Amicus Brief — Commonwealth Edison Co. v. Montana

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NO. 80-581

IN THE SUPREME COURT OF THE UNITED STATES

October Term, 1980

COMMONWEALTH EDISON COMPANY, et ale,

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

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

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

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......

THE DECISION BELOW SHOULD

BE i 4 + ).) eee ee ee

COMCT eect cece eee ee seeeesecoee

Page

TABLE OF AUTHORITIES

Page

CASES

Complete Auto Transit, Inc.

v. Brady, 430 U.S. 274

CAST VP ebb oe Soe eeerweeeeeescce 8

Heisler v. Thomas Colliery

Co., 260 U.S. 245 (1922) cee 6

Hope Gas Co. v. Hall,

ETE Ucbe 266 CUFZl) cccessecses 6

Oliver Iron Co. v. Lord,

\ Mm Pe BG) S +) eee 6

STATUTES

Montana Code Annotated,

15-35-101, et seq. eoeeeeeeeee 5

OTHER AUTHORITY

Survey of Electric Utility

Demand for Coal 197-322,

336-43 (Argonne National

Laboratory, August 1979)..... 3

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

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 of the Rules

of this Court.

INTEREST OF THE AMICUS CURIAE

Long-term coal contracts be-

tween Kansas electric utility com-

panies and Wyoming coal producers re-

quire 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 re-

mainder 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 re-

quirements 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 now under

great pressure, again principally

from Federal statutes, to use coal

instead of other fuels. AS a prac-

tical matter, Kansas utilities can

fulfill their needs for energy re-

sources 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 ex-

traordinary 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 ap-

proximately 17-1/2 percent of value.

Since fuel-related costs of elec-

tricity generation flow into con-

sumers' monthly bills, these taxes

are ultimately borne by the con-

sumers 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 cur-

rent 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 es-

calates, of course, the amount of the

tax will increase as well, even assum-

ing the Wyoming tax rate remains un-

changed. 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 constitu-

tional challenge to the 30 percent

Montana Coal Severance (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 in-

terest to the citizens of Kansas.

THE DECISION BELOW SHOULD BE REVERSED

To avoid burdening the Court

with unnecessary argument, we simply

subscribe to the arguments set forth

in appellants' Brief on the Merits,

adding the following comments:

1. The Montana Supreme Court

held that the Commerce Clause imposes

no limit on the power of the states

to tax energy resources destined for

immediate delivery to other states,

relying on a series of older cases,

citing Heisler v. Thomas Colliery

Co., 260 U.S. 245 (1922); Oliver Iron

Co. v. Lord, 262 U.S. 172 (1923); and

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 consti-

tutional doctrines have changed

markedly over the intervening decades

They strongly recommend reconsidera-

tion of those old decisions.

No one in this proceeding

has suggested the Commerce Clause de-

prives the states of their power to

tax extraction of energy or other re-

sources located within their borders,

at least to the extent that such taxes

bear some 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 legiti-

mate 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 prac-

tical 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 min-

eral resource. It is clear excessive

taxes, such as the Montana tax is al-

leged to be, are antithetical to the

ee ee ee, lo

principles underlying the Commerce

Clause and should, in appropriate cir-

cumstances, be struck down under that

Clause.

The substantive Commerce

Clause rules set out in cases such as

Complete Auto Transit, Inc. v. Brady,

430 U.S. 274 (1977), provide an ap-

propriate, workable means to safe-

guard the Commerce Clause interests

involved while maintaining the vital

interests of the affected states to

cover the costs of services which must

be provided. If those rules pertain,

they must have teeth, at least to the

extent of permitting plaintiffs to

prove, in appropriate circumstances,

that they have been violated. Appel-

lants here should have been given that

opportunity.

2. 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 gen-

eration 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 Fed-

eral policies by making coal unneces-

sarily expensive, thereby discourag-

10

ing its production and use. At some

point, 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 allega-

tions.

CONCLUSION

For the reasons set forth

above, and for those contained in the

appellants' Brief, this Court should

reverse the opinion and judgment of

the court below and remand the matter

for trial.

DATED: January25, 1981

Respec} ful submitted, Se a ae

ROBERT T. STHPHA RUCE E. MILLER

Attorney General Deputy Attorney

of Kansas General of Kansas

11

CERTIFICATE OF SERVICE

This is to certify that cop-

ies of the foregoing BRIEF AMICUS

CURIAE OF THE STATE OF KANSAS IN SUP-

PORT OF APPELLANTS were mailed by de-

positing same in the United States

Mail, first class postage prepaid,

this \} day of January 1981, to:

HON. MICHAEL T. GREELY, At-

torney General of Montana, State

Capitol, Helena, Montana 59601;

WILLIAM J. CARL, ESQ., Senior Counsel,

Montana Power Company, 40 East Broad-

way, 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 Assist-

ant Attorney General for State Tax

Commissioner, State Tax Department,

State Capitol, Bismarck, North Dakota

58505.

Bruce E. Miller

Deputy Attorney General

of Kansas

Bite LMilber

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