Amicus Brief — Commonwealth Edison Co. v. Montana

——.

NO. 80-581

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1980

COMMONWEALTH EDISON COMPANY, et al.,

Appellants,

v.

STATE OF MONTANA, et al.,

Appellees.

ON APPEAL FROM THE

SUPREME COURT OF THE STATE OF

MONTANA

BRIEF AMICUS CURIAE OF THE STATE OF

TEXAS

MARK WHITE JOHN STUART FRYER

Attorney General of Texas Assistant Attorney General

Counsel of Record

P. O. Box 12548, Capitol Station

JOHN W. FAINTER, JR. Austin, Texas 78711

First Assistant (512)479-8191

RICHARD E. GRAY III ATTORNEYS FOR THE

Executive Assistant STATE OF TEXAS

Of Counsel:

JAMES R. MEYERS DONALD A. GARRITY

Assistant Attorney General Garrity, Keegan & Brown

1400 Eleventh Avenue

JUSTIN ANDREW KEVER Helena, Montana 59601

Assistant Attorney General (406)442-8711

Dated: January 19, 1981

TABLE OF CONTENTS

Page

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SINE GPE MEBGRUIBRIGINT .....0.ccesccecvecccscvsscssccscessvcsccscessceseesen 4

THE OBJECTIVES OF CONGRESS ..........ccsscssesssssecssseseeneesneens 4

ais ss nsssasecnnnnhasehssnssosesusboseonsanssaosoineee 12

FRUSTRATION OF THE NATIONAL PURPOSE ..........0004: 13

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TABLE OF AUTHORITIES

Cases Page

Hines v. Davidowitz, 312 U.S. 151 (1978) sscssssssssssssssssssssseessenee 12

Malone v. White Motor Corp., 435 U. S. 497 (1978) ..............0 13

McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819) ........... 17°

Perez v. Campbell,412 U.S. 687 (1971) ......ccccccssccserccsssccesseccesccoees 13

Ray v. Atlantic Richfield Co., 435 U.S. 151 (1978) ..........00. 12,13

Southwestern Oil Co. V. Texas, 217 U.S. 114 (1910) ......ccceeeeee 3

Statutes

Clean Air Act Amendments Of 1977 ............:cssssssssssssscsssssseseeeees 16

Emergency Petroleum Allocation Act of 1973 (Pub.L.

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Energy Policy and Conservation Act of 1976 (Pub.L.

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Energy Supply and Environmental Coordination Act of

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Powerplant and Industrial Fuel Use Act, (Pub.L.

OSGOOD, BE Bias. GEG (ISTE) secccecesescossiscoseccscessosseccsssscoees 10,11,12

Other Authorities

Analysis of Proposed U. S. Department of Energy

Regulations Implementing the Powerplant and

Industrial Fuel Use Act, Department of

Inne I I os ciscetnuehicnciesiiattingbentbionenbenionnes 2

1 EN. MNGM’T (CCH)

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-iii-

TABLE OF AUTHORITIES (CONT'D)

Page

H.R. REP. NO. 95-496, 95th CONG., 2d Sess. 3 (1978) ............ 14

Presidential Energy Address (April 18, 1977)

reported in 1 EN. MNGM’T (CCH) Para. 781 ...............cecseee 5

President Nixon’s Energy Message to Congress,

9 WEEKLY COM. OF PRES. DOC. 389-406 (April 23, 1973) 5,6

S. REP. NO. 95-361, 95th CONG.,2d Sess. 37,

reprinted in 1978 U.S. CODE CONG. & AD NEWS 8361 ... 15

NO. 80-581

** *

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1980

“_* *

COMMONWEALTH EDISON COMPANY, et al.,

Appellants,

v.

STATE OF MONTANA, et al.,

Appellees.

*“* *

ON APPEAL FROM THE

SUPREME COURT OF THE STATE OF MONTANA

*“* *

BRIEF AMICUS CURIAE OF THE STATE OF

TEXAS

**“* *

THE INTEREST OF TEXAS

The interest of the State of Texas in the Montana coal

severance tax can be expressed in several contexts.

First, utilities serving Texas consumers are committed

to purchase Montana coal. The City of Austin, for

example, will be burning large amounts of the coal in its

electric generating facilities. The Fayette I facility, to

be operated by Austin and the Lower Colorado River

Authority, will purchase fifty million tons of Montana

-2-

coal during the twenty-five year term of its contract

with Decker Coal Company. Houston Lighting & Power

will purchase 176 million tons of Montana coal for use in

its own facilities. The interests of the state and its

citizens, as consumers and ratepayers of electricity

produced from the combustion of that coal, are greatly

affected by the tax and consequent cost of the coal.!

Texas’ concern in this regard is not limited to

disfavoring a net transfer of wealth from its citizens to

the Montana treasury. We are concerned that the

artificial added cost of energy imposed by the tax will

either prevent new industries from developing in Texas

or encourage existing industry to leave the state in order

to find cheaper energy elsewhere.

Second, Texas fears that if the Montana tax is allowed

to stand, other coal producing states will raise their tax

structures to the Montana level. Such a result would

subject most of the coal consumed in Texas to the tax

Consumers would have few alternatives. They could

look abroad for competing sources of coal, or they could

suffer the consequences of decreased energy production.

1 Because of Texas’ long reliance on its natural gas and petroleum,

and because it lacks substantial deposits of high-quality coal, the

shift to increased coal use will be far more difficult and costly for

Texas than for other areas of the country. Based upon a United

States Department of Energy Study, “Analysis of Proposed U. S.

Department of Energy Regulations Implementing the Powerplant

and Industrial Fuel Use Act” (November 1978), approximately

one-half of national conversion costs associated with the

Powerplant and Industrial Fuel Use Ace will be borne in Texas.

Texas concerns involve, in part, exacerbation of those conversion

costs by the additional tax burden exacted.

.

Third, the high level of the Montana tax could spur

other states to tax their own resources accordingly.

Some states would be encouraged to discover new

sources of tax revenues from goods sold upon the

national economy. Other states may simply tax old

sources at new rates. As a sovereign state exacting

severance taxes of its own,” Texas does not dispute the

right of states to levy severance taxes and other

measures long held to be valid -- and necessary -- acts of

sovereignty. As this Court has noted, so long as states do

not abridge the Constitution they possess a wide latitude

of discretion to impose taxes to support the general

welfare of the state. See Southwestern Oil Company v.

Texas, 217 U.S. 114 (1910).

Although Texas supports the rights of states to levy

appropriate tax measures, and does not oppose

Montana’s right to impose a coal severance tax per se,’

we believe that the particular tax subject to this Court’s

review is inconsistent with our system of federalism. If

Texas were autonomous, it would use its own energy

resources for domestic purposes and export the

2 Texas collects a severance tax of 4.6% of value of oil produced and

7.5% of value of natural gas produced within the state.

8 Texas defends the rights of states to enact appropriate taxes

upon the activity of severing minerals from the state. Mineral

extraction imposes many economic, environmental and social costs

upon astate while requiring the state to provide additional services.

A severance tax is a means of imposing those costs upon those

benefiting from the activity. Texas wishes to make clear that it is

not the concept of a coal severance tax which is being challenged,

but the excessive rate of this particular tax.

-4-

remainder at the price level of the world market.‘ Texas

would not need Montana coal. As shown below,

however, a federal program prevents Texas from acting

as its own interests otherwise would dictate. Texas does

need Montana coal. The Constitution prevents any state

from inordinately benefiting from such a federal

response to a national problem; the Montana tax should

be declared invalid.

SUMMARY OF ARGUMENT

The Congress has enacted a national energy policy

designed to substitute the use of coal and other more

abundant resources for the use of increasingly scarce oil

and natural gas. The Montana coal severance tax stands

as a substantial obstacle to the attainment of the

national objective. By frustrating the statutes of

Congress, the Montana tax is preempted and should be

declared invalid.

THE OBJECTIVES OF CONGRESS

No single issue has received more public attention in

the past few years than our nation’s energy problem.

This critical subject repeatedly has been singled out by

the last three Presidents as crucial to our nation’s

future. As stated by President Carter in his April 18,

1977, Presidential Energy Address:

4 As presented in our brief supporting the jurisdictional

statement of appellants, a variety of federal statutes control the

price, production, and allocation of oil and natural gas produced in

Texas. See e.g., the Emergency Petroleum Allocation Act of 1973

(Pub.L. 93-511, 88 Stat. 1608); the Energy Supply and

Environmental Coordination Act of 1974 (Pub.L. 93-319, 88 Stat.

246); the Energy Policy and Conservation Act of 1976 (Pub.L. 94-

163, 89 Stat. 871). Natural Gas Policy Act of 1978, Pub.L. 95-621

(1978).

£

Tonight I want to have an unpleasant talk

with you about a problem that is unprecedented

in our history. With the exception of

preventing war, this is the greatest challenge

that our country will face during our lifetime.

The energy crisis has not yet overwhelmed us,

but it will if we do not act quickly.

Presidential Energy Address (April 18, 1977), reported

in 1 EN. MNGM’T (CCH) Para. 731.

We realize that we must decrease our dependency on

and use of foreign oil. Our response is, and has been, to

substitute wherever possible alternate energy sources.

The most practical alternative is coal.

The past three Presidents have called for greatly

expanded use of coal. In 1973 President Nixon

addressed the subject in a special message to Congress.

Coal

Coal is our most abundant and least costly

domestic source of energy. Nevertheless, at a

time when energy shortages loom on the

horizon, coal provides less than 20 percent of

our energy demands, and there is serious

danger that its use will be reduced even

further. If this reduction occurs, we would

have to increase our oil imports rapidly, with

all the trade and security problems this would

entail.

I urge that highest national priority be given to

expanded development and utilization of our

coal resources. Present and potential users who

are able to choose among energy sources should

consider the national interest as they make

their choice. Each decision against coal

increases petroleum or gas consumption,

compromising our national self-sufficiency and

raising the cost of meeting our energy needs. ...

As an additional measure to increase the

production and use of coal, Iam directing thata

6-

new reporting system on national coal

production be instituted within the

Department of the Interior, and I am asking the

Federal Power Commission for regular reports

on the use of coal by utilities. (Emphasis

added.)

President Nixon’s Energy Message to Congress, 9

WEEKLY COMP. OF PRES. DOC. 389-406 (April 23,

1973).

Little more than six months after Mr. Nixon’s

message, the nation was in an energy crisis. The

President focused on the critical situation in an address

to the nation, making the following remarks:

I want to talk to you tonight (November 7,

1973) about a serious energy problem we must

all face together in the months and years ahead.

As America has grown and prospered in

recent years, our energy demands have begun

to exceed available supplies. In recent months

we have taken many actions to increase

supplies and reduce consumption. But even

with our best efforts, we knew that a period of

temporary shortages was inevitable. ...

We must therefore face up to the stark fact

that we are heading toward the most acute

shortages of energy since World War II. Our

supply of petroleum this winter will be at least

10 percent short of our anticipated demands --

and could fall short by as much as 17 percent.

Even before war broke out in the Middle

East, these prospective shortages were the

subject of intensive discussions among

members of my Administration and leaders of

Congress, Governors, mayors, consumers and

industrial representatives. From these

discussions has emerged a broad agreement

that we must now set out upon a new course for

our Nation.

7.

In the short run, this course means that we

must use less energy -- less heat, less electricity,

and less gasoline. In the long run, it means that

we must develop new sources of energy which

give us the capacity to meet our needs without

relying upon foreign nations. ...

We must be sure that our most vital needs are

met first -- and that our least important

activities are the first to be cut back. And we

must be sure that while the fat from our

economy is being trimmed, the muscle is not

seriously damaged.

Immediate steps. -- First, lam directing that

industries and utilities which use coal -- our

most abundant resource -- be prevented from

converting to oil in the immediate future. Efforts

will also be made to convert power plants from

the use of oil to the use of coal. (Emphasis added.)

Text of an address by the President on the energy crisis,

as reported in 1 EN. MNGM’T (CCH) Paras.549, 550.

The Arab oil embargo thus propelled coal to a position

of paramount importance in the federal scheme of

energy independence. Coal was to become even more

important in the coming years.

Within eleven months, a new Administration

proposed a policy to require use of coal and nuclear

energy for new electric generating facilities and for the

conversion of existing plants. White House Fact Sheet,

“A Program to Control Inflation in a Healthy and

Growing Economy,” October 8, 1974, as reported in 1

EN. MNGM’T (CCH) Para 657. Several months later,

President Ford’s first State of the Union address

demonstrated that adjustments would be necessary --

and coming -- to facilitate the increased use of coal:

Use of our most abundant domestic resource

--coal-- is severely limited. We must strike a

reasonalbe compromise on environmental

concerns with coal. Iam submitting Clean Air

-8-

Act amendment which will allow greater coal

use without sacrificing our clean air goals....

I vetoed the strip mining legislation passed

by the last Congress. With appropriate

changes, I will sign a revised version into law.

1 EN. MNGM’T (CCH) Para. 691.

Additionally, in a White House Fact Sheet

accompanying the address, the Administration stated:

Actions to achieve the above national energy

goals must be based upon the following

principles:

--Provide energy to the American consumer

at the lowest possible cost consistent with our

need for secure energy supplies.

--Make energy decisions consistent with our

overall economic goals.

--Balance environmental goals with energy

requirements.

--Rely upon the private sector and market

forces as the most efficient means of achieving

the Nation’s goals, but act through the

government where the private sector is unable

to achieve our goals.

--Seek equity among all our citizens in

sharing of benefits and costs of our energy

program.

--Coordinate our energy policies with those of

other consuming nations to promote

interdependence, as well as independence.

Id., Para. 693, White House Fact Sheet on the

President’s State of the Union Message, January 15,

1975.

In his second State of the Nation speech, the

President reaffirmed the need for a strong coal policy to

discourage the use of oil and natural gas. Jd, Para. 606.

-9-

Finally, President Carter continued the chain of

presidential proclamations urging increased use of coal

to reduce our dependence on imported oil.

Some believe that we should not continue or

expand the use of coal and others have the same

view about nucleur energy. But a careful look

indicates that we do not have a choice between

increasing the use of coal or nuclear energy.

Instead, we must increase the use of both coal

and nuclear energy until more acceptable

alternate energy sources are available. Even

with strong efforts to conserve energy, and

increased efforts to produce domestic oil and

natural gas, we must increase the use of both

coal and nuclear energy if we are to meet the

demands for energy for a growing economy.

The only alternative is to increase our growing

dependence on imported oil.

Id., Para. 711, Presidential Energy Message to

Congress, January 7, 1977.

Additionally, to encourage further utilization of coal

the President proposed a tax on the use of oil and natural

gas in industrial facilities. “Although coal now provides

only 18 percent of our total energy needs, it makes up 90

percent of our energy resources. . . . To increase the use

of coal by 400 million tons or about 65 percent. . . I

propose a sliding scale tax. .. on large industrial users of

oil and natural gas.” /d., Para. 739, President Carter’s

Energy Message to Congress, April 20, 1977.

Against this background of presidential

pronouncements, Congress has expressed a strong

purpose to further the immediate and long term

interests of the nation by the establishment of a federal

scheme designed to increase the use of coal in lieu of

-10-

alternative energy sources. That purpose is most

centrally expressed in Section 102 of the Fuel Use Act.?

(a) Findings.--The Congress finds that--

(1) the protection of public health and

welfare, the preservation of national security,

and the regulation of interstate commerce

require the establishment of a program for the

expanded use, consistent with applicable

environmental requirements, of coal and other

alternate fuels as primary energy sources for

existing and new electric powerplants and

major fuelburning installations; and

(2) the purposes of this Act are furthered in

cases in which coal or other alternate fuels are

used by electric powerplants and major

fuel-burning installations, consistent with

applicable environmental requirements, as

primary energy sources in lieu of natural gas or

petroleum.

(b) Statement of Purposes.--The purpose of

this Act, which shall be carried out ina manner

consistent with applicable environmental

requirements, are--

(1) to reduce the importation of petroleum

and increase the Nation’s capability to use

indigenous energy resources of the United

States to the extent such reduction and use

further the goal of national energy self-

sufficiency and otherwise are in the best

interests of the United States;

(2) to conserve natural gas and petroleum for

uses, other than electric utility or other indus-

trial or commercial generation of steam or

5 Powerpiant and Industrial Fuel Use Act, Pub.L. 95-620, 92 Stat.

3289 (1978).

-l1-

electricity, for which there are no feasible

alternative fuels or raw material substitutes;

(3) to encourage and foster the greater use of

coal and other alternate fuels, in lieu of natural

gas and petroleum, asa primary energy source;

(4) to the extent permitted by this Act, to

encourage the use of synthetic gas derived from

coal or other alternate fuels;

(5) to encourage the rehabilitation and

upgrading of railroad service and equipment

necessary to transport coal to regions or States

which can use coal in greater quantities;

(6) to prohibit or, as appropriate, minimize

the use of natural gas and petroleum as a

primary energy source and to conserve such

gas and petroleum for the benefit of present

and future generations;

(7) to encourage the modernization or

replacement of existing and new electric

powerplants and major fuel-burning

installations which utilize natural gas or

petroleum as a primary energy source and

which cannot utilize coal or other alternate

fuels where to do so furthers the conservation of

natural gas and petroleum;

(8) to require that existing and new electric

powerplants and major fuel-burning

installations which utilize natural gas,

petroleum, or coal or other alternate fuels

pursuant to this Act comply with applicable

environmental requirements;

(9) to insure that all Federal agencies utilize

their authorities fully in furtherance of the

purposes of this Act by carrying out programs

designed to prohibit or discourage the use of

natural gas and petroleum asa primary energy

source and by taking such actions as lie within

their authorities to maximize the efficient use

of energy and conserve natural gas and

-12-

petroleum in programs funded or carried out

by such agencies;

(10) to insure that adequate supplies of

natural gas are available for essential

agricultural uses (including’crop drying, seed

drying, irrigation, fertilizer production, and

production of essential fertilezer ingredients

for such uses);

(11) to reduce the vulnerability of the United

States to energy supply interruptions; and

(12) to regulate interstate commerce.

The purpose of Congress is clear; it wishes to further the

attainment of the enumerated goals by decreasing the

use of petroleum and natural gas as a boiler fuel. In

their place, Congress would have the nation use coal.

The Fuel Use Act prohibits new electric powerplants

from using oil or natural gas as a primary fuel source

and prohibits the use of natural gas in existing facilities

after 1989. Further, unless natural gas was used as a

primary source during 1977, its use is banned before the

January 1, 1990, deadline; plants meeting the 1977

usage exception are limited to their historical

consumption. Exemptions from the regulations will be

granted only in certain limited circumstances.

PREEMPTION

In Ray v. Atlantic Richfield Co., 485 U.S. 151, 158

(1978), this Court noted that “[e]ven if Congress has not

completely foreclosed state legislation in a particular

area, a state statute is void to the extent that it actually

conflicts with a valid federal statute.” Such conflict may

occur “where the state ‘law stands as an obstacle to the

accomplishment and execution of the full purposes and

objectives of Congress’ [citing Hines v. Davidowitz, 312

U.S. 52, 67 (1941)].” Jd. The Montana courts erred in

rejecting this standard. The courts looked for an

express congressional intent to prohibit a severance tax

on coal. Under the Hines v. Davidowitz standard,

-13-

however, such express intent is not required. “Any state

legislation which frustrates the full effectiveness of

federal law is rendered invalid by the Supremacy

Clause.” Perez v. Campbell, 412 U.S. 637, 652 (1971). A

head-on conflict with a federal statute is unnecessary;

preemption will occur where the state enactment

impairs or frustrates the purpose of Congress.

See Malone v. White Motor Corp., 435 U.S. 497 (1978).

The preemption standard, in summary, is not limited

to a consideration of whether Congress “so occupied the

field” such that state taxation is precluded, or whether

Congress specifically prohibited state coal severance

taxes. See Ray v. Atlantic Richfield, supra. The

question, rather, is whether the thirty percent tax on

coal frustrates and impairs the objectives of Congress in

enacting its national energy policy.

FRUSTRATION OF THE NATIONAL PURPOSE

It is apparent from presidential statements and

congressional action that there is a clear and definite

federal scheme favoring increased use of coal in lieu of

other energy sources. It is equally clear that the tax,

insofar as it exacts an exorbitant surcharge for the use

of Montana coal, serves to frustrate and impair the

federal scheme and the express purpose of Congress to

increase coal use.

For Texas and perhaps most of the West, western coal

is as a practical matter the only coal available for use.

Texas would show at trial on the merits that the high

cost of transportation of eastern coal to Texas precludes

its use. The use of coal from the Midwest is a break-even

proposition only at Texas cities served by barge. When

the added costs of inland rail transportation from dock

to generating plants are added to the costs of pollution

and pollution control for the higher sulphur content of

midwestern coal, western coal is seen as being the only

feasible alternative to the use of petroleum.

The thirty percent coal tax frustrates the use of

western coal. In enacting its energy plan, the Congress

ste

considered the effects of taxes on energy consumption.

A bill was introduced, (Title II of H.R. 6831; 95th Cong..,

Ist Sess.) to provide

incentives to cut down energy consumption in

the United States and to convert from the use of

oil and gas to coal, nuclear power, and other

more abundant energy sources. The bill raises

taxes on many users of energy, particularly in

cases where conservation or conversion from oil

and gas is relatively easy. The bill also provides

tax incentives to both individuals and

businesses for investments to conserve energy

or to convert to oil and gas to other energy

sources.

H.R. REP. No. 95-496, 95th CONG.., 2d Sess. 3 (1978).

In its report on the bill, the Committee on Ways and

Means stated, inter alia, that

urgency of the energy problem requires a

special measure designed specifically to reduce

the consumption of oil and natural gas by large

industrial and utility users. The cost of oil to

these users must be raised to reflect the

growing threat which unchecked oil imports

pose to the security of the United States. The

cost of natural gas must be raised because the

existence of long-term regulated contracts has

kept the price of natural gas below its

replacement cost, thus encouraging too much

consumption. At the same time, the revenue

from the taxes used to achieve these cost

increases should be employed to provide

incentives for the purchase of new equipment

which burns fuels other than oil or gas. The

committee has therefore designed a

combination of taxes and incentives which, it

believes, will achieve a substantial reduction in

oil and gas use.

-15-

Id at 94.

The Ways and Means Committee demonstrated its

belief that one purpose of a tax on any specific type of

energy is to decrease its use. On the other hand, tax

reductions on a type of energy encourage the use of that

energy type and further reduce the use of higher taxed

energy sources. The coal tax effects a result opposite to

that intended by Congress. The coal tax makes western

coal more expensive which tends to reduce the

consumption of coal relative to oil and gas, and thereby

makes imported petroleum or natural gas more cost

attractive.

Second, Congress has stated that the objectives of the

Fuel Use Act were “to effect the conversion from

natural gas and petroleum to coal or other domestic

fuels to the greatest extent possible within reasonable

economic and physical constraints.” S.REP. No. 95-361,

95th CONG. 2d Sess. 37, reprinted in 1978 U.S. CODE

CONG. & AD. NEWS 8361. The potential benefits of

attaining the objective of conversion to coal are many.

An increase in the use of domestic energy sources will

reduce the importation of foreign oil. National security

will be enhanced by a lesser dependence on foreign

energy sources. Further, the lowered demand for

imported oil should reduce the price of the oil, or at least

reduce the rate of increase in world oil prices. In turn,

the United States’ balance of payments will be positively

affected, the value of the dollar will be strengthened,

and there will be a corresponding downward pressure

on the inflation rate.

The Montana tax, however, not only frustrates the

objective of conversion, but contradicts the objective of

promoting conversion “within reasonable economic and

physical constraints.” The tax increases costs of

conversion to coal in derogation of the congressional

purpose. Moreover, the increased cost to the purchaser

does not have the countereffect of increasing producer

revenues and thereby generating increased supply; the

increased costs are paid as tax, not as an incentive as

-16-

contemplated by Congress, e.g. in the Natural Gas

Policy Act of 1978, Pub. L. 95-621, providing for

increased supplies of natural gas.

Finally, the Clean Air Act Amendments of 1977

demonstrate no intent by Congress to deviate from its

clear policy of coal conversion. These amendments were

initiated by certain congressmen from traditional coal

producing states concerned that the demand for

environmentally preferable, low-sulphur western coal

would displace the demand for high-sulphur eastern

and midwestern coal produced by their constituents.

Rather than attempt to encourage the production of

high-sulphur coal at the expense of western coal,

Congress simply attempted to encourage eastern

utilities to support their local mining industries by

requiring all coal-fired plants to install certain pollution

control devices. Apparently, Congress believed that if

the high-sulphur coal were placed on an effective equal

footing with low-sulphur western coal, coal production,

employment and local economies in the East and

Midwest would remain stable. Congress, in responding

to political reality, evidenced no desire to retreat from

its purpose of promoting coal conversion.

The Montana coal severance tax has the effect of

contradicting, impairing and frustrating the attempts

of Congress to meet the imperative energy problems

facing this nation. Rather than reflecting the aims of

Congress, the tax inhibits attainment of the goal of

conserving large amounts of imported petroleum

through conversion of electric generating facilities to

the utilization of coal as a primary energy source. As the

price of coal to the user increases, there will be a

reduction in usage, to the effect that either other fuels

such as oil and gas will be substituted, or there will bea

net reduction in energy devoted to productive ends.

Such a result is contrary to the federal scheme of energy

priority and therefore not permitted by the Supremacy

Clause.

ah.

As the foregoing demonstrates, the national energy

policy attempts to reduce importation of foreign

petroleum by promoting the increased use of coal. The

State of Texas respectfully submits that the courts

below have misconstrued the intent of the federal

scheme and the need to determine whether the coal

severance tax “stands as an obstacle to the

accomplishment and execution of the full purposes of

Congress.” Ray v. Atlantic Richfield, supra, 435 U.S. at

158.

CONCLUSION

This Court long ago held that

[t]he States have no power, by taxation or

otherwise, to retard, impede, burden, or in any

manner control, the operations of the

constitutional laws enacted by Congress to

carry into execution the powers vested in the

general government.

McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 436

(1819). The Constitution provides that in our balanced

federal system, the Constitution and enactments of

Congress shall be the supreme law of the land. Any state

laws frustrating the intent of Congress shall be invalid.

The coal severance tax clearly conflicts with the

imperative purpose expressed by Congress. Coal is

made more expensive, which either lessens the

conversion from oil and natural gas to coal, or reduces

the utilization of domestic energy resources, impairing

the economic health of this nation. The tax frustrates

the avowed aims of Congress in dealing with perhaps

the most critical concern of the remainder of this

century. The Montana courts have erred in their

construction of the federal scheme, the conflict between

the tax and the laws of Congress, and the necessary

standard to be applied in viewing the conflict.

Accordingly, the State of Texas respectfully requests

that the decision of the Montana courts be reversed.

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Respectfully submitted

MARK WHITE

Attorney General of Texas

JOHN W. FAINTER, JR.

First Assistant Attorney General

RICHARD E. GRAY III

Executive Assistant

Attorney General

JAMES R. MEYERS

Assistant Attorney General

Chief, Federal Energy Section

JUSTIN ANDREW KEVER

Assistant Attorney General

Chief, Federal Energy Section

JOHN STUART FRYER

Assistant Attorney General

P. O. Box 12548, Capitol Station

Austin, Texas 78711

(512)479-8191

Attorneys for the State of Texas