City of Valdez v. State
372 P.3d 240
Alaska2016Background
- Alaska’s AS 43.56 creates a statewide assessment regime for oil and gas property, vests the Department of Revenue (Revenue) with responsibility for determining taxability and valuing property, and establishes the State Assessment Review Board (SARB) to hear appeals from Revenue’s assessments.
- Statutory process: owners file returns; Revenue makes taxability and valuation determinations, issues an assessment roll and notices (by ~March 1); owners/municipalities may appeal to Revenue, then to SARB, and finally to superior court (statutorily a trial de novo from SARB).
- Revenue promulgated 15 AAC 56.015 (1986, amended 2003) splitting appeal tracks: valuation appeals proceed to SARB; taxability appeals are heard within Revenue under 15 AAC 05.001-.050 and appeal to a Revenue hearing officer (no automatic SARB review or statutory right to a trial de novo).
- Trans‑Alaska Pipeline System (TAPS) owners appealed both valuation and taxability for 2013. Revenue dismissed the taxability appeal for lack of jurisdiction (saying taxability is for Revenue), prompting municipalities (including the City of Valdez) to challenge the regulation.
- Superior court upheld the regulation under reasonable‑basis review. The Supreme Court applied substitution‑of‑judgment review, concluded 15 AAC 56.015(b)–(d) is inconsistent with AS 43.56, reversed and remanded for judgment for Valdez.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the term “assessment” in AS 43.56 includes Revenue’s initial taxability determination | "Assessment" includes taxability determination; therefore SARB has exclusive jurisdiction over appeals from Revenue assessments (including taxability) | "Assessment" means valuation only; Revenue may retain jurisdiction over taxability appeals via regulation | Court: "assessment" includes initial taxability determination; regulation inconsistent with statute; invalidated |
| Whether Revenue’s regulation dividing appeals (valuation → SARB; taxability → Revenue) is a permissible interpretation | Regulation unlawfully removes statutory SARB jurisdiction and denies automatic trial de novo | Regulation is a reasonable agency interpretation entitled to deference | Court: Regulation conflicts with plain text, history, and purpose; not entitled to deference; invalid |
| Appropriate standard of review for the agency interpretation | (Plaintiff) Statutory term is nontechnical; courts should substitute their judgment | (State) Agency expertise and administrative considerations warrant reasonable‑basis deference | Court: substitution of judgment applies (nontechnical term; court expertise on jurisdictional/statutory construction) |
| Whether longstanding agency practice warrants deference | (State) 1986 regulation (amended 2003) and longstanding practice merit deference | (Plaintiff) Application was inconsistent; SARB historically heard taxability appeals; agency interpretation not continuous | Court: SARB historically exercised taxability jurisdiction; agency interpretation not sufficiently longstanding or consistent to warrant extra deference |
Key Cases Cited
- Grunert v. State, 109 P.3d 924 (Alaska 2005) (standard for judicial review of regulations)
- Tesoro Alaska Petroleum Co. v. Kenai Pipe Line Co., 746 P.2d 896 (Alaska 1987) (substitution of judgment when courts interpret nontechnical statutory terms)
- Marathon Oil Co. v. State, Dep’t of Nat. Res., 254 P.3d 1078 (Alaska 2011) (agency expertise and review standards)
- BP Pipelines (Alaska) Inc. v. State, Dep’t of Revenue, 325 P.3d 478 (Alaska 2014) (describing Revenue’s role in valuing oil and gas property)
- State, Dep’t of Revenue v. BP Pipelines (Alaska) Inc., 354 P.3d 1053 (Alaska 2015) (further treatment of appeals and valuation issues under AS 43.56)
- Premera Blue Cross v. State, Dep’t of Commerce, 171 P.3d 1110 (Alaska 2007) (deference to contemporaneous agency interpretations)