Gas Producers Must Refund Ad Valorem Tax

Fortnightly Magazine - November 1 1997
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The Federal Energy Regulatory Commission has ordered natural gas producers in Kansas to refund to customers approximately $500 million for erroneously adding the state's ad valorem tax onto interstate rates.

In its Sept. 10 ruling, the FERC said such taxes are not eligible for rate recovery under the Natural Gas Policy Act of 1978 and, following court directive, ordered the customer refund. (See, Docket Nos. rp97-369-000 et al.).

DC PSC RFP Technical Consultant for Formal Case (FC) No. 1156

The refund covers gas produced from October 1983, when the petition challenging the add-on tax originally was filed at the FERC, until June 1988. In 1988, the D.C. Circuit Court had ruled the tax was not eligible for recovery and ordered it removed from interstate rates. (See, Colorado Interstate Gas Co. v. FERC, 850 f.2d 769 [D.C.Cir. 1988.])

Amoco Production Co., Anadarko Petroleum Corp., Mobil Oil Corp., OXY USA Inc., Union Pacific Resources Co., and other smaller producers were ordered to issue refunds to pipelines within 180 days.

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