadarko Holding Company f/k/a

Union Pacific Minerals, Inc. and f/k/a Union Pacific Resources Group, Inc.,

Appellees

On Appeal from the 79th District Court

Jim Wells County, Texas

Trial Court Cause No. 03–08–41740

Appealed to the Court of Appeals for the Fourth District of Texas

Appellate Cause No. 04–04–00731–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01284–CV

____________

Webb County, Appellant

v.

Chevron U.S.A., Inc. a/k/a Chevron Products Company; Texaco E&P, Inc.;

and Four Star Oil & Gas Company, Appellees

On Appeal from the 49th District Court

Webb County, Texas

Trial Court Cause No. 2003-CVQ-1374-D1

Appealed to the Court of Appeals for the Fourth District of Texas

Appellate Cause No. 04–04–00732–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01285–CV

____________

Webb County, Appellant

v.

Conoco Inc.; Continental Oil Company; Brandywine Industrial Gas;

ConocoPhillips Company; Phillips Petroleum Company; El Paso Production

Oil and Gas Company; El Paso Production Oil and Gas USA, L.P.; El Paso

CGP Company; Coastal Oil and Gas Corporation; The Coastal Corporation;

Coastal States Trading, Inc.; Coastal States Crude Gathering Company;

Coastal Gas Marketing Company; Coastal Limited Ventures, Inc.; and El

Paso Merchant Energy Company, Appellees

On Appeal from the 111th District Court

Webb County, Texas

Trial Court Cause No. 2003CVQ001368-D2

Appealed to the Court of Appeals for the Fourth District of Texas

Appellate Cause No. 04–04–00733–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01286–CV

____________

Zapata County and Zapata Independent School District, Appellants

v.

Conoco Inc.; Continental Oil Company; Brandywine Industrial Gas;

ConocoPhillips Company; Phillips Petroleum Company; El Paso Production

Oil and Gas Company; El Paso Production Oil and Gas USA, L.P.; El Paso

CGP Company; Coastal Oil and Gas Corporation; The Coastal Corporation;

Coastal States Trading, Inc.; Coastal States Crude Gathering Company;

Coastal Gas Marketing Company; Coastal Limited Ventures, Inc.; and El

Paso Merchant Energy Company, Appellees

On Appeal from the 49th District Court

Zapata County, Texas

Trial Court Cause No. 5,519

Appealed to the Court of Appeals for the Fourth District of Texas

Appellate Cause No. 04–04–00734–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01287–CV

____________

Zapata County and Zapata Independent School District, Appellants

v.

Chevron U.S.A., Inc. a/k/a Chevron Products Company; Shell Western E&P,

Inc.; Anadarko Petroleum Corporation; and Anadarko Holding Company

f/k/a Union Pacific Minerals, Inc. and f/k/a Union Pacific Resources Group,

Inc., Appellees

On Appeal from the 49th District Court

Zapata County, Texas

Trial Court Cause No. 5,520

Appealed to the Court of Appeals for the Fourth District of Texas

Appellate Cause No. 04–04–00735–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01326–CV

____________

Hidalgo County, Texas, Appellant

v.

Texaco, Inc., a surviving subsidiary of merger between Texaco, Inc. and

Chevron Inc.; TotalFinaElf E&P USA Inc.; Kerr–McGee Oil & Gas Onshore,

L.L.C.; Shell Western E&P, Inc.; and El Paso Production Oil & Gas

Company, Appellees

On Appeal from the 92nd District Court

Hidalgo County, Texas

Trial Court Cause No. C–640–03–A

Appealed to the Court of Appeals for the Thirteenth District of Texas

Appellate Cause No. 13–04–00542–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01327–CV

____________

Edinburg Consolidated Independent School District, Appellant

v.

Fina Oil and Chemical Company; Atofina Petrochemicals, Inc.; Fina, Inc.;

TotalFinaElf Gas & Power North America, Inc.; Fina Natural Gas Company;

Mokeen Oil Company; Conoco, Inc.; Continental Oil Company; Brandywine

Industrial Gas, Inc.; Shell Oil Company; Shell Western E&P, Inc.; Shell Gas

Trading Company; El Paso Production Oil and Gas Company; El Paso

Production Oil and Gas USA, L.P.; El Paso CGP Company; IBC Petroleum,

Inc.; Texas Independent Exploration, Inc.; Sun Operating Limited

Partnership; Oryx Energy Company; ANR Production Company; Coastal Oil

and Gas Corporation; The Coastal Corporation; Coastal States Trading, Inc.;

Coastal States Crude Gathering Company; Coastal Gas Marketing

Company; Coastal Limited Ventures, Inc.; El Paso Merchant Energy

Company; American Exploration Company; Contract Energy, L.L.C.; EOG

Resources, Inc.; Arco Oil & Gas Co.; Cody Energy LLC; Samedan Oil

Corporation; Cabot Oil & Gas Corporation; Vastar Resources, Inc.; BP

America Production Company; Kerr–McGee Oil & Gas Onshore LLC; Mobil

Producing TX. & N. M. Inc.; Chevron U.S.A. Inc.; Texaco, Inc.; and Socony

Mobil Company, Inc., Appellees

On Appeal from the 275th District Court

Hidalgo County, Texas

Trial Court Cause No. C–401–03–E

Appealed to the Court of Appeals for the Thirteenth District of Texas

Appellate Cause No. 13–04–00543–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01328–CV

____________

McAllen Independent School District, Appellant

v.

Fina Oil and Chemical Company; Altofina Petrochemicals, Inc.; Fina, Inc.;

TotalFinaElf Gas & Power North America, Inc.; Fina Natural Gas Company;

TotalFinaElf E&P USA, Inc.; Total E&P USA, Inc.; Denovo Oil & Gas, Inc.;

and Virtex Petroleum Company, Inc., Appellees

On Appeal from the 389th District Court

Hidalgo County, Texas

Trial Court Cause No. C–2195–03–H

Appealed to the Court of Appeals for the Thirteenth District of Texas

Appellate Cause No. 13–04–00544–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01329–CV

____________

Kleberg County and Kingsville Independent School District, Appellants

v.

Atofina Petrochemicals, Inc. f/k/a Fina Oil & Chemical Co.; Total Fina Elf

Holdings USA, Inc.; Anadarko Petroleum Corporation; and Anadarko

Holding Company f/k/a Union Pacific Minerals, Inc. and f/k/a Union Pacific

Resources Group, Inc., Appellees

On Appeal from the 105th District Court

Kleberg County, Texas

Trial Court Cause No. 03–441–D

Appealed to the Court of Appeals for the Thirteenth District of Texas

Appellate Cause No. 13–04–00553–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01330–CV

____________

Kleberg County and Kingsville Independent School District, Appellants

v.

El Paso Production Oil and Gas Company; El Paso Production Oil and Gas

USA, L.P.; El Paso CGP Company; Coastal Oil and Gas Corporation; The

Coastal Corporation; Coastal States Trading, Inc.; Coastal States Crude

Gathering Company; Coastal Gas Marketing Company; Coastal Limited

Ventures, Inc.; and El Paso Merchant Energy Company, Appellees

On Appeal from the 105th District Court

Kleberg County, Texas

Trial Court Cause No. 03–446–D

Appealed to the Court of Appeals for the Thirteenth District of Texas

Appellate Cause No. 13–04–00554–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01331–CV

____________

Willacy County, Appellant

v.

El Paso Production Oil and Gas Company; El Paso Production Oil and Gas

USA, L.P.; El Paso CGP Company; Coastal Oil and Gas Corporation; The

Coastal Corporation; Coastal States Trading, Inc.; Coastal States Crude

Gathering Company; Coastal Gas Marketing Company; Coastal Limited

Ventures, Inc.; and El Paso Merchant Energy Company, Appellees

On Appeal from the 357th District Court

Willacy County, Texas

Trial Court Cause No. 03–264

Appealed to the Court of Appeals for the Thirteenth District of Texas

Appellate Cause No. 13–04–00555–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01332–CV

____________

Edcouch–Elsa Independent School District; La Villa Independent School

District; Progresso Independent School District; Weslaco Independent School

District; City of La Joya; City of Edinburg; City of Mercedes; and City of

Penitas, Appellants

v.

Chevron U.S.A., Inc. a/k/a Chevron Products Company; Texaco E&P, Inc.;

Shell Western E&P, Inc.; Atofina Petrochemicals, Inc. f/k/a Fina Oil &

Chemical Co.; and Total Fina Elf Holdings USA, Inc., Appellees

On Appeal from the 332nd District Court

Hidalgo County, Texas

Trial Court Cause No. C–2166–03–F

Appealed to the Court of Appeals for the Thirteenth District of Texas

Appellate Cause No. 13–04–00556–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

and

____________

NO. 01–04–01333–CV

____________

Kenedy County, Appellant

v.

El Paso Production Oil and Gas Company; El Paso Production Oil and Gas

USA, L.P.; El Paso CGP Company; Coastal Oil and Gas Corporation; The

Coastal Corporation; Coastal States Trading, Inc.; Coastal States Crude

Gathering Company; Coastal Gas Marketing Company; Coastal Limited

Ventures, Inc.; and El Paso Merchant Energy Company, Appellees

On Appeal from the 105th District Court

Kenedy County, Texas

Trial Court Cause No. 03–CV–103

Appealed to the Court of Appeals for the Thirteenth District of Texas

Appellate Cause No. 13–04–00557–CV

and Transferred to the Court of Appeals for the First District of Texas

by the Supreme Court of Texas

Misc. Docket No. 04–9270

O P I N I O N

The appellant counties and school districts (collectively referred to as “the

Taxing Units”) filed claims in the trial courts for fraud and related causes of action

against the appellees (collectively referred to as “the Oil Companies”) arising out of

an alleged scheme to undervalue oil and gas reserves for ad valorem tax purposes.

The trial court granted the Oil Companies’ plea to the jurisdiction and dismissed the

Taxing Units’ cases for want of jurisdiction because they did not exhaust an

administrative remedy before filing suit.

In four points of error, the Taxing Units contend that (1) the district courts have

jurisdiction over their common-law remedy for fraud, (2) the district courts are not

divested of jurisdiction by the alleged existence of a Tax Code remedy for fraud for

which the Appraisal Review Board has jurisdiction, (3) the Oil Companies seek to

have this Court expand the Tax Code by creating a remedy before the Appraisal

Review Board, and (4) the Tax Code provides no pervasive regulatory scheme

encompassing the Taxing Units’ causes of action. We affirm the trial court’s order

dismissing the causes of action.

Background

In 19 separate suits, the Taxing Units sued the Oil Companies alleging “fraud

and conspiracy to defraud [the Taxing Units] through a series of schemes to

manipulate the gas and oil markets in order to underpay Ad Valorem taxes to the

taxing authorities. . . .” The Taxing Units alleged that the Oil Companies were

conducting “sham sales of gas” amongst each other as well as reselling the gas all in

an attempt to devalue their property for ad valorem tax purposes. Specifically, the

Taxing Units alleged that

By selling gas to marketing affiliates, reselling the gas for higher prices

through the affiliates and basing appraisals and ad valorem taxes on the

lower prices paid and received in the affiliated transaction, or on

fictional price calculations which did not equate to fair market value as

required by the Leases, [the Oil Companies] knowingly and intentionally

defrauded [the Taxing Units].

The Taxing Units asserted that, “through these fraudulent sales and the manipulation

of royalties on said sales and re-sales of gas from the Leases, [the Oil Companies]

made false, deceptive and misleading representations to [the Taxing Units] regarding

sales of gas covered by the [Leases] and the pricing used to properly appraise the

mineral estates.” The Taxing Units further alleged that the Oil Companies “failed to

disclose that prices were based on sales to affiliates who were in turn reselling the gas

for higher prices without adding value to the gas and that [the Oil Companies]

devised a formula by which to calculate royalties which did not relate to the economic

reality of the sale of gas from the field where the Leases were located.” The Oil

Companies allegedly “misrepresented prices and costs, thus causing the fictionally

low appraisal and thus incorrect ad valorem taxes to be calculated.” The Taxing

Units sued for fraud, negligent misrepresentation, and civil conspiracy to commit

fraud. The suit is not one to collect delinquent taxes. There is no allegation that the

Oil Companies failed to pay the taxes assessed them with respect to the oil interests.

When they filed their answers, the Oil Companies also filed pleas to the

jurisdiction. The pleas argued that the trial court lacked jurisdiction over the Taxing

Units’ suits because (1) the Tax Code provides that an Appraisal Review Board has

exclusive jurisdiction over challenges to the value of the Oil Companies’ property,

(2) the remedies for the Taxing Units’ claims are exclusive and are contained in the

Tax Code, (3) the Taxing Units have not exhausted their administrative remedies

under the Tax Code, and (4) the counties lack standing to bring this lawsuit. The trial

court granted the pleas to the jurisdiction.

In re ExxonMobil Corporation

In a case with almost identical facts, the Amarillo Court of Appeals recently

conditionally granted a petition for writ of mandamus directing the trial court to

dismiss the underlying suit. See In re ExxonMobil Corp. , 153 S.W.3d 605, 619 (Tex.

App.—Amarillo 2004, orig. proceeding). In ExxonMobil Corp ., the relators, which

consisted of more than 20 owners and operators of oil properties, filed a petition for

writ of mandamus after the trial court denied their pleas to the jurisdiction. Id . at

607–08. In the underlying suit, Yoakum County and the Denver City and Plains

Independent School Districts sued 28 owners and operators of oil companies in

Yoakum County, asserting causes of action for fraud and conspiracy with respect to

the valuation of the properties for ad valorem tax purposes. Id . at 608.

In ExxonMobil , the taxing units alleged that

the defendant companies, knowing and intending that appraisers rely on

[historical sales prices], engaged in a conspiracy and fraud carried out

by misrepresentations of the market price for oil through various

transactions, including posted price sales; sales of oil to subsidiary or

affiliated companies at below-market prices; and “buy/sell” or “swap

sales.”

Id . at 608-09. This conduct allegedly “constituted a ‘systematic price undervaluation’

that reduced the taxable value of their mineral interests and caused the taxing units

to lose tax revenue.” Id . at 609. The Amarillo Court identified “two threshold

conclusions” that guided their disposition of the proceedings.

Nature of Underlying Suit

The first threshold conclusion concerned the nature of the underlying suit. Id .

at 612. The defendant companies classified the taxing units’ suit as an ad valorem tax

case, and the taxing units called it a fraud and conspiracy case. Id . The court noted

that the district court would be unable to “adjudicate the claims asserted in the taxing

units’ pleading and award the relief they seek without determining the market value,

for ad valorem tax purposes, of the mineral interests in question. Id . (citing Tex. Tax

Code Ann . § 26.09 (Vernon 2001) (entitled “Calculation of Tax”)). Relying on

Ector County v. Stringer , 843 S.W.2d 477 (Tex. 1992), the Amarillo Court of Appeals

concluded that

a suit to recover damages measured by the ad valorem taxes not received

by a taxing unit because of undervaluation of property necessarily

involves substituting the district court’s determination of the proper

value of the property for that determined by the appraisal district and

approved by the appraisal review board. And . . . we cannot consider the

trial court’s jurisdiction over the taxing units’ claims here outside the

constitutional and statutory provisions governing the appraisal of

property for ad valorem purposes.

Id . at 613.

Tax Code Remedy

The second threshold conclusion reached by the ExxonMobil court was that the

Tax Code provided a remedy for the taxing units. Id . The court recognized that the

chief appraiser had a nondiscretionary duty under section 25.21 to add to the

appraisal roll real property omitted in any one of the five proceeding years. Id . (citing

Atascosa County v. Atascosa County Appraisal Dist. , 990 S.W.2d 255, 257 (Tex.

1999)). The court concluded that, “for purposes of section 25.21, property ‘omitted’

from the appraisal roll includes that undervalued by virtue of taxpayer fraud.” Id .

(citing Beck & Masten Pontiac-GMC, Inc. v. Harris County Appraisal Dist. , 830

S.W.2d 291 , 294–95 (Tex. App.—Houston [14th Dist.] 1992, writ denied) (holding

that, when the property assessments were void ab initio , the property “escaped

taxation.”)). The court also noted that section 41.03 provides for a remedy in the

event that the chief appraiser fails to address the allegedly fraudulent activity. Id . at

614. Section 41.03 provides that “a taxing unit is entitled to challenge before the

appraisal review board. . . .” Tex. Tax Code Ann . § 41.03 (Vernon 2001). Failing

to receive a satisfactory result at the Appraisal Review Board, de novo judicial review

of its decision was available. See id . §§ 42.031, 42.21, 42.23; Atascosa County , 990

S.W.2d at 259 .

Once it made these two “threshold conclusions,” the Amarillo Court was led

to the question of whether the Tax Code’s remedies were “the exclusive means by

which a taxing unit must address claims of fraud and conspiracy occurring in the

appraisal process.” In re ExxonMobil , 153 S.W.3d at 614 .

Exclusive Remedy

ExxonMobil recognized that, “whether an administrative body has been given

the sole authority, or exclusive jurisdiction, to make an initial determination in a

dispute depends on statutory interpretation.” Id . at 615 (citing Subaru of America,

Inc. v. David McDavid Nissan, Inc. , 84 S.W.3d 212, 221 (Tex. 2002)). The court

found that “the provisions of the Tax Code expressly provide the necessary

authority.” Id . (citing Tex. Tax Code Ann .§§ 6.01, 6.03, 23.01, 25.21 and Atascosa

County , 990 S.W.2d at 257 (Appraisal Review Board is “charged with ensuring that

property is properly appraised”)). The court stated that it would “defeat the Tax

Code’s purpose” to deny the appraisal review board and taxing units the power to

address and remedy, through Code procedures, fraudulent conduct that reduces the

appraised value of the mineral interests below the statutorily-required market price.

Id. at 615–16. After an examination of the Tax Code and, after noting the absence

of any specific legislative expressions of intent regarding exclusive jurisdiction, the

court commented that

Despite the absence from the Tax Code of specific language so

providing, the nature of the governmental function exercised through the

Tax Code, the constitutional mandates it implements, its comprehensive

and detailed provisions concerning appraisal of property, and its

provision of remedies combine to require the conclusion that the

Legislature intended the Code procedures to be the exclusive means

through which the taxing units may seek a remedy for the injuries

caused them by the tortious conduct alleged here.

Id . at 618. The Amarillo court concluded that the taxing units had failed to exhaust

“remedies the Legislature has made exclusive under the Tax Code, depriving the trial

court of jurisdiction.” Id .

Here, with essentially the same set of facts, we are asked to determine whether

the trial court erred when it granted the Oil Companies’ pleas to the jurisdiction and

dismissed the Taxing Units’ cases for want of jurisdiction because they did not

exhaust an administrative remedy before filing suit.

Standard of Review for Plea to the Jurisdiction

The existence of subject-matter jurisdiction is a question of law. State ex rel.

State Dep’t of Highways & Pub. Transp. v. Gonzalez , 82 S.W.3d 322, 327 (Tex.

2002). Therefore, we review de novo the trial court’s ruling on a plea to the

jurisdiction. Id . In deciding a plea to the jurisdiction, a court may not consider the

merits of the case, but only the plaintiff’s pleadings and the evidence pertinent to the

jurisdictional inquiry. County of Cameron v. Brown , 80 S.W.3d 549, 555 (Tex.

2002).

Ad Valorem Taxes

The Texas Constitution generally authorizes taxes on property in proportion

to the property’s value. Tex. Const . art. VIII, § 1(b); Tex. Mun. League

Intergovernmental Risk Pool v. Tex. Workers’ Comp. Com’n , 74 S.W.3d 377, 387

(Tex. 2002). An “ad valorem” tax is a tax on property at a certain rate based on the

property’s value. See generally 71 Am. Jur . 2D State & Local Taxation § 20 (1973);

Tex. Mun. League Intergovernmental Risk Pool , 74 S.W.3d at 387 . Obligations to

pay, as well as exemptions from, ad valorem taxes are derived entirely from

constitutional and statutory provisions. City of Houston v. Northwood Mun. Util.

Dist. No. 1 , 73 S.W.3d 304, 311 (Tex. App.—Houston [1st Dist.] 2001, pet. denied).

The amount of ad valorem taxes owed is based on the appraised value of the property.

Section 23.175 of the Texas Tax Code sets forth the method by which the

mineral properties must be appraised. Section 23.175(a) provides in part that,

if a real property interest in oil or gas in place is appraised by a method

that takes into account the future income from the sale of oil or gas to be

produced from the interest, the method must use the average price of the

oil or gas from the interest for the preceding year as the price at which

the oil or gas produced from the interest is projected to be sold in the

current year of the appraisal.

Tex. Tax Code Ann . § 23.175 (Vernon 2001).

Common Law Remedy

In point of error one, the Taxing Units argue that they have a common law

remedy for fraud and the district courts have jurisdiction of these claims. The Taxing

Units reference a 19th century United States Supreme Court case for the

“unquestioned principal of law” that a sovereign has the right to pursue common law

remedies against tortfeasors in its own courts. See Cotton v. United States , 52 U.S.

229, 230 (1850).

A municipal corporation’s power to tax property is derived solely “by virtue

of authority delegated to them by the state.” Texas & Pac. Ry. Co. v. City of El Paso ,

85 S.W.2d 245, 247 (Tex. 1935). Without a common law right to tax, the Taxing

Units have no common law right to sue for damages for an alleged loss in tax

revenues. See Bullock v. Amoco Prod. Co. , 608 S.W.2d 899, 901 (Tex. 1980) (with

statutory right and remedy not existing at common law, courts act in manner provided

by statute). When considering a claim premised on a right created entirely by statute,

“courts may act only in the manner provided by the statute which created the right.”

Id .

Market value for ad valorem tax purposes is determined by appraisal districts

and Appraisal Review Boards. Tex. Tax Code Ann . §§ 6.01(b); 41.01(a) (Vernon

2001). The Taxing Units’ claim would require the trial court to substitute its

determination of the market value of the Oil Companies’ property for the

determination of the appraisal districts and Appraisal Review Boards. See In re

ExxonMobil , 153 S.W.3d at 613 . As the ExxonMobil court stated, “we cannot

consider the trial court’s jurisdiction over the taxing units’ claims here outside the

constitutional and statutory provisions governing appraisal of property for ad volorem

tax purposes.” Id . at 613. The Taxing Units cannot avoid the procedures and

remedies in the Tax Code by characterizing a statutory tax case as a common law

fraud case. See id. Accordingly, we overrule point of error one.

Tax Code Remedy

In point of error two, the Taxing Units contend that the district courts are not

divested of jurisdiction by the alleged existence of a Tax Code remedy for fraud for

which the Appraisal Review Board of each county has jurisdiction, and which remedy

the Taxing Units have failed to exhaust prior to filing suit. And, in point of error

three, the Taxing Units argue that the Oil Companies “seek to have the court expand

the Tax Code, creating a remedy before the Appraisal Review Board, by implying

into Tax Code section 25.21 a private cause of action that is not found in the statute’s

wording or sanctioned by the statute itself in order to defeat the jurisdiction of the

district court.”

The Texas Constitution provides that the trial courts have jurisdiction “except

in cases where exclusive, appellate, or original jurisdiction may be conferred by this

Constitution or other law on some other court, tribunal, or administrative body.”

Tex. Const. art. V, § 8. An agency has exclusive jurisdiction when “a pervasive

regulatory scheme indicates that [the Legislature] intended for the regulatory process

to be the exclusive means of remedying the problem to which the regulation is

addressed.” In re Entergy Corp ., 142 S.W.3d 316, 322 (Tex. 2004).

The Tax Code is a classic example of a “pervasive regulatory scheme”

evidencing a legislative intent to vest the responsible agency with exclusive

jurisdiction, in this case the Appraisal Review Board. One of the Legislature’s

primary purposes in enacting the Tax Code was to establish a system that yields fair

and uniform valuations across taxing units. Watson v. Robertson County Appraisal

Review Bd. , 795 S.W.2d 307, 310 (Tex. App.—Waco 1990, no writ). To accomplish

this purpose, the Legislature abolished the appraisal authority of the taxing units,

established a centralized appraisal district for every county, and charged the appraisal

districts with the exclusive responsibility “for appraising property in the district for

ad valorem tax purposes of each taxing unit that imposes ad valorem taxes on

property in the district.” Tex. Tax Code Ann . § 6.01. With this shift of power, the

taxing units were sidelined in the appraisal process, except for certain specifically

circumscribed rights with respect to contested appraisals before the Appraisal Review

Board and rights of appeal from decisions of that tribunal.

Accordingly, because the Tax Code comprises precisely the type of

“comprehensive legislative scheme” that courts, including the ExxonMobil court

routinely hold to be exclusive and, because the Supreme Court of Texas has already

concluded that the Tax Code’s detailed provisions for adjudicating tax disputes

represent a “comprehensive tax scheme,” we overrule point of error two. See

ExxonMobil , 153 S.W.3d at 618 ; see also Atascosa County , 990 S.W.2d at 259 .

Alternatively, the Taxing Units argue that the Legislature has not given them

a remedy. We disagree.

In fact, the Tax Code provides at least two remedies for any alleged fraud by

taxpayers which results in undervaluation of property. First, the Taxing Units may

file a challenge to the Appraisal Review Board’s valuation of a category of properties,

which here would be oil and gas properties. Tex. Tax Code Ann . § 41.03(a)(1)

(Vernon 2001). Alternatively, the Taxing Units could have petitioned the chief

appraiser to void the original appraisal and then back-appraise the properties in

accordance with section 25.21 of the Tax Code. Tex. Tax Code Ann . § 25.21

(Vernon 2001); In re ExxonMobil , 153 S.W.3d at 613–14; Beck & Masten , 830

S.W.2d at 294–95.

The Taxing Units argue that the amendment to section 25.21 that changed the

wording “escaped taxation” to “omitted” property, renders 25.21 inapplicable to the

facts before us. We disagree. Both In re ExxonMobil and Beck & Masten considered

the very argument presented by the Taxing Units, and both courts concluded that

section 25.21’s application is determined by the allegation of fraud, not the

characterization of the result. See In re ExxonMobil , 153 S.W.3d at 613 (“For

purposes of 25.21, property ‘omitted’ from the appraisal roll includes that

undervalued by virtue of taxpayer fraud.”); see also Beck & Masten , 830 S.W.2d at

295 (fraud caused the initial assessment to be void ab initio, and the property escaped

taxation for purposes of section 25.21).

Accordingly, we overrule points of error two and three.

Pervasive Regulatory Scheme

In point of error four, the Taxing Units contend that “the Tax Code provides

no pervasive regulatory scheme encompassing their causes of action, the purpose and

effectiveness of which statutory scheme would be defeated by allowing the trial

courts to try these cases as common law fraud actions.”

The ExxonMobil court held that three factors “combine to require the

conclusion that the Legislature intended the Code procedures to be the exclusive

means through which the taxing units may seek a remedy for the injuries caused them

by the tortious conduct alleged here.” In re ExxonMobil , 153 S.W.3d at 618 . These

factors are: (1) the constitution’s mandate for a single appraisal of property, (2) the

Tax Code provisions relating to the [Appraisal Review Board’s] jurisdiction, and (3)

the Tax Code’s overall, comprehensive and detailed scheme regarding appraisal and

remedies. Id .

For the reasons previously discussed herein, the Taxing Units have not

persuaded us that we should reach a different conclusion than that of the ExxonMobil

court. Accordingly, we overrule point of error four.

Conclusion

We agree with the summation found in one of the briefs filed by the Oil

Companies. It stated that,

accepting [the Taxing Units’] novel theory would undermine the Tax

Code’s processes, strip the Appraisal Review Boards of their

sovereignty over property tax appraisals and their role in valuation

disputes, disrupt a well-thought-out administrative system that has

successfully recovered over $5 billion in fraudulent underpayments in

Harris County alone, and open the floodgates to a new era of judicially-created ad valorem tax suits, in direct contravention of the Legislature’s

intent.

We decline to do so. Accordingly, we affirm the trial court’s order dismissing the

causes of action.

George C. Hanks, Jr.

Justice

Panel consists of Justices Taft, Jennings, and Hanks.

Justice Jennings, concurring.