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Avanti Exploration, LLC v. Robinson

Court of Appeals of Louisiana, Third Circuit

April 17, 2019

AVANTI EXPLORATION, LLC
v.
KIMBERLY ROBINSON, SECRETARY, LOUISIANA DEPARTMENT OF REVENUE

          APPEAL FROM THE BOARD OF TAX APPEAL 3RD PARISH OF BOARD OF TAX APPEAL 3RD, NO. BTA9608D HONORABLE ANTHONY JOHN GRAPHIA, DISTRICT JUDGE

          Eulis Simien, Jr. Roy Bergeron, Jr. Simien & Simien, L.L.C. Defendant/Appellant - Kimberly Robinson, Secretary, Louisiana Department of Revenue

          James C. Exnicios Cheryl Mollere Kornick Randy J. Marse, Jr. Liskow & Lewis, APLC Plaintiff/Appellee - Avanti Exploration, LLC

          Court composed of Ulysses Gene Thibodeaux, Chief Judge, Billy Howard Ezell, and John E. Conery, Judges.

          ULYSSES GENE THIBODEAUX CHIEF JUDGE.

         In this tax case, the plaintiff taxpayer, Avanti Exploration, LLC (Avanti), disputes additional severance taxes assessed against it by the defendant, Kimberly Robinson, Secretary, Louisiana Department of Revenue (Department). Avanti filed a petition with the Board of Tax Appeals (Board). Both Avanti and the Department filed motions for summary judgment, and the Board found in favor of Avanti. The Department now appeals the Board's judgment granting summary judgment to Avanti. Following our de novo review, we find no issue of material fact and find that Avanti is entitled to summary judgment as a matter of law. We affirm the judgment of the trial court.

         I.

         ISSUE

         We must decide whether the Board erred in applying La.R.S. 47:633(7)(a) and applicable law in granting summary judgment to Avanti.

         II.

         FACTS AND PROCEDURAL HISTORY

         Avanti is engaged in the oil & gas production business in Louisiana, operating various wells and producing oil from mineral leases in Beauregard Parish. As a producer who severed the natural resource from the ground, Avanti was subject to the Louisiana oil severance tax levied under La.R.S. 47:633(7). The statute bases the tax on the value of the oil at the time and place of severance on the lease in the field. The severance tax is calculated on the producer's gross receipts on sales or by the posted field price, whichever is higher. However, if a producer incurs transportation costs in getting his product to market, to a point of sale off the lease, he can subtract the transportation costs from his gross receipts and calculate the severance tax on the reduced amount.

         Avanti sold the oil produced from the leases pursuant to contracts with buyers. The contracts obligated the initial buyer, the "first purchaser," to take title and delivery of the oil at the lease where production occurred. Therefore, Avanti did not have to transport its oil to market, or to a point of sale off the lease, and its severance tax payments should have been based upon its gross receipts, without any reduction/deduction for transportation costs.

         At issue in this case are Avanti's contracts with two of its first purchasers, Phillips 66 Company (Phillips), and Cokinos Energy Corporation (Cokinos). Each contract contained a negotiated price formula to establish the sales price to be paid to Avanti for the oil it conveyed to the buyer at the lease each month during the term of the contract. The price formulas in Avanti's contracts with its buyers began with published, oil market center prices for the month of production and made various positive and negative adjustments to arrive at a lower price to be paid for the crude oil being sold at the lease.

         Pursuant to the contracts and La.R.S. 47:638, the buyer was required to calculate, deduct, and withhold from Avanti's gross proceeds, the appropriate amount of severance tax due under La.R.S. 47:633 before remitting payment to Avanti, but the ultimate tax liability remained with Avanti under La.R.S. 47:637. After withholding the severance tax, the buyer would then file the necessary severance tax returns and remit the taxes to the Department. Following the payment of taxes on Avanti's behalf by its purchasers, Phillips and Cokinos, the Department performed an audit of Avanti's records and found that Avanti had impermissibly reduced its gross receipts, and its tax computation, by subtracting transportation costs that were not allowed in its case since it sold its oil on the lease.

         The Department issued a notice of assessment to Avanti for additional severance taxes for the tax period of January 1, 2012, through December 31, 2014. The total assessment was $119, 463.67, which included taxes in the amount of $79, 783.73, together with interest in the amount of $10, 567.65 and penalties in the amount of $29, 112.29. Except for specific amounts that Avanti admitted to owing because of well-classification errors and unfiled reports, Avanti disputed the additional severance tax and filed a petition for redetermination of the assessment. Subsequently, Avanti and the Department filed motions for summary judgment.

         Following a hearing, the Board found in favor of Avanti, granting its motion for summary judgment while denying the Department's motion for summary judgment. The Department brought this appeal. For the following reasons, we affirm summary judgment in favor of Avanti.

         III.

         STANDARD OF REVIEW

Summary judgments are reviewed de novo on appeal, with the reviewing court using the same criteria that govern the trial court's determination of whether summary judgment is appropriate; whether there is any genuine issue of material fact, and whether the movant is entitled to judgment as a matter of law. La.Code Civ.P. art. 966.

Smith v. Robinson, 18-728, p. 5 (La. 12/5/18), So.3d .

         IV.

         LAW AND DISCUSSION

         Applicable Law

         Louisiana imposes a severance tax on oil and other natural resources as they are severed from the ground or water. Louisiana Constitution Article 7, § ...


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