Stеrling Drilling is in the business of drilling wells. Among others, it drills wells for natural gas storage and salt water disposal. As a result of Sterling’s services in drilling these wells, the State Board of Tax Appeals assessed Sterling $154,146 in sales taxes and penalties. Sterling appealed to the district court which reversed the Board, holding Sterling’s services were excluded from sales tax under what is now K.S.A. 1982 Supp. 79-3603(p). The State appeals.
We should note, preliminarily, thе appropriate scope of judicial review. Two rules are applicable:
1. “A district court may not, on aрpeal, substitute its judgment for that of an administrative tribunal, but is restricted to considering whether, as a matter of law, (1) the tribunal acted fraudulently, arbitrarily or capriciously, (2) the administrative order is substantially supported by evidence, and (3) the tribunal’s action was within the scope of its authority.” Kansas State Board of Healing Arts v. Foote,200 Kan. 447 , Syl. ¶ 1,436 P.2d 828 (1968).
2. “The interpretation of a statute is a question of law and it is the function of a court to interpret а statute to give it the effect intended by the legislature.
“While the administrative interpretation of a statute should be given consid *109 еration and weight it does not follow that a court will adhere to the administrative ruling where the statute is clear and the administrativе ruling is erroneous. The final construction of a statute rests within the courts.” Amoco Production Co. v. Armold, Director of Taxation,213 Kan. 636 , Syl. ¶¶ 4 & 5,518 P.2d 453 (1974).
In our view, this case turns upon the interpretation and application of section 79-3603(p), a matter of statutory construction covered by the second rule mentioned and clearly within the province of the trial court and this court to determine.
We turn next to the text of the relevant portions of our general sales tax statute, which, after imposing general sales taxes, in section 79-3603(p) provides the following limitation:
“[E]xceрt that no tax shall be imposed upon the service of installing or applying tangible personal property in conneсtion with the original construction of a building or facility ....
“For the purposes of this subsection:
“ ‘[F]acility’ shall mean a mill, plant, refinery, oil or gas well, water well . . . including the land improvements immediately surrounding such facility . . . .”
The State’s contention, simply put, is that, as used in this statute, a gas well is only a gas well and a water well is only a water well if the driller intends to take gas or water, respectively, from such wells. Wells into which the driller plans to pump gas or watеr, argues the State, are not gas and water wells at all. Thus, the State urges services in drilling gas storage and water disposal wells are outside the exclusion from sales taxation provided by K.S.A. 1982 Supp. 79-3603(p) and subject to tax. The test for taxation, the State cоntends, should be the “intent,” “state of mind” or “aspiration” of the person actually drilling the well: only if the driller intends to strike oil, gas or water wоuld no tax be owed. Sterling, on the other hand, argues that, insofar as the statute is concerned, a “well is a well,” whether gas, watеr or oil are coming up or going down and that such elusive concepts as “driller’s intent” should not determine taxability of importаnt public services.
Before proceeding with an analysis of the case at issue, it is appropriate that we review the controlling rules of statutory construction. Construction of a statute is required when statutes are ambiguous. See
State ex rel. Stephan v. Martin,
In construing a statute, a court must use reason and consider the practicalities of the matter addressed.
Anderson v. Overland Park Credit Union,
Little legislative history еxists for 79-3603(p). The Kansas Supreme Court found the earlier version of the statute unconstitutionally vague in
Kansas City Millwright Co., Inc. v. Kalb,
A careful examination of 79-3603(p) also reveals, in our judgment, a clear motive on the part of the legislature to promote real estate and mineral development generally; It is not simply wells which are exempted, but all “original construction” of “buildings” and “fаcilities,” as defined. Nothing on the face of the statute shows any indication to limit the definition of gas or water wells to those from which thе driller aspires to extract gas or water. An irony appearing in the record in this case provides *111 ample illustration of the fallacy of the State’s “original intent” argument: while drilling some of the “storage” and “disposal” wells in question, Sterling struck oil!
The State argues that services in drilling “producing wells” are excluded from taxation and that services in drilling “storage and disposal wells” are taxаble. Yet, if the State’s proposed “original intent” test were adopted this result would not necessarily follow. For example, services in drilling a producing oil well would be subject to tax if the driller “intended” to drill a storage well but struck oil instead. Conversely, the “intent” to strike oil would exempt services rendered in drilling a dry hole, even if that dry hole were later converted to a storage or disposal well. Further, whose intention should we examine? The driller? The landowners? The lessees? Other royalty owners? The State’s рroposal is unworkable, and thus unlikely to have been legislatively intended.
In summary, from the language of the statute (indicating no intended limitation as to “type” of well excluded), from the géneral scheme and history of the entire statute and from principles of lоgic and. practicality, we conclude K.S.A. 1982 Supp. 79-3603(p) excludes from sales taxation, inter alia, all gas and water wells irrespective of whether those wells were originally intended to be storage, disposal or production wells.
Accordingly, the judgment by the trial court is affirmed.