Chevron U.S.A., Inc. v. State, Department of Revenue
2016 Alas. LEXIS 138
| Alaska | 2016Background
- Alaska taxed oil production using an Economic Limit Factor (ELF) that included a field size factor, producing different tax rates for different fields; legislature authorized the Department of Revenue (DOR) to aggregate "economically interdependent" leases for ELF calculation.
- Prudhoe Bay Unit contained large Initial Participating Areas (Initial PAs) and later-developed, much smaller Satellite Participating Areas (Satellite PAs); Satellite PAs used common production facilities belonging to the Initial PAs, commingled fluids, and sometimes "backed out" higher-cost oil from Initial PAs.
- Producers sought advance rulings that DOR would not aggregate certain Satellite PAs; DOR delayed, studied the issue internally, and drafted white papers considering regulatory rulemaking but did not finalize rulemaking.
- In January 2005 DOR issued an administrative Decision aggregating six Satellite PAs with the Initial PAs for tax periods beginning Feb 1, 2005, concluding the operations were "economically interdependent" and thus should be treated as a unit for ELF/tax purposes.
- Producers challenged the Decision, arguing DOR effectively promulgated a regulation without APA rulemaking (violating the APA) and denying procedural due process; administrative hearing and superior court upheld DOR.
- Supreme Court affirmed: DOR s Decision was a commonsense interpretation of the statute, not a regulation requiring APA rulemaking, and Producers had adequate opportunity to be heard.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether DOR's Decision was a "regulation" requiring APA rulemaking | DOR s Decision established a binding substantive rule (new standard for "economically interdependent") and thus is a regulation adopted without APA procedures and invalid | The Decision is a commonsense interpretation of ambiguous statutory language applying existing statutory discretion, not a new rule, so APA rulemaking was not required | Decision is not a regulation; it was a commonsense statutory interpretation, so APA rulemaking not required |
| Whether DOR added substantive requirements beyond the statute | DOR s analysis and internal drafting show it added new substantive criteria and changed prior policy, so it imposed new requirements without rulemaking | DOR relied on statutory language and precedent and did not insert new, precise substantive criteria beyond the statute's terms | Court found DOR did not add requirements of substance; it interpreted the statute according to its terms |
| Whether DOR s interpretation was unforeseeable or arbitrary | Producers contend the Decision was an unforeseeable policy shift after years of internal debate and therefore required notice-and-comment rulemaking | DOR argues the aggregation power was foreseeable given ELF purpose and statute; Decision reflected application of discretion to changed factual integration of operations | Court held interpretation was foreseeable and consistent with legislative purpose; not arbitrary |
| Whether Producers were denied due process / opportunity to be heard | Producers assert rulemaking would have allowed public input and a "clean slate" to propose alternatives | DOR notes Producers had multiple administrative remedies: informal conference, administrative hearing, appeals to superior court | Court held Producers had adequate opportunity to be heard through existing adjudicative process and appeals |
Key Cases Cited
- State, Dep't of Nat. Res. v. Nondalton Tribal Council, 268 P.3d 293 (Alaska 2012) (standard for when agency action constitutes a regulation)
- Alyeska Pipeline Serv. Co. v. State, Dep't of Envtl. Conservation, 145 P.3d 561 (Alaska 2006) (obvious, commonsense statutory interpretations need not be promulgated as regulations)
- Alaska Ctr. for the Env't v. State, 80 P.3d 231 (Alaska 2003) (agency interpretation of broad term was a commonsense interpretation, not a regulation)
- Jerrel v. State, Dep't of Nat. Res., 999 P.2d 138 (Alaska 2000) (agency added specific substantive requirement amounting to a regulation)
- Burke v. Houston NANA LLC, 222 P.3d 851 (Alaska 2010) (agency-created "discovery rule" capped grace period; held to be a regulation)
- Smart v. State, Dep't of Health & Soc. Servs., 237 P.3d 1010 (Alaska 2010) (agency choice among established definitions of a broad term did not create new substantive rule)
- Friends of Willow Lake, Inc. v. State, Dep't of Transp. & Pub. Facilities, 280 P.3d 542 (Alaska 2012) (unpromulgated rules are invalid; discussing APA scope)