Appendix — Commonwealth Edison Co. v. Montana
Supreme Court brief1981
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No. 80-581
DE ee
IN THE
Supreme Court of the United States
OCTOBER TERM, 1980
—__—<>—_— -
COMMONWEALTH EDISON COMPANY, CENTRAL ILLINOIS LIGHT COMPANY, DAIRY-
LAND POWER COOPERATIVE, DETROIT EDISON COMPANY, INTERSTATE POWER
COMPANY, LAKE SUPERIOR DISTRICT POWER COMPANY, LOWER COLORADO
RIVER AUTHORITY/CITY OF AUSTIN, MINNESOTA POWER & LIGHT COMPANY,
NORTHERN STATES POWER COMPANY, UPPER PENINSULA GENERATING COM-
PANY, WISCONSIN POWER & LIGHT COMPANY, DECKER COAL COMPANY,
PEABODY COAL COMPANY, WESTMORELAND RESOURCES, INC. and WESTERN
ENERGY COMPANY,
Appellants,
—against—
STATE OF MONTANA, TED SCHWINDEN, GOVERNOR OF MONTANA, HELEN J.
FEAVER, DIRECTOR OF THE STATE DEPARTMENT OF REVENUE, and MAURICE
L. BRUSETT, DIRECTOR OF ADMINISTRATION AND STATE TREASURER,
Appellees.
ON APPEAL FROM THE SUPREME COURT OF THE STATE OF MONTANA
JOINT APPENDIX
WILLIAM P. ROGERS MIKE GREELY
Counsel of Record Counsel of Record
WILLIAM R. GLENDON Avt@eney General
STANLEY GODOFSKY Mikt MCGRATH
STEPHEN FROLING Assistant Attorney General
JAMES N. BENEDICT Mikt MCCARTER
Rogers & Wells Assistant Attorney General
200 Park Avenue Office of the Attorney General
New York, New York 10166 State Capitol
(212) 972-7000 Helena, Montana 59601
Attorneys for Appellants (406) 449-2026
except Western Energy Company Attorneys for Appellees
January, 1981
(Additional attorneys listed inside front cover)
APPEAL DOCKETED OCTOBER 10, 1980
PROBABLE JURISDICTION NOTED DECEMBER 8, 1980
RES
PATRICK F, HOOKS
THOMAS A, BUDEWITZ
218 Broadway
Townsend, Montana 59644
(406) 266-3476
Attorneys for Appellants
except Western Energy C ompany
WILLIAM J. CARL
40 East Broadway
Butte, Montana 59701
(406) 723-5421
Attorney for Appellant
Western Energy Company
Of Counsel:
GEORGE J, MILLER
Dechert Price & Rhoads
717 Seventeenth Street
Denver, Colorado 80202
(303) 623-1777
Attorney for Appellant
Westmoreland Resources, Inc.
ROSS CANNON
Cannon & Gillespie
2031 Eleventh Avenue
Helena, Montana 59601
(406) 442-9930
Attorney for Appellees
TABLE OF CONTENTS
PAGE
Docket Entries:
EER Ri AT te a ee OR PO la
Supreme Court of the State of Montana........ 24a
District Court Order in the Consolidated Actions
Dismissing Counts I-III of the Complaints—July
eS apap eran or agrinnan erage Ie Me 30a
Clean Air Act Amendments of 1977, Pub.
as reas Sa-eo © bao, 42 U.S.C. 6 7425... . 5... 88a
Additional Documents Are Printed
in the Appendix to Appellants’
Jurisdictional Statement.
la
Docket Entries.
REGISTER OF CIVIL ACTIONS
DISTRICT COURT
>_>
Attorneys
COMMONWEALTH EDISON Co., Patrick Hooks
CENTRAL ILLINOIS LIGHT CO.,
et al.,
VS.
STATE OF MONTANA, Mike Greely
No. 42657
>
Minute
Date Memoranda Book Costs
6/20/78 Filed Complaint for refund of
taxes paid under protest and for
declaratory and injunctive re-
lief, issued summons $20.00
Do Motion for Admission of
Attorneys
Do Order 75/367
Do Plaintiff’s first set of Inter-
rogatories to Defendant
Do Plaintiff’s first request for
Production of Documents
6/27/78 Do Summons and Return
Date
6/28/78
7/ 3/78
7/10/78
8/ 3/78
8/31/78
9/ 1/78
9/ 8/78
9/18/78
9/28/78
10/18/78
11/ 1/78
2a
Docket Entries—District Court
(Commonwealth Edison action)
Minute
Memoranda Book
Do Return of Service
Do Stipulation and Acknowl-
edgement
Do Stipulation 75/381
Do Motion to Extend Time and
Order and Crt. 75/385
Do Motion to Extend time and
order 75/410
Do Motion to Extend time and
order 75/415
Do Motion
Do Affidavit in Support of Mo-
tion
Do Affidavit '. Support of Mo-
tion
Do Memorandum in Support of
Motion
Do O.S.C. and Temp. Stay 9-
12-78 10 a.m. 75/460
Do Certificate of Service by
Do Motion to Dismiss
Do Brief of Defendant 75/4861
—File Briefs by 9/28/78 75/481
Do Motion to Extend time and
Order 75/491
Do Motion to Extend time and
Order 77/12
Do Cross motion
on
Costs
Date
11/ 2/78
12/11/78
1/ 5/79
1/11/79
1/23/79
1/31/79
2/ 2/79
3a
Docket Entries—District Court
(Commonwealth Edison action)
Minute
Memoranda Book Costs
Do Plaintiff’s memo in opposi-
tion to Defendants Motions to
dismiss
—File briefs by December 4,
1978 77/34
Do Motion and order extending
time for filing a reply brief 77/78
Do Letter
Do Motion for leave to file brief
amicus curiae
Do affidavit of mailing
Do Order 2-7-79 3:00 p.m. 77/120
Do Order 2-7-79 9:00 a.m. 77/120
Do Defendant’s reply brief and
brief in Opposition to Plain-
tiff’s motion to summary judg-
ment
Do Appendix Volume I
Do Appendix Volume II
Do Motion for Postponement
of Hearing 77/144
Do Minute Entry 3-8-79 9:00
a.m. Hearing on Motion to Dis-
miss and hearing on Texas mo-
tion to file brief amicus curiae 77/144
Do Minute Entry 3-8-79 3:00
p.m. 77/144
Do Praecipe to Enter Name of
Counsel
4a
Docket Entries—District Court
(Commonwealth Edison action)
Minute
Date Memoranda Book Costs
2/ 1/79 —Court issued a ruling to Con-
tinue Hearing 77/144
2/16/79 Do Motion for leave to file or
participate in brief amicus cu-
riae
Do Proof of Service
3/ 8/79 Do Motion for Admission of
Counsel
3/ 9/79 Do Brief amicus curiae of State
of Texas
—A hearing for motion to dis-
miss and motion for summary
judgment was held this day. A
motion for severance was
granted. Motion to consolidate
was heard and Court consoli-
dated 42657 and 42689. Pro-
posed opinion and orders are to
be submitted by 3-26-79. Court
heard counsel and ordered
Texas be allowed to appear as
amicus curiae 77/173
3/26/79 Do Order to Consolidate with
42689 77/200
Do Defendant’s Proposed Opin-
ion and Order on Count IV
Do Plaintiff’s Supplemental
Memo in Opposition to motion
to dismiss
Date
4/ 2/79
4/ 4/79
4/ 3/79
4/ 5/79
4/17/79
6/ 4/79
6/ 4/79
6/ 5/79
6/22/79
Sa
Docket Entries—District Court
(Commonwealth Edison action)
Minute
Memoranda Book Costs
Do Plaintiff’s proposed Deci-
sion of Count IV
Do Proposed Decision Denying
Motion to Dismiss
Do Order—Count IV of Plain-
tiff compl. be severed 77/207
Do Plaintiff’s rebuttal memo in
opposition to Defendant’s mo-
tion to dismiss
Do Transcript of Proceedings
Do Defendant’s final reply brief
Do Letter from McGrath Asst.
Atty. Gen.
Do Corrected copy’. of
Defendant’s final reply brief
Do Defendant’s proposed opin-
ion and order
Do Order to submit any com-
ments on or before 6/25/79
Do Letter
Do Stipulation for subst. of
parties 77/296
Do Order Time schedule 77/296
Do Order—Piaintiff cannot re-
quire sequestration, Judgment
be issued accordingly 77/296
Do Defendant’s Comments and
Response by Atty. Gen.
Date
7/ 3/79
7/16/79
7/27/79
8/ 3/79
8/ 6/79
8/16/79
8/22/79
8/24/79
9/ 5/79
6a
Docket Entries—District Court
(Commonwealth Edison action)
Minute
Memoranda Book Costs
—Judgment on Count IV filed
ordering Defendants motion to
dismiss Count IV granted and
Plaintiffs cross-motion for sum-
mary judgment as to Count IV
is denied.
Do Notice of Entry of Judg-
ment
Do Order—granting motion to
dismiss Counts I, II, III was
granted 77/353
Do Letter
Do Notice of Appeal
Do Letter to Judge Meloy
Do Letter to Judge Meloy
Do Argument—Cited case
Do Letter from Patrick Hooks
8/15/79
Do Stipulation that plaintiffs
need not file an Undertaking of
costs on appeal 77/375
Do Judgment on Counts I, II,
III, JB 15 p. 42 77/380
Do Notice of Entry
Do Letter from Patrick Hooks
Do Notice of Appeal
Do Letter from Patrick Hooks
9/4/79
Ta
Docket Entries—District Court
(Commonwealth Edison action)
Minute
Date Memoranda Book Costs
Do Stipulation and Affidavit of
Mailing 77/403
9/11/79 Do Stipulation for entry of an
order extending time for trans-
mission of record on appeal and
order.
—Extension of time to 10-2-79 77/403
8a
Docket Entries
REGISTER OF CIVIL ACTIONS
DISTRICT COURT
ee
Attorneys
LAKE SUPERIOR DISTRICT
POWER Co., NORTHERN
STATES POWER Co., Patrick Hooks
et al. Rogers & Wells
VS.
STATE OF MONTANA,
THOMAS L,. JUDGE, et al. Ross Cannon
No. 42689
en
Minute
Date Memoranda Book Costs
6/28/78 Filed Complaint for refund of
taxes paid under protest and for
declaratory relief, issued sum-
mons $20.00
7/19/78 Do Motion to extend time and
order 76/11
7/31/78 Do Summons and Return
Do Motion to extend time 75/410
8/31/78 Do Amended Complaint for re-
fund of taxes paid under protest
9a
Docket Entries—District Court
(Lake Superior action)
Minute
Date Memoranda Book Costs
and for declaratory and injunc-
tive relief
Do Motion to Strike and Dis-
miss
9/ 8/78 Do Letter from M.PG.
Do Consent to Substitute Attor-
neys
—Do Brief of Defendant 75/481
9/18/78 —File Brief by 9/28/78 75/481
9/25/78 Do Motion to strike and dismiss
9/28/78 Do Motion to extend time and
Order
10/ 2/78 Do Brief in Support of
Defendant’s motion to strike
and to dismiss _ plaintiff’s
amended complaint
10/19/78 Do Motion to extend time and
order 77/12
11/ 1/78 Do Plaintiff Western Energy
Company’s memo in opposition
to defendants motion to dismiss
or strike
Do Plaintiff’s memo in opposi-
tion to Defendant’s motion to
dismiss or strike
11/ 2/78 —File briefs by Dec. 4, 1978 77/34
11/16/78 Do Plaintiff Western Energy
Co.’s, Brief on motion to strike
and/or dismiss complaint
Date
12/11/78
1/23/79
1/31/79
‘2/ 2/79
3/ 9/79
3/26/79
10a
Docket Entries—District Court
(Lake Superior action)
Minute
Memoranda Book Costs
Do Motion and order extending
time for filing reply brief 77/78
Do Defendant’s reply brief
Do Motion for postponement of
hearing
Do Minute Entry 3-8-79 9:00
a.m.
3-8-79 3:00 p.m. 77/145
—Hearing held at this time on
motion to dismiss and motion
for summary judgment and a
motion for severance was
granted. Motion to consolidate
was heard and Court consoli-
dated 42657 and 42689. Pro-
posed opinion and orders. Or-
der on motion to consolidate is
to be prepared and Court or-
dered that Texas be allowed to
appear as amicus curiae 77/173
Do Order to Consolidate with
42657 77/200
Do Plaintiffs Supp. Memo Op-
position to motion to dismiss
Do Decision (Proposed) on
Count IV
Do Defendants Proposed Opin-
ion Count IV
Date
4/ 2/79
4/ 5/79
4/17/79
6/ 1/79
6/ 4/79
6/ 5/79
7/ 3/79
7/27/79
8/ 3/79
lla
Docket Entries—District Court
(Lake Superior action)
Minute
Memoranda Book Costs
Do Proposed Decision to dis-
miss and Consolidate
Do Order to sever amended
complaint from other counts 77/207
Do Letter from Attorney Hooks
Do Corrected copy of Def.
Final Reply brief
Do Defendant’s proposed opin-
ion and order
Do Letter
Do Stipulation for sub. of par-
ties 77/296
Do Order to submit comments
by June 25, 1979 77/296
Do Order—Plaintiffs cannot re-
quire sequestration Judgment to
be issued accordingly. 77/296-298
Do Judgment on Count IV—
Defendants motion to dismiss
Count IV granted plaintiffs mo-
tion for summary judgment de-
nied
Do Notice of Entry of Judg-
ment 77/330
Do Order filed in 42657—Mo-
tions to dismiss Counts I, II, III
granted 77/353
Do Letter
Do Notice of Appeal filed 42657
12a
Docket Entries—District Court
(Lake Superior action)
Minute
Date Memoranda Book Costs
8/16/79 Do Stipulation that plaintiffs
need not file an undertaking of
costs on appeal 77/375
8/22/79 Do Judgment on Counts I, II,
III JB 15 p. 156
Do Notice of Entry 77/380
8/24/79 Do Notice of Appeal
Do Letter
Do Notice of Appeal
9/ 4/79 Do Letter from Patrick Hooks
9/ 5/79 Do Stipulation and Affidavit of
Mailing 77/403
9/11/79 Do Stipulation for entry of an
order extending time for trans-
mission of record on appeal and
order—extending time to 10-2-
79 77/403
13a
Docket Entries
REGISTER OF CIVIL ACTIONS
DISTRICT COURT
>
Attorneys
COMMONWEALTH EDISON Co.,
CENTRAL ILLINOIS LIGHT Co., Rogers & Wells
et al., Patrick Hooks
VS.
STATE OF MONTANA,
THOMAS L., JupDGE, et al. Ross W. Cannon
No. 42971
—>—
Minute
Date Memoranda Book Costs
9/25/78 Filed Complaint, Issued Sum-
mons $20.00
Do Summons
10/16/78 Do Motion
Do Brief in Support of Defen-
dants motion
11/15/78 Do Plaintiff’s memo in Opposi-
tion to Defendant’s motion to
strike and/or dismiss
Date
12/11/78
3/26/79
6/ 5/79
7/27/79
8/ 3/79
8/16/79
8/22/79
8/24/79
9/ 4/79
l4a
Docket Entries—District Court
(Commonwealth Edison action)
Minute
Memoranda Book Costs
Do Motion and Order extend
time until 1/22/79 77/78
Do Proposed Decision Count
IV
Do Proposed Decision Motion
Dismiss & Consolidate
Do State’s Proposed Order
Do Order—Plaintiffs cannot re-
quire sequestration
Judgment to be issued accord-
ingly 77/298
—Judgment on Count IV
Defendant’s motion to dismiss
is granted and plaintiff’s cross-
motion is denied 77/330
Do Order filed in 42657 Mo-
tions to dismiss on Counts I, II,
III is granted 77/353
Do Letter
Do Notice of Appeal filed 42657
Do Stipulation (copy)
Do Judgment on Counts I, II,
III JB 15 p. 42
Do Notice of Entry of Judg-
ment 77/380
Do Letter
Do Notice of Appeal
Do Letter from Patrick F.
Hooks
lSa
Docket Entries—District Court
(Commonwealth Edison action)
Minute
Date Memoranda Book Costs
9/ 5/79 Do Stipulation and Affidavit of
Mailing 77/403
9/11/79 Do Stipulation of Entry of an
order extending time for trans-
mission of record on appeal and
order
—Extending time to 10-2-79 77/403
l6a
Docket Entries
REGISTER OF CIVIL ACTIONS
DISTRICT COURT
<->
Attorneys
LAKE SUPERIOR DISTRICT
POWER COMPANY, NORTHERN
STATES POWER COMPANY,
et al. John Carl
VS.
STATE OF MONTANA,
THOMAS L, JUDGE, et al. Ross W. Cannon
No. 42972
as
Minute
Date Memoranda Book Costs
9/25/78 Filed Complaint, Issued Sum-
mons $20.00
Filed Complaint, Issued Sum-
mons 20.00
Do Summons
Do Summons
10/16/78 Do Motion
Do Brief in Support of Defen-
dants motion
Date
11/15/78
12/11/78
3/26/79
6/ 5/79
7/27/79
8/ 3/79
8/16/79
17a
Docket Entries—District Court
(Lake Superior action)
Minute
Memoranda Book Costs
Do Plaintiff’s memo in opposi-
tion to Defendant’s motion to
strike and/or dismiss
Do Plaintiff’s memo in opposi-
tion to Defendant’s motion to
dismiss or strike
Do Motion and Order extending
time 77/78
Do Proposed Decision Count
IV
Do Proposed Decision Deny
Motion and Consolidate
Do State’s Proposed Order
Do Order—Plaintiffs cannot re-
quire sequestration
Judgment to be issued accord-
ingly 77/298
—Judgment on Count IV or-
dering Defendant’s motion to
dismiss is granted and plaintiffs’
cross-motion is denied 77/330
Do Order filed in 42657 motion
to dismiss on Counts I, II, III is
granted 77/353
Do Letter
Do Notice of Appeal filed in
42657
Do Stipulation (copy)
Date
8/22/79
8/24/79
9/ 4/79
9/ 5/79
9/11/79
18a
Docket Entries—District Court
(Lake Superior action)
Minute
Memoranda Book Costs
Do Judgment on Counts I, II,
III JB 15 p. 156 77/380
Do Notice of Entry of Judg-
ment
Do Letter
Do Notice of Entry
Do Letter from Patrick Hooks
Do Stipulation and Affidavit of
Mailing 77/403
Do Stipulation for entry of an
order extending time for trans-
mission of record on appeal and
order
—Extending time to 10-2-79 77/403
19a
Docket Entries
REGISTER OF CIVIL ACTIONS
DISTRICT COURT
oe
Attorneys
COMMONWEALTH EDISON Co.,
CENTRAL ILLINOIS LIGHT Co.,
et al. Patrick Hooks
VS.
STATE OF MONTANA,
THOMAS L. JUDGE, et al. Ross W. Cannon
No. 43289
—<——_
Minute
Date Memoranda Book Costs
12/21/78 Filed Complaint, Issued Sum-
mons $20.00
12/22/78 Do Summons and Aff. of Ser-
vice
1/10/79 Do Motion to Dismiss and/or
to Strike
1/15/79 Do Brief in Support of
Defendant’s motion to strike
1/29/79 Do Plaintiff’s memo in opposi-
tion to Defendant’s motion to
strike and/or dismiss
Date
3/26/79
6/ 5/79
7/27/79
8/ 3/79
8/16/79
8/22/79
8/24/79
9/ 4/79
9/ 5/79
20a
Docket Entries—District Court
(Commonwealth Edison action)
Minute
Memoranda Book Costs
Do Proposed Decision
Do Proposed Decision Deny
Motion to Dismiss and Consoli-
date |
Do State’s Proposed Order
Do Order—Plaintiffs cannot re-
quire sequestration. Judgment
to be issued accordingly 77/298
—Judgment on Count IV or-
dering Defendant’s motion to
dismiss is granted and plaintiff’s
cross-motion denied 77/330
Do Order—filed in 42657 on
motion to dismiss Counts I, II,
III granted 77/353
Do Letter
Do Notice of Appeal filed in
42657
Do Stipulation (copy)
Do Judgment on Counts I, II,
III JB 15 p. 42
Do Notice of Entry 77/380
Do Letter
Do Notice of Appeal
Do Letter from Patrick Hooks
9-4-79
Do Stipulation and Affidavit of
Mailing 77/403
2la
Docket Entries—District Court
(Commonwealth Edison action)
Minute
Date Memoranda Book Costs
9/11/79 Do Stipulation of Entry of Or-
der extending time for transmis-
sion of record on appeal and
order—Extended to 10-2-79 77/403
22a
Docket Entries
REGISTER OF CIVIL ACTIONS
DISTRICT COURT
>
Attorneys
LAKE SUPERIOR DISTRICT POWER,
NORTHERN STATES
POWER CoO., Patrick Hooks
et al. John Carl
VS.
STATE OF MONTANA,
THOMAS L. JUDGE, ef ai. Ross W. Cannon
No. 43288
Ss
Minute
Date Memoranda Book Costs
12/21/78 Filed Complaint, Issued Sum-
mons $20.00
Do Complaint of Western
Energy and Issued summons
12/22/78 Do Summons and Affidavit of
Service
1/10/79 Do Motion to Dismiss and to
Strike
1/15/79 Do Brief in Support of
Defendant’s motion
23a
Docket Entries—District Court
(Lake Superior action)
Minute
Date Memoranda Book Costs
1/29/79 Do Plaintiff’s Memo in opposi-
tion to Defendant’s motion to
strike and/or dismiss
2/16/79 —Defendant’s motion to strike
or dismiss set for 3/1/79 2:00
p.m. 76/290
2/20/79 —Hearing is vacated without
date 76/292
24a
Docket Entries
REGISTER OF ACTIONS
SUPREME COURT OF THE STATE OF MONTANA
No. 14982
a
COMMONWEALTH EDISON COMPANY, et al.,
Plaintiffs and Appellants,
—Vvs.—
STATE OF MONTANA, ef al.,
Defendants and Respondents.
LAKE SUPERIOR DISTRICT POWER CO., ef al.,
Plaintiffs and Appellants,
—vs.—
STATE OF MONTANA, ef al.,
Defendants and Respondents.
—_<e>—
Attorneys for Plaintiffs-Appellants Commonwealth
Edison Co., et al.
ROGERS & WELLS
200 Park Avenue
New York, New York 10017
HOOKS AND BUDEWITZ
218 Broadway
Townsend, Montana 59644
25a
Docket Entries—
Supreme Court of the State of Montana
(consolidated action)
Attorneys for Amicus Curiae
GARRITY, KEEGAN AND BROWN
1400 19th Avenue
Helena, Montana
Attorney for Western Energy Co.
JOHN CARL
40 East Broadway
Butte, Montana 59701
Attorneys for Defendants-Respondents
MIKE GREELY
Attorney General
Helena, Montana
CANNON AND GILLESPIE
2031 11th Avenue
Helena, Montana
Filed in the District Court of the Ist Judicial District,
Lewis and Clark County
Nature of Action: Coal tax
Date
9/21/79
9/27/79
9/28/79
26a
Docket Entries—
Supreme Court of the State of Montana
(consolidated action)
MEMORANDUM OF PROCEEDINGS
(Commonwealth Edison Co. et al.)
>
Minute
Memoranda Book Costs
Order Per Curiam; prehearing
conference set 9:00 on Thurs.,
Sept. 27; matters include length
of briefs, contents of record and
time and order of argument $20.00
Application and Order that
State of Texas be permitted to
appear as amicus curiae and
shall file brief under same brief-
ing schedule as appellants 10.00
Order per Curiam. It is ordered
(1) The appeal in Cause No.
14991 is hereby consolidated
with this cause for oral argu-
ment and determination on ap-
peal (2) The record on appeal
shall consist of all records and
Exhibits before the District
Court in any consolidated ac-
tion herein (3) See Order (4) See
Order (5) This consolidated ap-
peal is set for hearing and Oral
argument April 15, 1980 at 9:30
a.m. (6), (7), (8) See order
‘~~
27a
Docket Entries—
Supreme Court of the State of Montana
Date
10/ 2/79
11/14/79
11/14/79
11/15/79
1/31/80
2/ 4/80
2/15/80
3/31/80
4/15/80
4/15/80
4/21/80
(consolidated action)
Memoranda
District Court Files 42971—
43288—42657—42689—43289—
Exhibits
Appellants’ Brief (Common-
wealth Edison Co. et al.)
Appellant Western Energy Com-
pany
Amicus Brief State of Texas
Application and Order granting
State Moat. to Feb. 15, 1980 to
file its Brief and Appellants
shall have until March 31, 1980
to file Reply Brief.
Order hearing & Oral argument
rescheduled for April 21, 1980
at 9:30 a.m. (see order)
Respondent’s Brief.
Appellants Reply Brief
Order No. Dakota tax commis-
sioner is granted permission to
file Amicus Brief.
Amicus curiae Brief (No. Da-
kota)
Argued & Submitted. William
R. Glendon, William Rogers,
John Carl, Appellants. Mike
Greely, Ross Cannon, Mike Mc-
Grath and Mike McCarter, Re-
Minute
Book Costs
$20.00
28a
Docket Entries—
Supreme Court of the State of Montana
(consolidated action)
Minute
Date Memoranda Book Costs
spondenis. Amicus curiae:
Mark Wiiite, Leo Wilking
3/28/80 Pre-assigned, Judge Sheehy
7/17/80 Opinion; Justice Sheehy; af-
firmed; Unanimous.
7/30/80 Remittitus and copy of opinion
sent to Clerk District Court
Helena and Court File and Ex-
hibits returned to Clerk Cert.
No. 6648489 and 6648491 and
6648493.
10/ 2/80 Notice of Appeal to U.S. Su-
preme Court.
10/ 6/80 Notice of Appeal to U.S. Su-
preme Court (John Carl).
12/11/80 Order from U.S. Supreme
Court noting probable jurisdic-
tion.
29a
Docket Entries
Judgt.: June 27, 1979
REGISTER OF ACTIONS
No. 1499]
>
COMMONWEALTH EDISON COMPANY, ef al.,
Plaintiffs and Appellants,
—vs.—
STATE OF MONTANA, ef al.,
Defendants and Respondents,
LAKE SUPERIOR DisTRICT POWER COMPANY, et al.,
Plaintiffs and Appellants,
—Vvs.—
STATE OF MONTANA, ef al.,
Defendants and Respondents.
>.
MEMORANDUM OF PROCEEDINGS
Minute
Date Memoranda Book Costs
9/27/79 Notice of appeal (Count IV) $20.00
9/28/79 Order per curiam. It is ordered
that the appeal in this Cause is
hereby consolidated with Cause
No. 14982 with instructions (see
order)
30a
District Court Order in the Consolidated Actions
Dismissing Counts I-III of the Compiaint—
July 27, 1979
IN THE DISTRICT COURT OF THE
FIRST JUDICIAL DISTRICT OF THE STATE OF MONTANA
IN AND FOR THE COUNTY OF LEWIS AND CLARK
>
Nos. 42657, 42971, 43289
COMMONWEALTH EDISON COMPANY, ef al.,
Plaintiffs,
—vs.—
STATE OF MONTANA, ef al.,
Defendants.
—<—>—
Nos. 42689, 42972, 43288
LAKE SUPERIOR DISTRICT POWER COMPANY, ef al.,
Plaintiffs,
—Vvs.—
STATE OF MONTANA, ef al.,
Defendants.
ORDER
These cases are actions for refunds of coal severance
tax paid by the plaintiffs pursuant to Chapter 35 of Title
15, M.C.A. The amounts were paid under protest and
3la
District Court Order in the Consolidated Actions
Dismissing Counts I-III of the Complaint—
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this suit followed. Plaintiffs seek, also, declaratory and
injunctive relief with respect to future installments of the
tax.
The plaintiffs allege that they are eleven out-of-state
public utilities operating in midwestern and southwestern
States and several companies which mine coal in Montana
and furnish the coal to the utilities pursuant to long-term
contracts. The tax is imposed on the severance of coal
from the ground and is measured by the “contract sales
price” of the coal when prepared by shipment “F.O.B. the
mine.” In certain instances the value may be imputed as
provided in Section 15-35-107, M.C.A. The rates vary,
ranging up to 30% of the value.
In cause number 42657, plaintiffs seek to recover the
first payment amounting to $7,019,705.16. With subse-
quent payments in causes number 42971 and 43289, the
sums paid aggregate in excess of $27,000,000.00. The
complaint of [2] Western Energy Company in causes
42689, 42972 and 43288 separately state its claim for
refunds of a portion of the taxes paid and acknowledge
that only a portion of its tax payments were made under
protest.
The complaints consist of four counts. The fourth
count, which asks for an injunction pendente lite to
prevent the State from disbursing the taxes collected, has
been severed as a separate cause of action and has been
dismissed by this court.
The first three counts are considered here. The defen-
dants have moved to dismiss each of the counts. Numer-
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ous briefs have been filed and an oral hearing was had on
the motion to dismiss. The defendants were represented
by Attorney Genera! Michael T. Greely, Assistant Attor-
neys’ General Mike McGrath and Mike McCarter and by
Koss Cannon. The plaintiffs were represented by Patrick
F. Hooks and William R. Glendon. Western Energy
Company was represented by John Carl.
The complaints set out the basic claims in three sepa-
rate counts.
Count I asserts that the severance tax is unconstitu-
tional in that it is an undue burden on interstate com-
merce in that the tax bears no fair relation to the services
and protection provided by the State of Montana to the
coal mining activity.
Count II asserts that the severance tax is unconstitu-
tional because it violates the Supremacy Clause of the
Federal Constitution in that it substantially frustrates the
congressional intended purpose to increase coal produc-
tion as a substitute for oil energy.
Count III asserts that the coal severance tax is unconsti-
tutional because it grossly distorts the compromise be-
tween the federal government and the states expressed in
the Mineral Lands Leasing Act of 1920 and as amended
by the Federal Coal Leasing Amendments Act of 1975, by
appropriating a major part of the “economic rents”
attributable to coal extraction thus frustrating federal
policies.
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To all three counts the defendants have filed motions to
dismiss on the ground that the complaint fails to state
claims upon which relief may be granted.
In considering a motion to dismiss the Court is guided
by the rule that a motion to dismiss will not be granted
unless, as a matter of law, no facts can be [3] proven that
will establish that plaintiffs are entitled to the requested
relief. Buttrell v. McBride Land and Livestock, 171 M
296 (1976). But whether a complaint states a cause of
action must be determined from allegations of fact and
not from conclusions. Coldwater v. State Highway Com-
mission, 118 Mont. 65.
In the approach to the question, and for the purpose of
the motion only, the Court accepts as true the well
pleaded facts of the claim. Potter v. Miller, 145 M. 197.
COUNT I.
This count alleges that:
1. The Coal Severance Tax is imposed on activities
which substantially affect interstate commerce, that it
violates the Commerce Clause of the United States be-
cause the amount of the tax bears no fair relation to the
cost of services and protection afforded by the state to
taxpayers, and that it discriminates against interstate
commerce. -
For the purposes of the motion to dismiss the defen-
dants admit the truth of the claim but contend that the
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allegations are not sufficient to state a claim against the
defendants upon which relief may be granted.
The issue to be decided as to Count I is the scope and
reach of the Commerce Clause of the United States
Constitution. The issue arises from the widely disparate
views of the parties as to whether a local activity such as
mining of coal, is subject to the exclusive jurisdiction of
the state for tax purposes? Or whether that activity for
tax purposes is subject to scrutiny under the Commerce
Clause when it has a substantial effect on interstate
commerce.
The basis for defendants’ contentions is that the tax-
able event, the severing of coal from the ground, is not an
act of commerce, but is a purely local activity which is
not reached by the Commerce Clause. The defendants
rely on United States Supreme Court case law which is
based upon what has been labeled as the “Heisler Tril-
ogy” case study of three United States Supreme Court
decisions, namely Heisler v. Thomas Colliery Co., 260
U.S. 235 (1922); Oliver Iron Mining Co. v. Lord, 262
U.S. 172 (1923) and Hope Natural Gas Co. v. Hall, 274
U.S. 284 (1927).
The plaintiffs here accept the reasoning of “Heisler
Trilogy” and label the reasoning in those decisions as
providing a “mechanical test” which does not apply [4] to
the situation here, and as to which the United States
Supreme Court no longer adheres.
The plaintiffs would characterize the “Heisler” rule as
follows:
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“Heisler employed a mechanical test to determine
whether an activity was interstate or intrastate com-
merce. The test simply required the Court to find a
‘point of time when they (goods) cease to be gov-
erned exclusively by the domestic law and begin to be
governed and protected by the national law of com-
mercial regulation. . . .” Heisler v. Thomas Colliery
Co., 260 U.S. 245, 260-61 (1922). Under the reason-
ing of the Heisler Court, activities such as mining,
manufacturing and agricultural production were on
one side of this line and were thus said to be within
the exclusive control of the state, and only the state
could regulate or tax the activity. On the other side,
the activity was exclusively within federal control.
Heisler’s mechanical test was perhaps most explicitly
stated in Carter v. Carter Coal Co., 298 U.S. 238,
303 (1936), where the Court used the test to strike
down a federal law regulating mining activities:
One who produces or manufactures a commodity,
subsequently sold and shipped by him in interstate
commerce, whether such sale and shipment were
originally intended or not, has engaged in two
distinct and separate activities. So far as he pro-
duces or manufactures a commodity, his business
is purely local. So far as he sells and ships, or
contracts to sell and ship, the commodity to cus-
tomers in another state, he engages in interstate
commerce. Jn respect of the former, he is subject
only to regulation by the state; in respect of the
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latter, to regulation only by the federal govern-
ment. (Emphasis supplied)
According to defendants, the Heisler trilogy cases
are ‘as valid today as they were when initially laid
down.” (Tr. 7). They claim that, because of this
mechanical test, the Coal Severance Tax is immune
from any examination at all under the Commerce
Clause (Tr. 17), without regard to the actual effect of
the Tax on interstate commerce (Defendants’ Reply
Br. at 3), and that this would be so, even if the rate
of tax were raised to 100% ad valorem (Tr. 84).
Plaintiffs take issue with these conclusions. They
argue that the rationale of Heisler and like cases has
been rejected and repudiated by later cases. (Plain-
tiffs’ Br. at 22-35). They say that mining, manufac-
turing and agricultural production are not immune
frum Commerce Clause scrutiny. Plaintiffs trace an
overall evolution in the development of the Com-
merce Clause since 1937, on the basis of which they
argue that the breadth and scope of the Clause has
expanded so that it now touciies, and can be used to
scrutinize for impermissible ourdens, all activities
which ‘substantially affect’ interstate commerce.
Plaintiffs have further asserted that the Coal Sever-
ance Tax has such a ‘substantial effect’ on interstate
commerce and is, therefore, subject to scrutiny.
Accordingly, the centrai issue before the Court is
whether or not the ‘mechanical test’ of the Heisler
trilogy has been retained by the Supreme Court’s
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opinions since that time or has been supplanted, as
the plaintiffs claim, by a ‘substantial effects’ test.
The two tests are fundamentally different in several
respects. The test which plaintiffs claim should be [5]
employed gives an expansive reading to the Com-
merce Clause; it involves a judicial balancing and
accommodation of the competing state and federal
interests involved. The power of the states and the
federal government necessarily overlap under this
test. Defendants’ test, on the other hand, gives a very
narrow scope to the Commerce Clause, and it would
make the powers of each government exclusive in its
own domain.”
It is the wish of this Court to examine the principal
decisions of the Supreme Court since the “Heisler Tril-
ogy” cases to determine if the Supreme Court has ex-
panded the reach of the Commerce Clause to effect a
control of the taxing authority of a state of a local
activity.
Under the theory of the plaintiffs that the so-called
“Mechanical Test” has been supplanted by “substantial
effect on commerce” test this Court would necessarily
have to deny the motion to dismiss and proceed to a
factual determination.
The plaintiffs do not contend that the State may not
tax an activity which has a substantial effect on interstate
commerce. They do contend, however, that the tax has to
bear a fair relationship to the cost impact such activity
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has on the taxpayers of the state. If such be the law then a
factual determination is necessary.
The parties disagree as to the interpretation of later
Supreme Court decisions as to their effect on the Heisler
rule.
1922
The taxable event in Heisler vy. Thomas Colliery Co.,
was anthracite coal mined, washed, screened or otherwise
prepared for market. Over the contentions that Pennsyl-
vania had a monopoly on anthracite coal which was a
prime necessity of other states, and that the tax was a
collection of tribute from other states, the Supreme Court
held that the taxable event was not a regulation of
commerce and was exclusively governed by domestic law
and not governed and protected by the national law of
commerce regulations until the goods commence their
final movement for transportation from the state of their
origin to that of their destination.
1923
The taxable event in Oliver Iron Co. v. Lord, et al.,
was the occupation of those “engaged in the business of
mining or producing iron ores or other ores.” The chief
contention was that mining, as conducted by the plain-
tiffs, if not actually a part of interstate commerce, was so
closely connected therewith that to tax it is to burden or
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interfere with such commerce, something a state cannot
do under the [6] Commerce Clause of the United States
Constitution.
As in the Heisler case, the argument was that the
demand or market for the ore outside the state. The
Supreme Court held that mining is not interstate com-
merce but, like manufacturing, is a local business subject
to local regulation and taxation. Its characteristic in this
regard is intrinsic, is not affected by intended use or
disposal of the product, is not controlled by contractual
engagements and persists even though the business be
conducted in close connection with interstate commerce.
1927
The taxable event in Hope Natural Gas Company vy.
Hall was the business of producing natural gas in the
state, upon which activity an “annual privilege tax” was
assessed. The business was the production and purchase
of natural gas in West Virginia, and the continuous and
uninterrupted transportation of this through pipe lines to
Other states. The Supreme Court of the United States
approved a lower court’s decision that the value of the
gas must be computed before it enters the stream of
interstate commerce. It was admitted that there was no
violation of the Commerce Clause when the state lays a
privilege or occupation tax upon producers of natural gas
reckoned according to the value at the well head, because
production is a purely local activity.
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1933
The tax event in Minnesota v. Blasius, 290 U. S. 1
concerned the shipment of livestock to the St. Paul
market. The Supreme Court held that while a state may
not tax items in the current of interstate commerce yet
under the facts the transportation had ceased and when
Blasius received the cattle, put them in his own pens,
where he could sell to buyers within or without the state,
the “cattle were not held by him for the purpose of
promoting their safe or convenient transit. They were not
in transit. Their situs was in Minnesota where they had
come to rest. There was no federal right to immunity
from the tax.”'
1936
Carter v. Carter Coal Co., 298 U.S. 238 concerned a
Federal statute, the “Bituminous Coal Conservation Act
of 1935.” The question was whether the labor [7] provi-
sions of the act could be upheld as an exercise of the
power to regulate commerce. The thrust of the legislative
averment was that production and distribution by pro-
ducers of such coal bear upon and directly affect inter-
state commerce and render regulation of production and
l This case is corollary to the Heisler cases but instead of activity prior
to entering the stream of interstate commerce is one in which interstate
commerce had ceased.
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distribution imperative for the protection of such com-
merce. The act was struck down when the court held:
“One who produces or manufactures a commodity,
subsequently sold and shipped by him in interstate
commerce, whether such sale and shipment were
originally related or not, has engaged in two distinct
and separate activities. So far as he produces or
manufactures a commodity, his business is purely
local. So far as he sells and ships, or contracts to sell
or ship, the commodity to customers in another
State, he engages in interstate commerce. In respect
to the former, he is subject only to the regulation by
the state; in respect to the latter, to regulation only
by the federal government. Utah Power and Light
Co. v. Pfost, 286 U.S. 165, 182. Production is not
commerce, but a step in preparation for commerce.
Chassaniol v. Greenwood, 291 U.S. 584, 587.”
1936
National Labor Relations Board v. Jones and Laughlin
Steel Corporation, 301 U.S. 1. The involvement consid-
ered was a violation by Jones and Laughlin of the
National Labor Relations Act by engaging in unfair labor
practices affecting commerce. Section 10(a) of the act
provided “The Board is empowered, as hereinafter pro-
vided, to prevent any person from engaging in any unfair
labor practice (listed in section 8) affecting commerce.”
The contention of Jones-Laughlin was that the act was
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beyond the reach of Congress. The Supreme Court
reasoned as follows:
“The critical words of this provision, prescribing the
limits of the Board’s authority in dealing with the
labor practices, are ‘affecting commerce’. The Act
specifically defines the ‘commerce’ to which it refers
(§ 2(6)):
“The term commerce means trade traffic, commerce,
transportation, or communication among the several
states, or between the District of Columbia or any
Territory of the United States, and any State or other
Territory, or between any foreign country and any
State, Territory, or the District of Columbia or any
Territory, or between points in the same State but
through any other State or any Territory or the
District of Columbia or any foreign country:
“There can be no question that the commerce thus
contemplated by The Act (aside from that within a
Territory or the District of Columbia) is interstate
and foreign commerce in the constitutional sense.
The Act also defines the term ‘affecting commerce’
(§ 2(7)):
“The term ‘affecting commerce’ means in commerce
a burdening or [8] obstructing commerce or the free
flow of commerce, or having led or tending to lead
to a labor dispute burdening or obstructing com-
merce or the free flow of commerce.
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“This definition is one of exclusion as well as inclu-
sion. The grant of authority to the Board does not
purport to extend beyond the relationship between
all industrial employees and employers. Its terms do
not impose collective bargaining upon all industry
regardless of effect upon interstate or foreign com-
merce. It purports to reach only what may be deemed
to burden or obstruct that commerce and, thus
qualified, it must be construed as contemplating the
exercise of control within constitutional bounds. It is
a familiar principle that acts which directly burden or
obstruct interstate or foreign commerce, or its free
flow, are within the reach of congressional power.
Acts having that effect are not rendered immune
because they grow out of labor disputes.”
The Supreme Court held the act constitutional.
The plaintiffs here take the position that the Heisler
Trilogy rule, although not specifically overruled by Jones
and Laughlin, is overruled by implication. The defen-
dants characterize the Jones and Laughlin decision as not
applicable since it dealt with a situation in which Con-
gress had acted, specifically enacting legislation applied to
activities which “affect commerce”, which is not the
situation considered here.
1940
The event in Sunshine Anthracite Coal Co. v. Adkins,
310 U. S. 381 involved the Bituminous Coal Conservation
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Act of 1937 which provided for regulation and sale of
bituminous coal. The Act was upheld on the basis that the
regulatory provisions of the Act were within the Com-
merce power; they apply only to sales or transactions in,
or directly or intimately affecting, interstate commerce.
The Sunshine Coal Company was the lessee of coal lands
in Arkansas and was engaged in the business of mining
and shipping coal. The Supreme Court held “The regula-
tory provisions are clearly within the power of Congress
under the Commerce Clause of the Constitution; * * *
The fixing of prices, the proscription of unfair trade
practices, the establishment of marketing rules respecting
such sales of bituminous coal constitute regulations
within the competence of Congress under the Commerce
Clause.” This case is an outgrowth of Carter v. Carter
Coal Co., after the Act had been amended.
1941
The event in United States v. Darby, 312 U. S. 100 was
the U. S. Fair Labor Standards Act of 1938 and its fixing
of minimum wages and hours. The questions [9] pre-
sented were “first, whether Congress has constitutional
power to prohibit the shipment in interstate commerce of
lumber manufactured by employees whose wages are less
than a prescribed minimum or whose weekly hours of
labor at that wage are greater than a prescribed max-
imum, and second, whether it has the power to prohibit
the employment of workmen in the production of goods
for interstate commerce at other than prescribed wages
and hours.”
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As to the first question the Supreme Court held that
“while manufacturing is not of itself interstate commerce,
the shipment of manufactured goods interstate is such
commerce and the prohibition of such shipments by
Congress is indubitably a regulation of commerce.”
As to the second question the Court held:
“While this Court has many times found state regu-
lation of interstate commerce, where uniformity of
its regulation is of natural concern, to be incompati-
ble with the Commerce Clause even though Congress
has not legislated on the subject, the court has never
implied such restraint on state control over matters
of intrastate not deemed to be regulations of inter-
state commerce or its instrumentalities even though
they affect the commerce. Minnesota Rate Cases,
230 U. S. 352, 398 et seq., and cases cited: 410 et
seq., and cases cited. In the absence of congressional
legislation on the subject laws which are not regula-
tions of the commerce itself or its instrumentalities
are not forbidden even though they affect interstate
commerce. Kidd v. Pearson, 128 U.S. 1; Bacon vy.
Illinois, 227 U.S. 504; Heisler v. Thomas Colliery
Co., 260 U. S. 245; Oliver Iron Co. v. Lord, 262
U.S. 192.
“But it does not follow that Congress may not by
appropriate legislation regulate intrastate activities
where they have a substantial effect on interstate
commerce.”
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The Supreme Court upheld the application of the Act’s
provisions.
1942
The event in Wickard v. Filburn, 317 U. S. 111 in-
volved the U. S. Agricultural Adjustment Act of 1938. A
farmer sought to enjoin enforcement against himself of
the penalty imposed on that part of his 1941 wheat crop
which was available for marketing in excess of the
marketing quota established for his farm. His argument
was that the marketing provisions of the act applicable to
him were unconstitutional because not obtainable under
the Commerce Clause. He urged that the marketing
quotas were a regulation of production and consumption
of wheat. (The excess wheat was grown for his own
consumption.) The thrust of the opinion is that Congress
has, under the Commerce Clause, the power to regulate
local activity if such activity “exerts a [10] substantial
economic effect on interstate commerce.”
1943
The event in Parker v. Brown, 317 U. S. 341 involved
the California Agricultural Prorate Act and whether it
was rendered invalid under the United States Sherman
Act or by the United States Agricultural Marketing
Agreement Act of 1937. The declared purpose of the
California Act was to “conserve the agricultural wealth of
the State” and “to prevent economic waste in the market-
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ing of agricultural products” of the State. The Supreme
Court held that the California activity was not within the
reach of the Commerce Clause and said:
“This court has repeatedly held that the grant of
power to Congress by the Commerce Clause did not
wholly withdraw from the States the authority to
regulate commerce with respect to matters of local
concern, in which Congress has not spoken. (Citing
cases) A fortiori there are many subjects and trans-
actions of tocal concern not themselves interstate
commerce or a part of its operation which are within
the regulatory and taxing powers of the States, so
long as state action serves local ends and does not
discriminate against the commerce, even though the
exercise of those powers may materially affect it.
Whether we resort to the mechanical test sometimes
applied by this Court in determining when interstate
commerce begins with respect to a commodity grown
or manufactured within a State and then sold and
shipped out of it—or whether we consider only the
powers of the state in the absence of congressional
action to regulate matters of local concern, even
though the regulation affects or in some measure
restricts the commerce—we think the present regula-
tion is within state power.”
In reference to the “mechanical test”, the Court went on
to say:
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“But courts are not confined to so mechanical a test.
When Congress has not exerted its power under the
Commerce Clause, and state regulation of matters of
local concern is so related to interstate commerce
that it also operates as a regulation of that com-
merce, the reconciliation of the powers thus granted
with that reserved to the state is to be attained by the
accommodating of the competing demands of the
state and the national interests involved.”
1946
The event in Nippert v. City of Richmond, 327 U. S.
416 involved a municipal ordinance on persons engaged
in the business of soliciting. The tax was struck down as
violative of the Federal Commerce Clause because it had
the possibility of discriminating between an “instate” and
an out-of-state merchant. The Court said:
“There is no lack of power in the state or its
municipalities to see that interstate commerce bears
with local trade its fair share of the cost of local
government, more especially in view of recent [11]
trends in this field. McGoldrick v. Berwind-White
Co., supra. But this does not mean, and the trends
do not signify, that the state or municipal govern-
ments may devise a tax applicable to all commerce
alike, which strikes down or discriminates against
large volumes of that commerce in order to reach
other portions as to which the application of the tax
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would produce no such consequences, or only negli-
gible ones. Other types of tax are available for
reaching both portions which do not involve the
forbidden evils or the necessity for putting them
upon some commerce in order to reach the other.
The problem comes down therefore to whether the
state or municipal legislative bodies in framing their
tax measures to reach interstate commerce shall be at
pains to do so in a manner which avoids the evils
forbidden by the commerce clause and puts that
commerce actually up on a plane of equality with
local trade in local taxation, not as is said to a
question of whether interstate trade shall bear its fair
share of the cost of local government, the benefit and
protection of which it enjoys on a par with local
business,”
“The tax here in question inherently involves too
many probabilities, and we think activities, for exclu-
sion of or discrimination against interstate com-
merce, in favor of local competing business, to be
sustained in any application substantially similar to
the present one.”
The Court pointed out the artful method used by the
taxing authorities to make such discrimination possible
and condemned the use of a “local incident” to justify the
discrimination, The Court said:
“If the only thing necessary to sustain a state tax
bearing upon interstate commerce were to discover
some local incident which might be regarded as
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separate and distinct from the transportation or
intercourse which is the commerce itself and then lay
the tax on that incident, all interstate commerce
could be subjected to state taxation and without
regard to the substantial effects of the tax upon
commerce.”
The plaintiffs here contend that this is the pronounce-
ment of the Supreme Court which, in effect, overrules the
Heisler cases. This Court does not so view the Nippert
case. The Nippert case is squarely one of discrimination
which is not the issue in the case under consideration
here. It may be true that the tax adds to the cost of the
coal to the ultimate consumers but there is no discrimina-
tion between out-of-state consumers and in-state con-
sumers, insofar as the tax is concerned.
1948
The event in Memphis Gas vs. Stone, 335 U. S. 80 was
a state franchise tax or excise tax on the value of capital
used, invested or employed in Mississippi by the Memphis
Natural Gas Co., whose business was exclusively inter-
state. Challenge was made as to the validity of the tax
under the Federal Commerce Clause. The Supreme Court
affirmed the Mississippi court upon the grounds that the
tax was a recompense [12] for the state’s protection of the
petitioners local interstate activities.
The Court characterized the factual situation as fol-
lows:
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“The facts of this case present again the perennial
problem of the validity of a state tax for the privilege
or [sic], within a state, certain activities admittedly
necessary to maintain or operate the interstate busi-
ness of a taxpayer. * * * The states have sought by
taxation to collect from the instrumentalities of com-
merce compensation for the protection and advan-
tages rendered to commerce by state governments.
The federal courts have sought over the years to
determine the scope of a state’s power to tax in the
light of competing interests of interstate commerce,
and of the states with their power to impose reason-
able taxes upon incidents connected with that of
commerce.”
1954
The event in Michigan-Wisconsin Pipe Line v. Calvert,
347 U. S. 157 concerned two natural gas pipe line compa-
nies which carried on an interstate business and a tax
levied not on the capture or production of the gas but
rather on its taking into interstate commerce after pro-
duction. The tax was declared invalid because it was the
type of tax that could be levied by each state through
which the pipe line ran and would in effect establish
custom [sic] barriers that the Commerce Clause was
designed to eliminate. The Court said:
“It is now well settled that a tax imposed on a local
activity related to interstate commerce is valid if, and
only if, the local activity is not such an integral part
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of the interstate process, the flow of commerce, that
it cannot be separated from it (citing cases). And if a
genuine separation of the taxed local activity from
the interstate process is impossible, it is more likely
that other states through which the commerce passes
or into which it flows can with equal right impose a
similar levy on the goods, with the net effect of
prejudicing or unduly burdening commerce.”
“The problem in this case is not whether the State
could tax the actual gathering of all gas whether it is
transmitted in interstate commerce or not, cf. Hope
Natural Gas Co. v. Hall, supra, but whether here the
state has delayed the incidence of the tax beyond the
step where productions have ceased and transmission
in interstate commerce has begun.”
1961
The event in Alaska v. Artic Maid, 366 U.S. 199 was a
license tax on freezer ships of 4% of the value of salmon.
Artic Maid used freezer ships for the taking and preserva-
tion of salmon along Alaska’s shores. The salmon were
caught off the coast of Alaska by boats which Artic Maid
owns or had under contract and by independent fisher-
men who sell salmon to Artic Maid. The salmon are
frozen when received [13] aboard the freezer ships, and
eventually they are taken to the State of Washington,
where they are canned. The Supreme Court held, as
applied to salmon taken in Alaska’s territorial waters, the
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tax was not invalid as a burden on interstate commerce in
violation of the Federal Constitution. (The measure of
the tax is not the taxable event, 366 U. S. at 202.)
The Supreme Court said:
“The process of gathering fish either through the
catcher boats that are a part of respondent’s fleet or
through independent operators is a ‘local activity’
(Michigan-Wisconsin Pipe Line Co. v. Calvert, su-
pra, 166) in a vivid sense of the term. We see no
reason why our cases involving the taking of shrimp
(Toomer v. Witsell, supra) and the exhaustion of ore
(Oliver Iron Mining Co. v. Lord, 262 U. S. 172) are
not dispositive of this controversy. The Oliver Iron
case is indeed a first cousin of the present case. Here,
as there, the tax is an occupation tax. Here as there,
the market for the product obtained locally is inter-
State, the taking being a step in a process leading to
an interstate Market.”
1969
The event in Dunbar-Stanley Studios, Inc. v. Alabama,
393 U. S. 587 was a tax on photographers for each
county, town or city where he operates. In the case of a
photographer or gallery “at a fixed location” the max-
imum tax was $25.00 in largest cities. The tax was $5.00
per year for a transient photographer. The transient
photographer contended that the Federal Commerce
Clause barred the imposition of the transient
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photographer’s tax on its activities. The Supreme Court
held that the tax was constitutionally permissible. The
transient photographer’s activities were limited to taking
pictures at J. C. Penney’s stores in Alabama and trans-
mitting the exposed film to an office in North Carolina
where the film was developed and finished and returned
to the Penney stores in Alabama. The Court said:
“It could hardly be suggested that if J. C. Penney
had set up its own resident or transient photography
studios, using its own employees, such a photog-
raphy business would have been exempt from State
taxation merely because it chose to send the exposed
film out of the state for processing.
“The extraction of a natural resource within a state is
not immunized from state taxation merely because,
once extracted, the product will be immediately
shipped out of state for processing and sale to
consumers. Alaska v. Artic Maid, supra, at 203-204;
Oliver Iron Mining Co. v. Lord, 262 U. S. 172, 177-
79 (1923 cf. Toomer vs. Whitsell, 334 U. S. 385, 394-
395 (1948).”
1970
The event in Pike v. Bruce Church, Inc., 397 U.S. 137
concerned the Arizona [14] Fruit and Vegetable Standar-
dization Act which was designed to prevent deceptive
packaging. The State issued an order prohibiting the
company from shipping its cantaloupes outside the state
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unless they were packed in containers in a manner ap-
proved. The Supreme Court held that the order burdens
interstate commerce since the cantaloupes were destined
to be shipped from Arizona to an ascertainable location
in California immediately after harvest, and the applica-
tion of the challenged statute would require an operation
then conducted outside the state to be performed within
the state so it could be regulated there. The act required
that all cantaloupes grown in Arizona and offered for sale
must be packed in regular compact arrangements in
closed standard containers approved by the supervisors.
The Court said:
“Although the criteria for determining the validity of
State statutes affecting interstate commerce have
been variously stated, the general rule that emerges
can be phrased as follows: Where the statute regu-
lates evenhandedly to effectuate a legitimate local
public interest, and its effects on interstate commerce
are only incidental, it will be upheld unless the
burden imposed on such commerce is clearly exces-
Sive in relation to the putative local benefits.”
1976
The event in National League of Cities v. Usery, 426
U. S. 833 involved the Federal Fair Labor Standards Act
which in 1974 was amended so as to extend the Act’s
minimum wage and-maximum hour provisions to almost
all employees of states and their political subdivisions.
The
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Court held the amendments not within the authority
of Congress granted by the Commerce Clause. The Su-
preme Court overruled the language in Wirtz (421 U. S.
548) as follows:
The
“«'We] look to activities in which the states have
habitually engaged as marking the boundary of re-
striction upon the federal taxing power. But there is
no such limitation upon the plenary power to regu-
late commerce. The state can no more deny the
power if its exercise has been authorized by Congress
than can an individual.’ ”
opinion then went on as follows:
“But we have reaffirmed today that the States as
States stand on quite a different footing from an
individual or corporation when challenging the exer-
cise of Congress’ power to regulate commerce. We
think the dicta from United States v. California,
simply wrong. Congress may not exercise that power
so as to force directly upon the State its choices as to
how essential decisions regarding the conduct of
integral governmental functions are to be made. We
agree that such assertions of [15] power, if un-
checked, would indeed, as Mr. Justice Douglas con-
tended in his dissent in Wirtz, allow ‘the National
Government [to] devour the essentials of state sov-
ereignty.’ ”
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1976
The event in Great Atlantic & Pacific Tea Co. v.
Cottrell, 324 U. S. 277 involved a Mississippi regulation
that milk and milk products from another state may be
sold in Mississippi only if the other state accepts milk and
milk products produced in Mississippi on a reciprocal
basis. The regulation was challenged on the basis that it
violated the Federal Commerce Clause. A District Court
holding the regulation valid as an exercise of the State
police powers even though it incidentally burdened inter-
state commerce, was reversed by the U. S. Supreme
Court. The Court ruled that this regulation was manda-
tory and presented a situation where “burden imposed on
[interstate] commerce is clearly excessive in relation to the
putative local benefits.”
1977
The event in Complete Auto-Transit v. Brady, 430 U. S.
274 involved a Mississippi tax on the privilege of doing
business in the state. The opinion commenced with the
following language:
“Once again we are presented with ‘the perennial
problem of the validity of a state tax for the privilege
of carrying on, within a state, certain activities re-
lated to a corporation’s operation of an interstate
business.’ ”
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The taxes in question were sales taxes assessed to a
Michigan corporation engaged in the business of trans-
porting motor vehicles by motor carrier for General
Motors Corporation. The tax was upheld by the Supreme
Court.
The Supreme Court rejected the rule of Spector Motor
‘Service, Inc. v. O’Connor that a state tax on the “privi-
lege of doing business” is per se unconstitutional when it
is applied to interstate commerce. The Court adopted the
language of Western Livestock v. Bureau of Revenue, 303
U. S. 250 (1938) as follows:
“It was not the purpose of the Commerce Clause to
relieve those engaged in interstate commerce from
their just share of State tax burden even though it
increases the cost of doing business.”
The Court commented on the Spector rule as follows:
“This rule looks only to the fact that the incidence of
the tax is ‘the privilege of doing business’; it deems
irrelevant any consideration of the practical effect of
the tax.”
[16] On the basis that interstate commerce must pay its
way, the Court approved the rule “that net income from
the interstate operations of a foreign corporation may be
subject to state taxation provided the levy is not dis-
criminatory and is properly apportioned to local activities
within the State forming sufficient nexus to support the
tax.”
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1977
The event in Philadelphia v. New Jersey, 437 U. S. 617
was a New Jersey statute which prohibited the importa-
tion of solid or liquid waste which was originated or
collected outside the state. It was argued that there was
no commerce because the waste was valueless. The Court
held that all objects of interstate trade merit Commerce
Clause protection and none is excluded from the defini-
tion at the outset. The Court held that “Congress has
power to regulate the interstate movement of these
wastes, states are not free from Constitutional scrutiny
when they restrict that movement.”
1978
The event in Department of Revenue of Washington v.
Association of Washington Stevedoring Companies, 435
U. S. 734 was a business and occupation tax taxing the
interstate activity of stevedoring within the State. It was
pointed out that stevedoring is essentially a part of
interstate commerce and since there was no showing that,
under the Complete Auto reasoning, the tax was dis-
criminatory, or did not have sufficient nexus to the state,
was not fairly apportioned or fairly related to services
provided by the State, the tax was upheld.
1979
The event in Hughes v. Oklahoma, ___ U. S. ___,
decided April 24th, involved an Oklahoma statute prohib-
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iting the transportation or shipping for sale natural min-
nows from the waters of Oklahoma to points outside the
state. The Supreme Court held that the statute discrimi-
nates against interstate commerce and blocked the flow of
commerce at the state’s border. The Supreme Court
overruled Geer v. Connecticut, 161 U. S. 519 (1896)
upholding the right of Connecticut to prohibit the expor-
tation of game birds killed within the state on the ground
that the birds never entered the stream of commerce and
that therefore only internal commerce, rather than inter-
state commerce, was affected by the statute. The Court
said:
[17] “The fiction of state ownership may no longer
be used to force those outside the State to bear the
full costs of ‘conserving’ the wild animals within its
borders when equally effective nondiscriminatory
measures are available.”
The Supreme Court cases decided since the Heisler,
Oliver and Hope cases appear’ to this Court to be,
depending upon the activity involved, properly allocated
in four categories, to-wit: (1) When Congress has asserted
its regulatory powers under congressional acts'; (2) When
the state engages in regulatory activity of interstate com-
1 National Labor Relations Board v. Jones and Laughlin Steel Corp.
(supra); Wickard v. Filburn (supra); National League of Cities v. Usery
(supra); United States v. Darby (supra); Sunshine Anthracite Coal Co.
v. Adkins (supra); Carter v. Carter Coal Co. (supra); Parker v. Brown
(supra).
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merce’; (3) When the state imposes a tax on interstate
commerce activity’; (4) When the state imposes a tax on
an activity which is not in commerce‘. The thrust of the
plaintiffs’ argument is that there is but one definition of
commerce and that the Commerce Clause involves and
authorizes congressional action, an affirmative effect and
a restriction on state activities, a negative effect. It is
contended that any activity which “substantially affects”
commerce is subject to the scrutiny and the reach of the
Federal Commerce Clause.
Since our present economy involves inter-relationships
between the local and national level, it is difficult to
conceive of any activity which does not have some effect
on interstate commerce and thus, if the plaintiffs’ posi-
tion is correct we do have a situation in which the control
of all activities is within the umbrella of the Federal
Commerce Clause, whether it be by affirmative applica-
tion or negative application. The plaintiffs, however,
2 Pike v. Bruce Church, Inc. (supra); Great Atlantic & Pacific Tea Co. v.
Cottrell (supra); Philadelphia v. New Jersey (supra); Hughes v. Okla-
homa (supra).
3 Nippert v. City of Richmond (supra); Memphis Gas v. Stone (supra);
Michigan-Wisconsin Pipe Line v. Calvert (supra); Complete Auto-
Transit v. Brady (supra); Spector Motor Service, Inc. v. O’Connor
(supra); Dept. of Revenue of Washington v. Association of Washington
Stevedoring Companies (supra); Dunbar-Stanley Studios, Inc. v. Ala-
bama (supra).
4 Heisler v. Thomas Colliery Co. (supra); Oliver Iron Co. v. Lord
(supra); Hope National Gas Co. v. Hall (supra); Alaska v. Artic Maid
(supra); Minnesota v. Blasius (supra).
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contend that only those local activities which have a
“substantial” effect on commerce are within the reach.
It is the opinion of this Court that the United States
Supreme Court has not [18] adopted the view of the
plaintiffs and that insofar as the negative effect on local
activities the Supreme Court is still adhering to the
threshold question as to whether the local activity is an
act of commerce. The so-called “mechanical test” of the
Heisler cases has been followed as recently as 1961 and
1969. (Alaska v. Artic Maid (supra) and Dunbar-Stanley
Studios, Inc. v. Oklahoma (1969)).
However, when a state imposes a tax on interstate
commerce as demonstrated by the cases cited in Note 3,
the Supreme Court has fashioned a rule that is premised
on the idea that activities of interstate commerce must
bear a fair share of the burden upon a state because of
such activity. If the tax (under the cases under Note 3) has
a substantial effect on interstate commerce it will be
upheld if (a) the tax is applied to an activity with a
substantial nexus with the taxing state; (b) is fairly appor-
tioned; (c) does not discriminate against interstate com-
merce and (d) is fairly related to the services provided by
the state.
The plaintiffs assert that this rule applies here. This
Court does not agree. The application of this rule would
assume that the event here affects commerce within the
purview of the cases cited under Note 3. Such is not the
effect of those cases for in those cases there was no
7
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question but that the tax was on an “interstate com-
merce” activity while here the tax can not be said to be an
interstate commerce activity. To extend the rule of the
cases of Note 3 to the tax here would, in the opinion of
this Court, not be warranted and would be contrary to
the cases of Note 4.
Since Congress has not asserted its commerce power as
demonstrated by cases under Note | and since the tax
here is in no sense regulatory as demonstrated by cases
under Note 2 there is no further need to discuss them.
The plaintiffs contend that the Montana Coal Sever-
anc* Tax is discriminatory. This contention is not tenable
since the tax is imposed on the coal that is produced in the
state by Montana or out-of-state companies, without
regard to its consumption either in Montana or out of
Montana.
It is the opinion of this Court that the complaint after
application of the law as decided by the Supreme Court
of the United States does not state a cause of action as to
which the relief sought may be obtained.
The motion to dimiss Count One of the complaint is
granted.
[19] COUNT 11.
Count II alleges that Congress has enacted legislation
which encourages the use of coal to meet the nation’s
energy requirements and that the Coal Severance Tax
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substantially frustrates and impairs fulfillment of these
national policies.
The complaint alleges that the tax is unconstitutional
under the Supremacy Clause of the United States
(ARTVI) which, in part, reads as follows:
“This constitution and the laws of the United States
which shall be made in pursuance thereof * * * shall
be the supreme law of the land * * *.”
The thrust of plaintiffs’ allegations is that the tax
increases the cost of Montana coal and thus lessens the
possibility of its use as a substitute for oil.
The defendants contend in support of their motion to
dismiss that before reliance may be had under the Su-
premacy Clause of the Federal Constitution there must be
allegations as to a conflict between the state law and
specific federal statutes or regulations.
The plaintiffs contend that it is not necessary that there
be a direct and specific conflict between state and federal
statutes and that allegations of “substantial frustration”
are sufficient.
The issue necessarily involves the congressional enact-
ments and the congressional intent as to whether the
congressional enactments have precluded the states from
imposing a severance tax on mining activities within its
borders.
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The Court has heretofore asked the parties to submit to
the Court the items bearing on the question, and as to
which this Court can judicially notice, and therefrom
make a determination as a matter of iaw as to whether the
complaint states a cause of action upon which the relief
sought may be had.
A review of the items submitted by the parties discloses
a deep concern by the Executive and by Congress as to
the world-wide oil situation.
Facing Congress were problems of readjustment of
energy use, shifting from less dependence on oil and
natural gas and more dependence on coal. While oil was
plentiful the nation was using oil in home heating, manu-
facturing, production of electricity and transportation.
The Congress had theretofore concerned itself with air
quality and had enacted legislation to achieve a better
national air quality and the use of coal to supply energy
presented the problem of air quality being lowered. [20]
Congress took note of the fact that, for air quality, low
sulfur coal would produce less air contamination. West-
ern coal, as compared to midwestern and eastern coal was
of less sulfur content. However the greater use of western
coal and lesser use of midwestern and eastern coal would
cause economic problems in the midwest and the east. To
achieve the goals of the Congress, it enacted statutes
which would act as incentives to promote the use of coal
and other non-oil based forms of energy. The statutes are
as follows:
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Power plant and Industrial Fuel Use Act of 1978
Pub. Law No. 95-620, 92 Stat. 3289
Natural Gas Policy Act of 1978
Pub. Law No. 95-621, 92 Stat. 3350
Energy Conservation and Production Act
Pub. Law No. 94-385, 90 Stat. 1125
Energy Policy and Conservation Act of 1975
Pub. Law No. 94-163, 89 Stat. 871
Federal Non-Nuclear Energy Research and Devel-
opment Act of 1974
Pub. Law No. 94-577, 88 Stat. 1878
Energy Reorganization Act of 1974
Pub. Law No. 93-438, 88 Stat. 1233
Energy Supply and Environmental Coordination
Act of 1974
Pub. Law No. 93-319, 88 Stat. 246
Emergency Petroleum Allocation Act of 1973
Pub. Law No. 93-159, 87 Stat. 627
Clean Air Amendments of 1970
Pub. Law No. 91-604, 84 Stat. 1676
This Court, therefore, for the purposes of the motion
to dismiss finds the activity of Congress directed toward
incentives to use coal as a substitute for the use of oil.
Plaintiffs contend that the tax “substantially frustrates
and impairs” the goals of the national policy and seeks to
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present economic evidence which they contend will dem-
onstrate that the Montana tax will lessen the use of coal
and therefore “frustrate” the national policy.
The defendants contend that the preemptive force of
the national coal policies are in the first instance a matter
of law which must be established by reference to federal
Statutes and legislative history. With this position the
Court agrees. The defendants contend that there is no
national policy which requires the [21] limitation or
elimination of state coal severance taxes and that the
economic effect on the price of coal is irrelevant.
The United States Supreme Court has dealt with the
Supremacy Clause application to factual situations. The
criteria has been stated in various words some of which
could be said not consistent with the others depending
upon the use of words to the facts involved.
In Farmers Education & Coop Union v. W. Day, Inc.,
360 U.S. 525 (1959) the court said:
“A determination of suppression of state law rests on
legal and political presuppositions which should be
made explicit and not left clouded. States should not
be held to have been ousted from power traditionally
held in the absence of either a clear declaration by
Congress that it intends to forbid the continued
functioning of the state law or an obvious and
unavoidable conflict between the federal and state
directives.”
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In City of Burbank v. Lockheed Air Terminal, 411
U.S. 524 (1973) the court said:
“Our prior cases on pre-emption are not precise
guidelines in the present controversy, for each case
turns on the peculiarities and special features of the
federal regulatory scheme in question * * * Control
of noise is of course deep-seated in the police power
of the State. Yet the pervasive control vested in EPA
and in FAA under the 1972 Act seems to us to leave
no reason for local curfews or other local controls
* *
In DeCanas v. Bica, 424 U.S. 351 (1976) the court said:
“Of course, even state regulation designed to protect
vital state interests must give way to paramount
federal legislation. But we will not presume that
Congress, in enacting the INA, intended to oust state
authority to regulate the employment relationship
covered by § 2805(a) in a manner consistent with
pertinent federal law. Only a demonstration that
complete ouster of state power—including state
power to promulgate laws not in conflict with federal
laws—was ‘the clear and manifest purpose of Con-
gress’ would justify that conclusion.”
* * *
“Respondents have not made that demonstration.
They fail to point out, and an independent review
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does not reveal any specific indication in either the
wording or the legislative history of INA that Con-
gress intended to preclude even harmonious state
regulation touching on aliens in general or the em-
ployment of illegal aliens in particular.”
[22] In Hines v. Davidowitz, 312 U.S. 52 (1941) the
court said:
“This Court, in considering the validity of state laws
in the light of treaties or federal laws touching the
same subject, has made use of the following expres-
sions: Conficting; contrary to; occupying the fieid;
repugnance; difference; irreconcilability; inconsis-
tency; violation; curtailment; and interference. But
none of these expression provides an infallible consti-
tutional test or an exclusive constitutional yardstick.
In the final analysis, there can be no one crystal clear
distinctly marked formula.
“In general, the states may exercise any power pos-
sessed by them prior to the adoption of the Constitu-
tion unless the exercise of such power is expressly or
by necessary implication prohibited thereby or inter-
feres with some power delegated to the United
States.”
In McGoldrich v. Gulf Oil Corp., 309 U.S. 414 (1940)
the City of New York levied a sales tax on the sale of fuel
oil manufactured in New York City from crude petro-
leum, which had been imported from a foreign country to
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New York and there sold and delivered as ship’s stores to
vessels engaged in foreign commerce. The Gulf Oil Cor-
poration contended that the New York statute conflicted
with Section 630 of the Revenue Act of 1932, aided by
amendments of June 16, 1933, 48 Stat. 256, declaring
“that no tax under § 601 shall be laid ‘upon any article
sold for use as fuel supplies, ship’s stores . . . on vessels
. . actually engaged in foreign trade.’ ” The Court said
“The Congressional regulation, read in the light of its
purpose is tantamount to a declaration that in order to
accomplish constitutionally permissible ends, the import
merchandise shall not become a part of the common mass
of taxable property within the state, pending its disposi-
tion as ship’s stores and shall not become subject to the
state taxing power.” * * * The state tax in the circum-
stances must fail as an infringement of the congressional
regulation of commerce.” (emphasis supplied)
The United States Supreme Court held in the case of
McCulloch v. Maryland, 17 U.S. (4 Wheat) 316 (1819)
(the landmark decision establishing the supremacy rule)
that Congress, when acting within its constitutional
limits, has supremacy over states. However such suprem-
acy must occur in the enactment of laws which the U.S.
Constitution gives Congress the power to enact. Here no
challenge has been made as to whether in the energy acts
of the U.S. Congress is within the Congressional granted
power. The principle cases relief [sic] upon by plaintiffs
and the use of the Supremacy Clause involve specific
grants of power to the Congress, [23] namely, Federal
Regulation of Immigration—Federal power to levy and
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collect taxes—Federal power to regulate Interstate Com-
merce—Federal power to borrow money—Federal power
to establish Uniform Bankruptcy laws—Federal Indian
jurisdiction.
Assuming the energy policy acts are something more
than incentive legislation and are within the grant of
power to the United States Congress it appears from the
United States Supreme Court decisions that there are
generally three situations for the pre-emption of state
action:
(1) Where Congress has expressly prohibited state
action. The items judicially noticed as supplied by
the parties in no instance prohibit the states from
its taxing authority.
(2) Where Congressional action clearly and unmis-
takeably shows the intent of Congress to prohibit
state action. Here none of the items considered
show such clear and unmistakeable intention.
(3) Where a state statute conflicts with a federal
enactment and stands as a direct obstacle to its
execution.
Plaintiffs concede that national policies must be deter-
mined by examining federal statutes, together with appro-
priate “legislative history, committee reports, administra-
tive statements, regulations and the like.” The scope and
substance of national policies are matters of statutory
interpretation. The types of “evidence” which form the
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basis for statutory interpretation are matters of law and
do not require the taking of testimony. For purposes of a
motion to dismiss a court is not required to accept
plaintiffs’ allegations of law and legal conclusions are
true. Newport News Shipbuilding & Dry Dock Co. v.
Schauffler, 303 U.S. 54, 57 (1938); Mitchell v. Archibald
& Kendall, Inc., 573 F.2d 429, 432 (7th Cir. 1978); Kadar
Corp. v. Milbury, 549 F.2d 230, 233 (ist cir. 1977);
Blackburn v. Fisk University, 443 F.2d 121, 124 (6th Cir.
1971).
In the case of the Clean Air Act Amendments of 1977,
the specific provisions of the Act, along with legislative
history, demonstrate that the Congress favored and in-
tended to encourage production and use of high-sulfur
Eastern and Midwestern coal at the expense of low-sulfur
Western coal. The legislative history reflects to an extent
Congressional dissatisfaction with the use of low-sulfur
Western coal to meet air emission standards. House and
Conference Committee reports further reflect a Congres-
sional intent to (1) reduce reliance upon Western coal and
(2) promote expanded use of high-sulfur Eastern and
Midwestern coal. Low-sulfur Western coal was [24] rele-
gated a more limited role, to be used principally by
existing facilities for which technological upgrading of air
pollution control equipment is unfeasible or impractical.
Specific provisions were enacted to implement those pro-
posals, the most important of which are found in 42
U.S.C. §§ 7411 and 7425.
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Section 7411, as amended in 1977, has the effect of
preventing specified new fossil fuel fired Stationary
sources from meeting air pollution emission standards by
merely burning untreated low-sulfur coal. It requires
“application of the best technological system of continu-
Ous emission reduction” for all new stationary sources.
Thus, new sources using low sulfur coal must further
reduce already low sulfur emissions by utilizing the best
available anti-pollution equipment and techniques. The
intent of Congress in adopting this requirement is ex-
pressed in the House Report: (Congressional and Ad-
ministrative News 95th Congress, 1977 Session, Vol. II,
pp. 1245.)
“Actually, the committee has designed this proposal
to strengthen demand for and use of this Nation’s
abundant supply of coal. The prevention of signifi-
cant deterioration policy combined with section ///
revision of existing new source performance stan-
dards (to require new major pollution sources to use
best technological system of continuous emission
reduction [considering costs, energy, et cetera]) will
help strengthen incentives for new plants to use
locally available coal plus best available control tech-
nology. As EPA’s ‘Preliminary Economic Analysis
. . . (pp. 1-3 and V-6) concluded: ‘Therefore, some
plants especially those in the Midwest, which for-
merly were planning to import western low-sulfur
coal in order to meet the requirements of the Clean
Air Act will find it more economical to use local
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high-sulfur coal and install a scrubber. As a result,
the demand for Midwestern coal will increase by 25
million tons or by 20 percent.
Present new source performance standard regula-
tions do not require use of any pollution control
technology when a source burns very low-sulfur coal.
While this promotes the use of low-sulfur coal and
drives up the price of the coal, it means that billions
of tons of medium and high-sulfur coal (located
predominantly in the Midwestern and Eastern United
States) remain in the ground, unmined.”
Section 7425, as amended, has a similar purpose. See
“The Clean Air Act Amendments of 1977: A Selective
Legislative Analysis”, 13 Land and Water L.R. 747, pp.
800-812. It grants the Governor of an affected state, the
Environmental Protection Agency, and the President
authority to prohibit a major fuel burning stationary
source “from using fuels other than locally or regionally
available coal or coal derivatives to comply with imple-
mentation plan requirements.” This [25] prohibition may
be effected upon a finding that the action “is necessary to
prevent or minimize significant or regional economic
disruption or unemployment. . .”
Thus, the specific provisions of the Act, along with
accompanying legislative history, show a continued Con-
gressional consideration for the regional interests of the
Midwestern and Eastern states, and specifically for use of
—_
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high-sulfur Midwestern and Eastern coal at the possible
expense of the use of low-sulfur Western coal.
Similarly, a look at the provisions of the “Energy
Policy and Conservation Act of 1975” and its legislative
history reveals no clear national policy demanding the use
of Montana coal. 42 U.S.C. 6201 provides:
“The purposes of this chapter are—
(1) to grant specific stand-by authority to the
President, subject to congressional review, to impose
rationing, to reduce demand for energy through the
implementation of energy conservation plans, and to
fulfill obligations of the United States under the
international energy program;
(2) to provide for the creation of a strategic Petro-
leum Reserve capable of reducing the impact of
severe energy supply interruptions;
(3) to increase the supply of fossil fuels in the
United States, through price incentives and produc-
tion requirements;
(4) to conserve energy supplies through energy
conservation programs, and, where necessary, the
regulation of certain energy uses;
(5) to provide for improved energy efficiency of
motor vehicles, major appliances, and certain other
consumer products;
(6) to reduce the demand for petroleum products
and natural gas through programs designed to pro-
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vide greater availability and use of this Nation’s
abundant coal resources; and
(7) to provide a means for verification of energy
data to assure the reliability of energy data.
Initially, a reading of this Act shows that it is not limited
to coal. Section 6201(3) sets out a statement of policy
encouraging increased production of all domestic “fossil
fuels.”
Further, the Act provides specific methods for imple-
mentation of its general statements of policy. Among the
methods adopted are incentives for development of un-
derground coal mines, 42 U.S.C. § 6211; provision for
export restrictions, 42 U.S.C. § 6212; and the creation of
a strategic coal and other fossil fuel reserves, 42 U.S.C.
§ 6231 et seq. None of the methods adopted prohibit state
severance taxes or nullify other state and federal regula-
tions, taxes or policies which may increase costs of coal
production and use.
[26] Reference to other federal statutes dispels any
notion that in establishing domestic energy policies, Con-
gress intended to nullify other national, state, local or
individual policies or interests which may increase the
costs of coal production and use. For example, miners of
low-sulfur coal are not exempted from costly environ-
mental strip mining regulations, see 42 U.S.C. §§ 1251 et
seq., nor are they exempted from health and safety
requirements under the “Federal Coal Mine Health and
of
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July 27, 1979
Safety Act”, 30 U.S.C. § 801 et seq; nor from royalties
payable under the Mineral Lands Leasing Act of 1920, as
amended, 30 U.S.C. § 181, et seq. Moreover, Congres-
sional findings in the “Surface Mining Control and Recla-
mation Acts of 1977”, 30 U.S.C. §§ 1201 et seq., indicate
a congressional preference for underground coal mining,
contradicting any argument that Congress intended to
promote strip mining of low-sulfur coal, in Montana or
elsewhere, to the exclusion of environmental and other
concerns.
Federal energy and environmental legislation is ulti-
mately an amalgam of competing and often conflicting
policies and interests; it is the product of compromise.
The specific enactments of Congress fix the points of
compromise and nothing in the statutes to which this
Court’s attention has been directed supports plaintiffs’
contention that Congress intended to preempt state tax
powers over coal or that a state tax is an obstacle to
congressional policy because it increases coal costs.
If Congress intended to preempt the states’ power to
impose a tax on mining activity, and had the power to do
sO, it did not. A state tax is not an “obstacle” to federal
policy in a constitutional sense merely because it increases
the cost or price of a product, the use of which Congress
encourages or favors.
The recent case of Exxon v. Governor of Maryland,
432 U.S. 117 (1978) summarily rejected a contention that
broad, general national policy can preempt state laws
which have some sort of indirect economic effect upon
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July 27, 1979
the policy. In Exxon, plaintiffs claimed that a state statute
prohibiting producers or refiners of petroleum products
from operating retail service stations was invalid. They
asserted that the law was anti-competitive and therefore
conflicted with a national policy favoring “free competi-
tion”:
“Appellants point out. . . the. . . basic national
[27] policy favoring free competition, and argue that
the Maryland statute ‘undermines’ the competitive
balance that Congress struck between the Robinson-
Patman and Sherman Acts. This is merely another
way of stating that the Maryland statute will have an
anti-competitive effect. In this sense, there is a con-
flict between the statute and the central policy of the
Sherman Act—our ‘charter of economic liberty.’
Northern Pacific R.R. Co. v. United States, 356 U.S.
1, 4, 2 L.Ed.2d 545, 78 S.Ct. 514. Nevertheless, this
sort of conflict cannot itself constitute a sufficient
reason for invalidating the Maryland statute. For if
any adverse effect on competition were, in and of
itself, enough to render a state statute invalid, the
States’ power to engage in economic regulation
would be effectively destrqyed. We are, therefore,
satisfied that neithe’ *he broad implications of the
Sherman Act nue ine Robinson-Patman Act can
fairly be construed as a congressional decision to
preempt the power of the Maryland Legislature to
enact this law. (Emphasis added). 432 U.S. at 133-
134.
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In the context of state tax powers, the United States
Supreme Court has rejected arguments that an occupa-
tion tax upon an exchange broker dealing in foreign
currency indirectly burdens foreign commerce, Nathan v..
Louisiana, 8 Howard 73, 12 L.Ed. 995 (1850); it has
consistently rejected attacks upon nondiscriminatory state
taxes which have some indirect rather than direct effect
upon interstate commerce, c.g., McGoldrich v. Berwind-
White Coal Mining Co., 309 U.S. 33, 45-49 (1940); it has
refused to extend federal sovereign immunity from state
taxation to third parties even where the tax in question is
ultimately borne by the United States, United States v.
Boyd, 378 U.S. 39 (1964); it has rejected arguments that
state taxation of property conflicts with federal taxing
power because the tax may effectively destroy the prop-
erty and therefore destroy a potential subject of federal
taxation, A. Magnano Co. v. Hamilton, 292 U.S. 40
(1934); and it has upheld a nondiscriminatory gross re-
ceipts tax on an off-reservation resort operated by an
Indian tribe against an argument that federal law pro-
hibits every state tax which touches or affects a tribal
enterprise. Mescalero Apache Tribe v. Jones, 411 U.S.
145 (1973). In each of these cases the Supreme Court has
deemed the amount and ultimate impact of the challenged
tax irrelevant under the Supremacy Clause.
“* * * It cannot be that a state tax which remotely
affects the efficient exercise of a federal power is for
that reason alone inhibited by the Constitution. To
hold that would be to deny to the States ali power to
tax persons or property. Every tax levied by a State
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July 27, 1979
withdraws from the reach of federal taxation a por-
tion of the property from which it is taken, and to
that [28] extent diminishes the subject upon which
taxes may be laid. The States are, and they must ever
be, co-existent with the National Government.
Neither may destroy the other. Hence the Federal
Constitution must receive a practical construction.
Its limitations and its implied prohibitions must not
be extended so far as to destroy the necessary powers
of the States, or prevent their efficient exercise.”
Union Pacific R. R. Co., v. Peniston, 85 U. S. 3,30-31
(1973): The principles of Union Pacific were restated in
Penn Dairies, Inc., v. Milk Control Commission of Penn-
sylvania, 318 U.S. 261 (1943), which concluded:
“An unexpressed purpose of Congress to set aside
statutes of the states regulating their internal affairs
is not lightly to be inferred and ought not to be
implied where the legislative command, read in the
light of its history, remains ambiguous. * * *”
(footnotes omitted)
This Court is of the opinion, as a matter of law, that
Congress has not and did not intend to preclude the State
of Montana from imposing a tax on the mining activities
within the state. The allegations of Count II of the
complaint, in the light of the Congressional intent, are
insufficient to state a cause of action.
The motion to dismiss Count II of the complaint is
granted.
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July 27, 1979
COUNT III.
The plaintiffs assert in Count III that the Coal Sever-
ance tax is invalid in that it “grossly distorts” the compro-
mise between the Federal government and the states,
expressed in the Mineral Lands Leasing Act of 1920 Pub.
Law No. 146, 41 Stat. 437, as amended by the Federal
Coal Leasing Amendment Act of 1975 Pub. Law No.
94377, 90 Stat. 1083 by appropriating directly to Mon-
tana a major part of the “economic rents” attributable to
the exhaustion of federally-owned coal and thus frustrate
the federal policies established by these policies.
The parties, pursuant to the Court’s request, have
submitted to the Court items of which the Court may
judicially notice bearing on Congressional action and the
legislative history.
The history of the legislation discloses a difference of
opinion as to the production of coal in government lands.
The opinion of many of the Western congressmen was
that instead of a leasing system, that the lands be sold to
private interests or to the states. The opponents [29] of
this view held that the coal producing lands should be
retained by the United States under a leasing system.
The opposing views were expressed as follows:
H.R.Rep. No. (668 Part 2) 63 Congress 2nd Session
6 (1914)
“No matter how loudly and vigorously and re-
peatedly it may be proclaimed that these lands ‘be-
long to all the people,’ the fact remains that when
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July 27, 1979
those States were admitied to the Union the United
States Government entered into a solemn compact
with each of them that the lands within their borders
should be expeditiously and in an orderly manner
disposed of to the settlers and be allowed to go into
private ownership to help maintain the State govern-
ment; and Congress has no moral, legal, or constitu-
tional right to repudiate or violate that agreement—
much less to wantonly impose excise duties upon our
development.”
Similarly, H.R.Rep. No 17 (Part 2), 64th Congress, Ist
Session 8 (1916) (minority views) (Tab 33) states:
“The West is new and poor, and it is absolutely
wrong for Congress to force the West to help support
the East—at the same time depriving the West of
many of its greatest sources of revenue by per-
manently withdrawing them from entry and prevent-
ing them ever going into private ownership and
becoming subject to taxation for State and local
governments. But, harsh as it is, it is not so much the
disposition of the funds that we object to, as it is the
permanent withdrawal from entry of these enormous
resources, and the perpetual bureaucratic domina-
tion that will be exercised from Washington in their
administration and control. It is the violation of
what we deem are the inherent and equal rights of
our Western States as sovereign States.
“Aside from the purely material questions in-
volved there are those which go to the very founda-
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July 27, 1979
tion, the very fundaments, of our form of govern-
ment.
* * *
“Such legislation as is now proposed inevitably
leads to an undermining of the sovereignty of the
State; to a weakening of its power to sustain itself; to
a confiscation of a part of the fruits of its natural
resources; to a withholding of those resources from
the possibility of taxation, thus increasing the bur-
dens upon all other property within the State.”
This was the background against which the compro-
mise embodied in the 1920 Act was reached. The debate
was firmly resolved in favor of retaining federal owner-
ship in these mineral lands, for the benefit of the citizens
of the entire country. Thus, Section 2 of the 1920 Act
establishes a leasing program under the auspices of the
Secretary of the Interior. (41 Stat. 438 § 2) The Act
authorizes the Secretary to offer the coal lands of the
United States for leasing, not for sale, and to award
leases on such land on terms which he prescribes.
The Act also adopted a revenue sharing plan, whereby
the states in which the [30] coal mining occurred would
receive 37'2% share of the rents and royalties derived by
the federal government from the leasing system, to be
used for the construction of public roads and schools
(522% of the revenues were assigned to a Reclamation
Fund to reclaim the lands of the West; the remaining 10%
went to the U. S. Treasury). Mineral Lands Leasing Act
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July 27, 1979
of 1920, Ch. 85 § 35, 41 Stat. 450. This is the principal
mechanism by which the states and the Nation were to
divide the proceeds from this mineral wealth which had
been reserved to the Nation as a whole.
The Federal Coal Leasing Amendments Act of 1975
increased from 37'2% to 50% the amount of federal
royalty revenues which would be rebated to the states
under the 1920 Act (Pub. L. No. 94-377, § 9(a) ) and
increased the minimum coal royalties on federally owned
coal from five cents per ton to 12'2% of the value of the
coal mined (Pub. L. No. 94-377, § 7(a) ) (Tab 35). The
Amendments also permitted the states to spend their
increased share of the royalties for purposes other than
the construction and maintenance of public roads and the
support of public schools. (Pub. L. No. 94-377, § 9(a) ).
See also H.R.Rep. No. 94-681, 94th Cong., 2nd Session
(1976). With these exceptions, the 1975 Amendments
continued the federal policies establisiied by the 1920 Act
and alleged in the complaint—the federal government was
to continue to retain ownership of the coal lands, lease
the mineral rights to private interests, and share the
“economic rents” with the states in the proportion pro-
vided by the statute.
The plaintiffs contend that implicit in the compromise
is a limitation on the States right to tax no further than
the states legitimate needs.
The defendants contend as follows:
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July 27, 1979
Although the Mineral Lands Leasing Act comprehen-
sively regulates various aspects of the leasing of mineral
deposits, including provisions for state royalties, nothing
in the Act indicates an intention by Congress to preempt
State taxation. In fact, the Act specifically leaves the
States the authority to levy and collect taxes on the output
of mines subject to leases. 30 U.S.C. § 189 provides:
“The Secretary of the Interior is authorized to pre-
scribe necessary and proper rules and regulations and
to do any and [31] all things necessary to carry out
and accomplish the purposes of this chapter, also to
fix and determine the boundary lines of any struc-
ture, or oil or gas field, for the purposes of this
chapter. Nothing in this chapter shall be construed or
held to affect the rights of the states or other local
authority to exercise any rights which they may have,
including the right to levy and collect taxes upon
improvements, output of mines, or other rights,
property or assets of any lessee of the United States.”
In this section, Congress explicitly recognized state
authority to tax coal mined pursuant to federal leases.
Mid-Northern Oil Company v. Montana, 268 U. S. 45
(1925), affirming Mid-Nortkern Oil Company v. Walker,
65 Mont. 414, 211 P 353 (1922), carefully scrutinized 30
U.S.C. § 189. The Court held that:
“Although the act deals with the letting of public
lands and the relations of the government to the
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July 27, 1979
lessees thereof, nothing in it shall be so construed as
to affect the rights of the states, in respect of such
private persons and corporations, to levy and collect
taxes as though the government were not con-
cerned.” (268 U.S. at 49)
Continuing that analysis,
“In other words, the purpose of Congress was...
to put beyond doubt the authority of the states to
impose taxes upon lessees in respect of their prop-
nm..."
In conclusion the Court held:
“No doubt, what Congress immediately had in mind
was the necessity of making it clear that, notwith-
standing the interest of the government in leased
lands, the rights of the states to tax improvements
thereon and the output thereof should not be in
doubt. . . We think the proviso plainly discloses the
intention of Congress that persons and corporations
contracting with the United States under the act,
should not, for that reason, be exempt from any
form of state taxation otherwise lawful.” (268 U. S.
at 50)
In the light of the authority to tax without limitation as
provided in 30 U.S.C. § 189 and in the light of the
reasoning in Mid-Northern Oil Co. v. Montana (supra) it
is the opinion of this Court, as a matter of law, that the
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July 27, 1979
Mineral Lands Leasing Act of 1920 does not preempt or
limit the right of the State of Montana to impose the tax
on the mining activity. The cause of action of Count III
fails to state a cause of action upon which the relief
requested can be granted.
Count III must be and is dimissed.
Dated this 27th day of July, 1979.
PETER G. MELOY
District Judge
88a
Clean Air Act Amendments of
of 1977, Pub. L. No. 95-95
§ 125, 42 U.S.C. § 7425
§ 7425. Measures to prevent economic disruption or
unemployment
Determination that action is necessary
(a) After notice and opportunity for a_ public
hearing—
(1) the Governor of any State in which a major
fuel burning stationary source referred to in this
subsection (or class or category thereof) is located,
(2) the Administrator, or
(3) the President (or his designee),
may determine that action under subsection (b) of this
section is necessary to prevent or minimize significant
local or regional economic disruption or unemployment
which would otherwise result from use by such source (or
class or category) of—
(A) coal or coal derivatives other than locally or
regionally available coal,
(B) petroleum products,
(C) natural gas, or
(D) any combination of fuels referred to in sub-
paragraphs (A) through (C),
to comply with the requirements of a State implementa-
tion plan.
89a
Clean Air Act Amendments of 1977,
42 U.S.C. § 7425
Use of locally or regionally available coal or coal deriva-
tives to comply with implementation plan requirements
(b) Upon a determination under subsection (a) of this
section—
(1) such Governor, with the written consent of
the President or his designee,
(2) the President’s designee with the written con-
sent of such Governor, or
(3) the President
may by rule or order prohibit any such major fuel
burning stationary source (or class or category thereof)
from using fuels other than locally or regionally available
coal or coal derivatives to comply with implementation
plan requirements. In taking any action under this subsec-
tion, the Governor, the President, or the President’s
designee as the case may be, shall take into account, the
final cost to the consumer of such an action.
Contracts; schedules
(c) The Governor, in the case of action under subsec-
tion (b)(1) of this section, or the Administrator, in the
case of an action under subsection (b)(2) or (3) of this
section shall, by rule or order, require each source to
which such action applies to—
(1) enter into long-term contracts of at least ten
years in duration (except as the President or his
designee may otherwise permit or require by rule or
90a
Clean Air Act Amendments of 1977,
42 U.S.C. § 7425
order for good cause) for supplies of regionally
available coal or coal derivatives,
(2) enter into contracts to acquire any additional
means of emission limitation which the Administra-
tor or the State determines may be necessary to
comply with the requirements of this chapter while
using such coal or coal derivatives as fuel, and
(3) comply with such schedules (including incre-
ments of progress), timetables and other require-
ments as may be necessary to assure compliance with
the requirements of this chapter.
Requirements under this subsection shall be established
simultaneously with, and as a condition of, any action
under subsection (b) of this section.
Existing or new major fuel burning stationary sources
(d) This section applies only to existing or new major
fuel burning stationary sources—
(1) which have the design capacity to produce
250,000,000 Btu’s per hour (or its equivalent), as
determined by the Administrator, and
(2) which are not in compliance with the require-
ments of an applicable implementation plan or which
are prohibited from burning oil or natural gas, or
both, under any other authority of law.
9la
Clean Air Act Amendments of 1977,
42 U.S.C. § 7425
Actions not to be deemed modifications of major
fuel burning stationary sources
(e) Except as may otherwise be provided by rule
by the State or the Administrator for good cause,
any action required to be taken by a major fuel
burning stationary source under this section shall not
be deemed to constitute a modification for purposes
of section 7411(a)(2) and (4) of this title.
Treatment of prohibitions, rules, or orders as re-
quirements or parts of plans under other provisions
(f) For purposes of sections 7413 and 7420 of this
title a prohibition under subsection (b) of this sec-
tion, and a corresponding rule or order under subsec-
tion (c) of this section, shall be treated as a require-
ment of section 7413 of this title. For purposes of
any plan (or portion thereof) promulgated under
section 7410(c) of this title, any rule or order under
subsection (c) of this section corresponding to a
prohibition under subsection (b) of this section, shall
be treated as a part of such plan. For purposes of
section 7413 of this title, a prohibition under subsec-
tion (b) of this section, applicable to any source, and
a corresponding rule or order under subsection (c) of
this section, shall be treated as part of the applicable
implementation plan for the State in which subject
source is located.
92a
Clean Air Act Amendments of 1977,
42 U.S.C. § 7425
Delegation of Presidential authority
(g) The President may delegate his authority un-
der this section to an officer or employee of the
United States designated by him on a case-by-case
basis or in any other manner he deems suitable.
Locally or regionally available coal
or coal derivatives
(h) For the purpose of this section the term
“locally or regionally available coal or coal deriva-
tives” means coal or coal derivatives which is, or can
in the judgment of the State or the Administrator
feasibly be, mined or produced in the local or re-
gional area (as determined by the Administrator) in
which the major fuel burning stationary source is
located.
July 14, 1955, c. 360, Title I, § 125, as added Aug. 7,
1977, Pub.L. 95-95, Title I, § 122, 91 Stat. 722.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.