2014 COA 101
Colo. Ct. App.2014Background
- Pioneer Natural Resources operates >2,000 wells and ten compressor/processing sites in Colorado's Raton Basin; its gathering pipelines and fittings move produced natural gas from wells to on-site processing/compressor stations.
- The gathering system maintains line pressure (daily pressure management, pigging, dewatering) and moves unprocessed gas in continuous flow to processing facilities where dehydration and final processing occur before interstate transport.
- The pipelines and fittings at issue were purchased while located in Colorado’s South Central Enterprise Zone.
- Colorado DOR audited the 2003–2004 purchases and denied enterprise-zone/manufacturing sales-tax exemption, finding the gathering pipelines were not used in ‘‘manufacturing’’ under §§ 39-26-709 and 39-80-106.
- Pioneer appealed administratively, then sued for judicial review; the district court granted Pioneer summary judgment. The Colorado Court of Appeals affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether pipelines and fittings used to gather produced natural gas qualify for the enterprise-zone sales-tax exemption as machinery "directly used in manufacturing" (including extracting/processing) | Pipelines move gas from extraction (wells) to processing in a continuous flow and thus are ‘‘machinery’’ directly and predominantly used in manufacturing under § 39-26-709 and § 39-80-106 | "Gathering" is not the same as extracting or processing; the continuous-flow language in § 39-26-709(1)(d) applies only to the manufacturing process described in the preceding sentence and not to natural-gas ‘‘manufacturing’’ covered by the enterprise-zone statute | Pipelines and fittings are machinery used to move material between direct production steps in a continuous flow and, because § 39-80-106 expressly includes extracting/processing as manufacturing, the purchases qualify for the enterprise-zone sales-tax exemption |
Key Cases Cited
- McIntire v. Trammell Crow, Inc., 172 P.3d 977 (Colo. App. 2007) (statutory interpretation reviewed de novo)
- Ball Corp. v. Fisher, 51 P.3d 1053 (Colo. App. 2001) (tax exemptions are construed narrowly)
- Broadmoor Hotel, Inc. v. Dep’t of Revenue, 773 P.2d 627 (Colo. App. 1989) (ambiguities in tax-exemption statutes are construed against taxpayer)
- Bertrand v. Bd. of Cnty. Comm’rs, 872 P.2d 223 (Colo. 1994) (a statutory term’s meaning in one statute does not automatically carry to another statute)