MISSOURI GAS ENERGY v. GRANT COUNTY ASSESSOR
2016 OK CIV APP 44
| Okla. Civ. App. | 2016Background
- Missouri Gas Energy (MGE), a Missouri distributor, purchased gas and used Southern Star pipeline/storage, including the Webb underground storage facility in Grant County, OK; title to stored gas remained with MGE though Southern Star had physical possession.
- Southern Star allocates volumes stored at Webb to customers as of January 1; Grant County assessed ad valorem tax on MGE's allocated volumes for tax year 2011.
- MGE filed a Freeport Exemption declaration for the portion of allocated gas it claimed originated outside Oklahoma; the Grant County Assessor and Board denied the exemption and assessed the gas.
- MGE sued and moved for summary judgment, arguing (1) natural gas in storage is "goods, wares and merchandise" and therefore eligible for the Freeport Exemption, and (2) alternatively, gas that did not originate in Oklahoma lacked taxable situs in Oklahoma under 68 O.S. §2831.
- The trial court granted summary judgment for appellees, holding natural gas in storage is not "goods, wares and merchandise;" later denied reconsideration after HB 1962 amended 68 O.S. §2807 to include oil/gas as goods. This appeal followed.
Issues
| Issue | Plaintiff's Argument (MGE) | Defendant's Argument (Assessor/Board) | Held |
|---|---|---|---|
| Whether natural gas in storage is "goods, wares and merchandise" under the Freeport Exemption | Terms should be given their ordinary meaning; OUCC treats severed oil/gas as goods; OTC forms and ballot title support inclusion | Statutory scheme separately lists "oil, gas, and petroleum products in storage," so stored gas is excluded from "goods, wares and merchandise" | Reversed trial court: natural gas severed from realty qualifies as "goods, wares and merchandise" for Freeport purposes (HB 1962 construed as clarifying) |
| Whether HB 1962 (2015) may be applied to clarify inclusion of oil/gas as goods for Freeport claims | HB 1962 clarifies longstanding ambiguity that severed natural gas is tangible personal property and thus falls within Freeport terms | Retroactive application improperly expands scope beyond original intent | Court treated HB 1962 as clarifying and considered it supportive of inclusion; trial court reversal on definitional issue |
| Whether gas allocated to MGE that originated outside Oklahoma acquires taxable situs in Oklahoma | If gas originated outside Oklahoma and was merely in transit/storage, it should not acquire situs | Presence in storage establishes nexus and taxable situs | Affirmed in part: gas stored at Webb for approximately nine months has taxable situs in Oklahoma; thus taxable if Freeport does not apply |
| Remedy on remand | Determine volumes that (1) originated outside Oklahoma, (2) were stored ≤9 months, and (3) were shipped/sold outside Oklahoma for tax year 2011 | County to reassess consistent with Freeport determinations | Remanded for trial court to determine exempt quantities and related facts |
Key Cases Cited
- In the Matter of the Assessment of Personal Property Taxes Against Missouri Gas Energy, a Division of Southern Union Company for Tax Years 1998, 1999, and 2000 v. Missouri Gas Energy, 234 P.3d 938 (Okla. 2008) (addressed taxable situs and origination; declined to decide definitional Freeport question)
- Golsen v. ONG Western, Inc., 756 P.2d 1209 (Okla. 1988) (contracts for sale of natural gas treated as sale of goods under OUCC)
- Austin, Nichols & Co. v. Oklahoma County Bd. of Tax-Roll Corrections, 578 P.2d 1200 (Okla. 1978) (Freeport requirement that property be shipped to final destination outside state)
- Oklahoma Indus. Auth. v. Barnes, 769 P.2d 115 (Okla. 1988) (administrative construction of tax statutes afforded great weight)
- Texas County Irr. & Water Res. Ass'n v. Okla. Water Resources Bd., 803 P.2d 1119 (Okla. 1990) (statutory amendments construed as clarifying when ambiguity exists)
- Barker v. State Insurance Fund, 40 P.3d 463 (Okla. 2001) (summary judgment reviewed de novo)
- Fanning v. Brown, 85 P.3d 841 (Okla. 2004) (questions of law reviewed de novo)