Opposition Brief — Western Gas Resources, Inc. v. Heitkamp

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Buprems Court, US |

_ FILED |

JAN 28 1993 !

No. 92-1152 \

ge—-JHE CLERM

In The

Supreme Court of the United States

October Term, 1992

WESTERN GAS RESOURCES, INC., SUCCESSOR IN

INTEREST TO WESTERN GAS PROCESSORS, LTD.,

Petitioner,

ROBERT E. HANSON, TAX COMMISSIONER OF THE

STATE OF NORTH DAKOTA,

Respondent.

€

Petition For Writ Of Certiorari

To The North Dakota Supreme Court

RESPONDENT'S BRIEF IN OPPOSITION TO

THE PETITION FOR WRIT OF CERTIORARI

Herpr HEmrKAMP

Attorney General

State of North Dakota

Rosert W. Wirtz*

Assistant Attorney General

State Capitol-Eighth Floor

600 East Boulevard Avenue

Bismarck, North Dakota

58505-0599

(701) 224-2770

Attorneys for Respondent

*Counsel of Record

COCKLE LAW BRIEF PRINTING CO,, (800) 225-6964

OR CALL COLLECT (402) 342-283

QUESTION PRESENTED

Whether in accordance with the due process clause,

the North Dakota Tax Commissioner and the North

Dakota Supreme Court properly interpreted the North

Dakota oil extraction tax statute, N.D.C.C. § 57-51.1-01(3),

as including field condensate in the definition of the term

oil.

LIST OF PARTIES

Petitioner (Plaintiff-Appellant):

Western Gas Resources, Inc. is the Successor in

Interest to Western Gas Processors, Ltd.

Western Gas Resources, Inc. has no parent com-

pany or non-wholly owned subsidiaries.

Respondent (Defendant-Appellee):

M. K. Heidi Heitkamp, Tax Commissioner of the

State of North Dakota was succeeded in office

through election by Robert E. Hanson. M. K.

Heidi Heitkamp is now the duly elected Attor-

ney General of North Dakota. The petition in

this case was filed before Robert E. Hanson suc-

ceeded M. K. Heidi Heitkamp as Tax Commis-

sioner. Robert E. Hanson’s name should be

substituted as provided under Supreme Court

Rule 35.3.

TABLE OF CONTENTS

NE SO WORE MUR U GOED bs oss s nese e ce sscceseoes

Dresnmumees Ge etm CASE. .........0 csc ccescenes

SUMMARY OF THE ARGUMENT .................

ARGUMENT:

REASONS FOR DENYING THE WRIT, CONSID-

ERATIONS UNDER SUPREME COURT RULE 10

I. THE OPINION BELOW DOES NOT CONFLICT

WITH ANY STATE OR FEDERAL COURT DECI-

RE ESET Pea ra

Il. THE OPINION BELOW DID NOT DECIDE ANY

IMPORTANT QUESTION OF FEDERAL LAW

WHICH SHOULD BE DECIDED BY THE

FE Se

TEE a

TABLE OF AUTHORITIES

Page

CASsEs:

City of Canton, Ohio v. Harris, 489 U.S. 378, 109

ee. CO WR coo vex nuaue cerecene bene Coeucueon 4

we eR Ot. eee 5

St. Louis v. Praprotnik, 485 U.S. 112, 108 S.Ct. 915

EG Ss al rds ns CERRESA RL CEREAL TREE ORNS TEs 4

State v. Schwalk, 430 N.W.2d 317 (N.D. 1988)......... 5

CONSTITUTION AND STATUTES:

yah SN SUNN MIMD DP oe evs a cencvccsencesnsys's 4

U.S. Sapreme Court Rule 10.1(5)....... 6252... c ass 5

US. Supreme Court Rule 10.1(c) .............6.26200 6

eee Ge I IOI as ot os ca bscesetesauadess 3

N.D. Cent. Code §57-51.1-01(3)................ ) ee Se

hee ee ee errs 1

Pasar Sn. CN PE EMD 0 ani vnsescdedaccaanenss 6

No. 92-1152

In The

Supreme Court of the United States

October Term, 1992

WESTERN GAS RESOURCES, INC., SUCCESSOR IN

INTEREST TO WESTERN GAS PROCESSORS, LTD.,

Petitioner,

ROBERT E. HANSON, TAX COMMISSIONER OF THE

STATE OF NORTH DAKOTA,

Respondent.

Petition For Writ Of Certiorari

To The North Dakota Supreme Court

RESPONDENT'S BRIEF IN OPPOSITION TO

THE PETITION FOR WRIT OF CERTIORARI

STATEMENT OF THE CASE

The statement of facts is well articulated by the

North Dakota Supreme Court in the opinion below:

Section 57-51.1-02, N.D.C.C., imposes an

“‘oil extraction tax’ [OET], upon the activity in

this state of extracting oil from the earth.” For

purposes of the OET, Section 57-51.1-01(3)

defines “oil as petroleum, crude oil, mineral oil,

casinghead gasoline, and all liquid hydrocar-

bons that are recovered from gas on the lease

incidental to the production of the gas.” The

principal issue in this appeal is whether “field

condensate” is “oil” as defined by Section

57-51.1-01(3), N.D.C.C. Our analysis of this issue

requires a description of “field condensate” and

how Western recovers “field condensate” from

natural gas.

Western is a gas processing company which

owns and operates a natural gas gathering sys-

tem and a natural gas processing facility in Bill-

ings County. Western purchases natural gas

from various oil and gas producers and moves

the gas through its gathering system to its pro-

cessing facility at the Teddy Roosevelt Gas Plant

[TR Plant]. At the well sites, the producers

pump a mixture into oil, gas, and water from

wells and separate the mixture into oil, gas, and

water phases with a separator or heater treater.

The producers dispose of the water, retain the

oil, and pipe the gas stream in a vapor form to a

“custody transfer meter” where custody and

ownership is transferred to Western for move-

ment through its gathering system to its pro-

cessing facility at the TR Plant.

As the gas stream moves through Western’s

gathering system, changes in pressure and tem-

perature cause liquid hydrocarbons to condense

in the ea The liquid hydrocarbons are

called “drips” or “field condensate” and are col-

lected and stored in underground tanks called

“drip locations.” In addition to the “drip loca-

tions,” Western also recovers field condensate at

field compressor stations, where the gas is com-

pressed in three separate stages to facilitate its

movement to the TR Plant. Western sells all the

“field condensate” at a crude oil price and puts

it in a crude oil pipeline.

On October 18, 1985, the Commissioner

assessed an OET against Western for field .

condensate recovered from January 1981

through December 1983. ... Western objected

to the assessment for field condensate, contend-

ing that field condensate was produced after the

custody transfer meter and was therefore not

recovered “on the lease” as required by the defi-

nition of “oil” in Section 57-51.1-01(3), N.D.C.C.

An administrative hearing officer deter-

mined that field condensate was “oil” under

Section 57-51.1-01(3), N.D.C.C. The hearing offi-

cer construed “all liquid hydrocarbons that are

recovered form gas on the lease” to mean liquid

hydrocarbons recovered in Western’s gathering

system before the inlet receiver at the TR Plant.

The hearing officer recommended that Western

be assessed an OET of $129,483.71. The Commis-

sioner substantially adopted the hearing offi-

cer’s findings of fact, conclusions of law, and

recommendation. However, under Section

57-51-10, N.D.C.C., the Commissioner found

good cause for waiving one hundred percent of

the penalty and twenty percent of the interest

on the OET. The Commissioner thus ordered

Western to pay an OET of $129,483.71 plus

eighty percent of the interest. The district court

affirmed the Commissioner’s decision, and

Western appealed.

489 N.W.2d 870-871 (Pet. App. A-2 to A-3).

The North Dakota Supreme Court affirmed the dis-

trict court and specifically found that Western’s due pro-

cess rights were not violated. The opinion below

concluded that “[sJection 57-51.1-01(3), N.D.C.C., when

considered in light of the clear legislative intent to tax

hydrocarbons recovered before processing at a gas plant,

provides adequate notice of the meaning of ‘on the lease.’ ”

489 N.W.2d 873, 874 (Pet. App. A-8 to A-10)

SUMMARY OF THE ARGUMENT

The policy of this Court with respect to when it

grants review was expressed in City of Canton, Ohio v.

Harris, 489 U.S. 378, 109 S.Ct. 1197, 1202 (1989), by quot-

ing the following from St. Louis v. Praprotnik, 485 U.S. 112,

108 S.Ct. 915, 922 (1988): “The decision to grant certiorari

represents a commitment of scarce judicial resources with

a view to deciding the merits ... of the questions

presented in the petition.”

Since the opinion below does not conflict with any

state or federal court decision and since there is no

important question of federal law which should be

reviewed, this Court should not commit its scarce judicial

resources to this case involving an administrative inter-

pretation of state law.

ARGUMENT

REASONS FOR DENYING THE WRIT

CONSIDERATIONS UNDER SUPREME COURT RULE 10

I. THE OPINION BELOW DOES NOT CONFLICT WITH

ANY STATE OR FEDERAL COURT DECISION.

There is no state or federal court decision which con-

flicts with the opinion below. The opinion below is limited to

a review of an administrative interpretation of an ambiguous

state statute. The reviewing court examined the extrinsic aids

used to formulate the administrative interpretation of the

statutory meaning and concluded that the administrative

interpretation was supported by a preponderance of the

evidence and that a reasoning mind could reasonably reach

the same conclusion. 489 N.W.2d 872-874 (Pet. App. A-4 to

A-9). Therefore, there is no reason to grant the petition under

Supreme Court Rule 10.1(b).

Il. THE OPINION BELOW DID NOT DECIDE ANY

IMPORTANT QUESTION OF FEDERAL LAW WHICH

SHOULD BE DECIDED BY THE SUPREME COURT.

The Due Process Clause prohibition against excessive

statutory vagueness does not invalidate every statute which

a reviewing court believes could have been drafted with

greater precision. Rose v. Locke, 423 U.S. 48, 49 (1975). “All the

Due Process Clause requires is that the law give sufficient

warning that men may conduct themselves so as to avoid

that which is forbidden.” Id. 50. Further, a statute is not

unconstitutionally vague because it is necessary to consult

other sources to interpret the statute. Id. ‘

The North Dakota Supreme Court recognized this stan-

dard in State v. Schwalk, 430 N.W.2d 317, 320 (N.D. 1988), and

applied it in the opinion below. 489 N.W.2d 873 (Pet.App.

A-7 to A-8). Based upon the findings in this case, condensate

can be considered petroleum, crude oil, or casinghead gas-

oline. (Pet. App. E-1 to E-28). These items are specifically

included in the definition of oil under N.D.C.C.

§ 57-51.1-01(3). Thus, the statute cannot be unconstitutionally

vague as applied to the condensate in this case.

Further, the statutory provisions relating to tax liability

indicate that purchasers, such as Western, are liable for the

oil extraction tax. See N.D.C.C. § 57-51.1-05. Therefore, rea-

sonable persons in the same situation as Western would

know that condensate is subject to the oil extraction tax. The

statute in question is not unconstitutionally vague and there

is no important question of federal law which should be

reviewed under Supreme Court Rule 10.1(c).

CONCLUSION

For the reasons stated in this brief, the petition should

be denied.

Dated January 28, 1993.