Amicus Brief — Commonwealth Edison Co. v. Montana

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NO. 80-581 NOV 12 198

| MIOMSEL RODAK ‘

IN THE SUPREME COURT OF THE UNItED-SPATES*:

OT es

October Term, 1980

COMMONWEALTH EDISON COMPANY, et al.,

Appellants,

--against--

STATE OF MONTANA, et al.,

Appellees,

On Appeal From The Supreme Court

Of the State of Montana

BRIEF AMICUS CURIAE

OF THE STATE OF KANSAS

IN SUPPORT OF APPELLANTS'

JURISDICTIONAL STATEMENT

ROBERT T. STEPHAN

Attorney General of Kansas

BRUCE E. MILLER

Deputy Attorney General

of Kansas

Kansas Judicial Center

Second Floor

Topeka, Kansas, 66612

(913) 296-2215

Attorneys for Kansas

IN THE SUPREME COURT OF THE UNITED STATES

October Term, 1980

COMMONWEALTH EDISON COMPANY, et al.,

Appellants,

--against--

STATE OF MONTANA, et al.,

Appellees,

On Appeal From The Supreme Court

Of the State of Montana

BRIEF AMICUS CURIAE

OF THE STATE OF KANSAS

IN SUPPORT OF APPELLANTS '

JURISDICTIONAL STATEMENT

ROBERT T. STEPHAN

Attorney General of Kansas

BRUCE E. MILLER

Deputy Attorney General

of Kansas

Kansas Judicial Center

Second Floor

Topeka, Kansas, 66612

(913) 296-2215

Attorneys for Kansas

TABLE OF CONTENTS

INTEREST OF AMICUS CURIAE ..... 2

THE QUESTIONS PRESENTED

ARE SUBSTANTIAL . . « « « «© © © «© « §6

CONCLUSION. . 7. . . e o . ad * ° ° sd 10

—_— ane. LLU... .... Ae... ee... ee. A

TABLE OF AUTHORITIES

CASES

Heiler v. Thomas Colliery Co.,

“gu 0.8. 280 {(A9e8)0 « ©,

Oliver Iron Co. v Lord

aGa Gils Ble LAeeels « é a “s

Hope Gas Co. v. Hall

274 U.S. 284 (1927). . . « «

STATUTES

Montana Code Annotated,

15-35-101, et seq. ... .

OTHER AUTHORITY

Survey of Electric Utility

Demand for Coal 197-322,

336-43, (Argonne National

Laboratory, August 1979.)

| dp ell EEE le eer ee

NO. 80-581

IN THE SUPREME COURT OF THE UNITED STATES

October Term, 1980

COMMONWEALTH EDISON COMPANY, et al.,

Appellants,

--against--

STATE OF MONTANA, et al.,

Appellees,

On Appeal From The Supreme Court

Of the State of Montana

BRIEF AMICUS CURIAE

OF THE STATE OF KANSAS

IN SUPPORT OF APPELLANTS'

JURISDICTIONAL STATEMENT

The State of Kansas, by and

through its Attorney General, Robert T.

Stephan, appears’ parens patriae on

behalf of its citizens and files this

brief pursuant to Rule 36 3f the Rules of

this Court.

INTEREST OF THE AMICUS CURIAE

Long-term coal contracts

between Kansas electric utility

companies and Wyoming coal producers

require the purchase of hundreds’ of

millions of tons of low-sulphur coal

from Wyoming during the remainder of

this century. One such utility alone,

The Kansas Power and Light Company, is

committed to purchasing 276,136,000 tons

of Wyoming coal during the remainder of a

contract expiring in the year 2013.

=

Annual demand for coal to serve

new power plants in Kansas--those

planned but not yet in operation--has

been projected to equal more than ten

million tons by 1992, with’ total

shipments in that year of coal from

Wyoming to Kansas amounting to more than

sixteen million’ tons. See Argonne

National Laboratory, Survey of Electric

Utility Demand for Coal 197-322, 336-43

(August 1979).

Kansas utilities have been

driven to look to Wyoming coal, in large

part, by Federal clean air and energy

statutes. Coal mined in the western

states--principally Wyoming and

Montana--meets air-quality requirements

of Federal law far better than coal from

any other region. These two states

together have 68 percent of the nation's

low sulphur coal. At the same time,

utilities in Kansas and elsewhere are

o Den

now under great pressure, again

principally from Federal statutes, to

use coal instead of other fuels. As a

practical matter, Kansas utilities can

fulfill their needs for energy resources

and their obligations to their customers

only through the use of such coal.

As one consequence of these

Federal mandates, the citizens of Kansas

are captives of state tax policies in

other states which are, therefore, in a

position to take extraordinary and

unreasonable economic advantage of their

plight. Wyoming and its local

subdivisions presently impose large

severance taxes on the value of this

coal, amounting to approximately 17-1/2

percent of value. Since fuel-related

costs of electricity generation flow

into consumers' monthly bills, these

taxes are ultimately borne by the

abe

consumers of electric energy in, among

other places, Kansas. The net effect of

such taxes is to shift millions of

dollars from Kansas consumers to the

Wyoming treasury.

Massive amounts are involved.

At present tax rates and at the current

prices of coal, about $1.00 per ton is

paid by Kansas Power and Light to the

State of Wyoming in severance taxes. As

the price of the coal escalates, of

course, the amount of the tax will

increase as well, even assuming the

Wyoming tax rate remains unchanged. By

1987, it is estimated at least $26.5

million per annum will be shifted from

Kansas consumers to the State of Wyoming

through these taxes.

The questions presented in this

appeal arise out of a constitutional

tn

challenge to the 30 percent Montana Coal

Severance Tax (Montana Code Annotated,

15-35-101 et seg.), but they have equal

application to Wyoming's power to

continue, and potentially to increase,

its taxes. They are, therefore, of great

interest to the citizens of Kansas.

THE QUESTIONS PRESENTED ARE SUBSTANTIAL

The questions presented by this

appeal are substantial from both a

practical and a constitutional point of

view. To avoid burdening the Court with

unnecessary argument, we simply

subscribe to the arguments set forth in

appellants' Jurisdictional Statement,

adding the following comments:

Le The Montana Supreme Court held

that the Commerce Clause imposes. no

limit on the power of the states to tax

wt

energy resources destined for immediate

delivery to other states, relying on a

series of older cases. See Heisler v.

Thomas Colliery Co., 260 U.S. 245

(1922); Oliver Iron Co. v. Lord, 262

U.S. 172 (1923); Hope Gas Co. v. Hall,

274 U.S. 284 (1927). The principal issue

presented by appellants' Commerce Clause

Claim is one which has not been examined

here for more than 50 years. Both

practical circumstances and

constitutional doctrines have changed

markedly over the intervening decades.

They strongly recommend reconsideration

of those old decisions.

No one in this proceeding has

Suggested the Commerce Clause deprives

the states of their power to tax

extraction of energy or other resources

located within their borders, at least

to the extent that such taxes bear some

ao Pie

fair relation to services and protection

provided by the state. At the same time,

excessive taxation which falls

principally on resources destined for

other States--taxation all out of

Proportion to the legitimate needs of

the taxing state--has serious effects on

consumers in those states and on our

nation-wide economy. The facts of this

case bring these effects into vivid

focus. The practical effect is that

citizens of coal-poor states where

electric generation is coal-fired--such

as Kansas--may effectively be held

hostage to those which happen to be rich

in that mineral resource. It is clear

excessive taxes, such as the Montana tax

is alleged to be, are antithetical to the

principles underlying the Commerce

Clause and should, in appropriate

circumstances, be struck down under that

Clause.

Ze The Montana Supreme Court also

‘held it could discern no Federal policy

which could be frustrated by Montana's

tax. That holding, derived without any

factual record, does not conform to

practical reality. The electric utility

companies serving Kansas are among the

leaders of their industry in converting

electrical generation from oil to

coal-fired. In doing so, the utilities

have done more than any other

institution to move the nation from

dependence on foreign oil toward secure,

domestic fuels. This conversion has

taken place in response to the mandates

of a clear national policy.

Excessive taxes manifestly have

the potential to frustrate Federal

policies by making coal unnecessarily

expensive, thereby discouraging its

production and use. At some point,

ofa

excessive taxes should be held to be

contrary to national policies which

encourage, require, or mandate the use

of coal. Appellants' have argued that

Montana's tax has reached that point.

They should be given an opportunity to

prove their allegations.

CONCLUSION

For the reasons’ set’ forth

above, and for those contained in the

appellants' Jurisdictional Statement,

this Court should note probable

jurisdiction to review the opinion and

judgment of the court below.

DATED: November F p

1980.

Respectfully submitted,

Udi Lh. En hbhe

ROBERT T. STEPHAN BRUCE E. MILLER

Attorney General Deputy Attorney

of Kansas General of

Kansas

o1G«

CERTIFICATE OF SERVICE

This is to certify that copies

of the foregoing BRIEF AMICUS CURIAE

OF THE STATE OF KANSAS IN SUPPORT OF

APPELLANTS ' JURISDICTIONAL STATEMENT

were mailed by depositing same in the

United States Mail, first class postage

prepaid, this 7+h day of November,

1980, to:

HON. MICHAEL T. GREELY, Attorney

General of Montana, State Capitol,

Helena, Montana, 59601; WILLIAM J.

CARL, ESQ., Senior Counsel, Montana

Power Company, 40 East Broadway, Butte,

Montana, 59701; ROGERS & WELLS,

Attorneys at Law, 200 Park Avenue, New

York, New York, 10166; HON. MARK WHITE,

Attorney General of Texas, Supreme Court

Building, P.O. Box 12548, Austin, Texas,

78711; LEO F. J. WILKING, ESQ., Special

Assistant Attorney General for State Tax

Commissioner, State Tax Department,

State Capitol, Bismarck, North Dakota,

Krewe £, Will

Bruce E£. Miller

Deputy Attorney General

of Kansas

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