Commonwealth Edison Company v. Montana

PETITIONER: Commonwealth Edison Company
RESPONDENT: Montana
LOCATION: Western District Court of Kentucky

DOCKET NO.: 80-581
DECIDED BY: Burger Court (1975-1981)
LOWER COURT: Montana Supreme Court

CITATION: 453 US 609 (1981)
ARGUED: Mar 30, 1981
DECIDED: Jul 02, 1981

ADVOCATES:
Michael T. Greely - on behalf of the Appellees
William P. Rogers - on behalf of the Appellants

Facts of the case

Question

Media for Commonwealth Edison Company v. Montana

Audio Transcription for Oral Argument - March 30, 1981 in Commonwealth Edison Company v. Montana

Warren E. Burger:

We'll hear arguments next in Commonwealth Edison et al. v. Montana.

Mr. Rogers, I think you may now proceed whenever you wish.

William P. Rogers:

Mr. Chief Justice, and may it please the Court:

This is a challenge to a Montana tax based on the Commerce Clause and the Supremacy Clause.

The tax was enacted in 1975.

Prior to 1975 there was an array of taxes in Montana, including a net proceeds tax, a property tax, license tax, and a severance tax.

In addition, the state received royalties from the Federal Government to cover the impact of mining coal in Montana.

And the coal companies... mindful of the problems they had with Anaconda Copper and earlier, provided that the coal companies had to reclaim the land as they mined and they had to post substantial bonds to guarantee that the land would be properly reclaimed.

So presumably, the taxes on the books at that time were sufficient to meet the cost of the services provided by Montana.

In fact... and I point out that this tax was a 1975 tax... in 1973 the severance tax had been increased from 10 cents a ton, based on BTU, to approximately 34 cents a ton.

Shortly thereafter, the Arab oil embargo occurred and it became clear that the nation was facing a very serious energy crisis.

So Montana saw an opportunity.

Montana has more than 25 percent of the coal reserves in the United States and it started to plan how it could maximize its taxes.

The spirit in which it was done was exemplified by one of its sponsors in the House of Representatives when he said, the Arabs have the oil but we have the coal.

Most of this coal is shipped out of the state; 90 percent of it, in fact.

And the coal is leased under long-term contracts, so the discussion in the Legislature for the most part involved the question, how much would the market xx?

The Legislature was advised that the amount of the tax would not be subject to any judicial review.

William H. Rehnquist:

Well, Mr. Rogers, are you suggesting that the State of Montana could not have doubled its severance tax at any particular time?

William P. Rogers:

No, we're not.

We're claiming that, actually, Montana in this cases did not meet the tests of Complete Auto and Washington Stevedoring.

We don't claim that they're not entitled to tax.

We think that the tax because it was specifically tailored to fall on customers outside the state has to be fairly related to the services provided by Montana.

The result of this tax--

Harry A. Blackmun:

In any event, there was no challenge to the lower rate periods?

William P. Rogers:

--None.

And I might say, parenthetically, there would not have been.

It was the amount of this tax that--

Harry A. Blackmun:

According to the courts below, have you conceded that a 50 percent tax would be?

William P. Rogers:

--No, we have not, Your Honor.

That is a misstatement.