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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Exxon Mobil Corporation, a New Jersey Corporation, Hillcorp Alaska, LLC, and SAExploration, Inc. v. State of Alaska, Department of Revenue (6/11/2021) sp-7536
Notice: This opinion is subject to correction before publication in the P ACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@akcourts.us.
THE SUPREME COURT OF THE STATE OF ALASKA
EXXON MOBIL CORPORATION, )
) Supreme Court No. S-17674
Appellant, )
) Superior Court No. 3AN-18-07193 CI
v. )
) O P I N I O N
STATE OF ALASKA, )
DEPARTMENT OF REVENUE, ) No. 7536 - June 11, 2021
)
Appellee. )
)
Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Eric. A. Aarseth, Judge.
Appearances: Jonathan E. Iversen and S. Lane Tucker, Stoel
Rives LLP, Anchorage, for Appellant. Mary Hunter
Gramling and Patrick Sherry, Assistant Attorneys General,
Anchorage, and Kevin G. Clarkson, Attorney General,
Juneau, for Appellee.
Before: Bolger, Chief Justice, Winfree, Maassen, and
Carney, Justices. [Borghesan, Justice, not participating.]
WINFREE, Justice.
I. INTRODUCTION
An oil producer challenged a Department of Revenue advisory bulletin
interpreting the oil tax code, arguing that the bulletin violated the Alaska Administrative
Procedure Act (APA) and seeking a declaratory judgment that the interpretation was
contrary to law. We hold that the advisory bulletin cannot be challenged under the APA
----------------------- Page 2-----------------------
because it is not a regulation and that a declaratory judgment is not available because the
tax dispute between the parties is not ripe. We therefore affirm the superior court's grant
of summary judgment to the Department.
II. FACTS AND PROCEEDING S
A. Facts
1. Overview of oil production tax and tax credits
Oil and gas producers in Alaska have been subject to an annual production
1
tax since 1977. In 2006 the legislature amended the statutory framework to establish
2
a minimum production tax that North Slope oil producers must pay. The oil production
tax statutes have included a variety of tax credits that North Slope producers may obtain
or earn and then use to reduce or eliminate their total tax liabilities, even below the
minimum tax amount. For example, producers previously could earn tax credits for
3 4
certain capital expenditures and exploration activities, and those producing less than
a specified amount of oil may earn what are often referred to as small producer credits
5
to offset their tax liabilities.
In 2013 the legislature added two new oil production tax credits: the
1 Ch. 136, § 1, SLA 1977 (codified at AS 43.55.011(e)).
2
Ch. 2, § 5, TSSLA 2006; (codified at AS 43.55.011(f)) (applying to
production "north of 68 degrees North latitude").
3 AS 43.55.023(a)(3). For North Slope production this credit applies only
to capital expenditures made before January 1, 2014. Id.
4 AS 43.55.025. For North Slope production this credit applies only to
exploration activities between June 30, 2008 and July 1, 2016. AS 43.55.025(b)(1).
5 AS 43.55.024(c).
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6 7
"$5 per barrel" tax credit and the "sliding scale" tax credit. The $5 per barrel tax credit
8
gives producers a tax credit of $5 for each barrel of taxable oil meeting certain criteria.
The sliding scale tax credit, which varies from $0 to $8 per barrel depending on the price
of oil, gives producers a tax credit for each barrel of taxable oil that does not meet the
criteria for the $5 per barrel tax credit.9 When these credits were established, the capital
expenditure credit previously available to North Slope producers was eliminated.10
As originally proposed in the 2013 legislature, and as with other tax credits
available to North Slope producers at the time, a producer would be prohibited from
using the sliding scale tax credit to reduce its tax liability below zero.11 The bill's
sponsor later introduced an amendment to "make sure that the floating per barrel credit
does not run the total tax bill below the minimum tax[, s]o it ensures that [the] 4 percent
6 Ch. 10, § 21, SLA 2013 (codified at AS 43.55.024(i)).
7 Id. (codified at AS 43.55.024(j)).
8 AS 43.55.024(i).
9 AS 43.55.024(j).
10 See ch. 10, § 14, SLA 2013 (codified at AS 43.55.023(a)(3)(A)) (adding
sunset provision to capital expenditure credit for North Slope production).
11 See House Res. Standing Comm., Work Draft of Proposed S.B. 21, 28th
Leg., 1st Sess. at § 25 (Apr. 2, 2013) (codified at AS 43.55.024(j)) ("A tax credit
authorized by this subsection may not reduce a producer's tax liability for a calendar year
under [the production tax] to below zero."); cf., e.g., AS 43.55.025(i)(1) (2013)
(exploration tax credit "may not be applied to reduce a taxpayer's tax liability under [the
production tax] below zero for a calendar year"); AS 43.55.024(g) (2013) (small
producer credit "may not be applied to reduce a producer's tax liability for any calendar
year under [the production tax] below zero").
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12
minimum tax on the gross is retained - no matter what - within the legacy fields."
The amendment provided that a sliding scale tax credit "may not reduce a producer's tax
13 The
liability for a calendar year under [the production tax] below the [minimum tax]."
14
amendment passed without objection, and the bill was signed into law in June 2013.
The Department thereafter amended some of its regulations and added
15 Alaska Administrative Code (AAC) 55.335(g), providing:
If a producer's application of tax credits other than a [sliding
scale tax credit] against a [production tax] reduces the
producer's tax liability to the amount calculated for a
calendar year after 2013 under [the minimum tax] or less, the
producer may not apply a [sliding scale tax credit] against the
tax for that calendar year. If a producer's application of tax
credits other than a [sliding scale tax credit] against a
[production tax] does not reduce the producer's tax liability
to the amount calculated for a calendar year after 2013 under
[the minimumtax] or less, the producer may apply against the
tax no more than the portion of a [sliding scale tax credit] that
is equal to the difference between the amount calculated for
the calendar year under [the minimum tax] and the tax
liability after reduction by application of tax credits other
than a [sliding scale tax credit]. In calculating that reduction,
if the tax credits to be applied include one or more tax credits
subject to a percentage limitation . . . , calculation of the
percentage limitations under 15 AAC 55.375(a) must take
12 Minutes, House Res. Standing Comm. Hearing on S.B. 21, 28th Leg., 1st
Sess. 1:52-1:54 a.m. (Apr. 4, 2013) (testimony of Rep. Feige, sponsor of Amendment
33).
13 See Committee Substitute for Senate Bill (C.S.S.B.) 21 (Res), 28th Leg.,
1st Sess. (2013); House Res. Standing Comm., Conceptual Amendment 33, 28th Leg.,
1st Sess. (Apr. 4, 2013).
14 Minutes, House Res. Standing Comm. Hearing on S.B. 21, 28th Leg., 1st
Sess. 1:52-1:54 a.m. (Apr. 4, 2013); 2013 Senate Journal 1291.
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----------------------- Page 5-----------------------
account of any [sliding scale] tax credit or portion of a
[sliding scale] tax credit . . . the producer will apply against
the producer's tax, to the extent allowed under this
subsection.[15]
The Department's prior regulations had provided a default ordering for
applying oil tax credits but permitted producers to apply their tax credits in any order
they chose.16 But when the Department promulgated 15 AAC 55.335(g), it amended its
other regulations to provide that the default ordering and a producer's ability to order its
tax credits were "subject to 15 AAC 55.335(g)."17
2. The Department's 2017 nonbinding advisory bulletin
The Department is statutorily authorized to issue nonbinding interpretive
advisory bulletins "for the information and guidance of producers, explorers, and other
18 In 2017 the Department issued an advisory bulletin in response
interested persons."
to "inquiries from various taxpayers and holders of tax credit certificates" regarding the
applicability of tax credits against the production tax and "under what circumstances, if
any, a tax credit certificate may be used to reduce a taxpayer's tax liability below [the
minimum tax]." The Department explained in the advisory bulletin that, based on the
plain language of the tax credit statute, the relevant legislative history, the commutative
15 Notice of Adopted Changes to Regulations of the Department of Revenue,
Tax Division, Register 208 (Jan. 2014) 33-34 (codified at 15 AAC 55.335(g)).
16 Former 15 AAC 55.375(a), (c) (2012).
17 Notice of Adopted Changes to Regulations of the Department of Revenue,
Tax Division, Register 208 (Jan. 2014) 34-35 (codified at 15 AAC 55.375(a),(c)).
18 AS 43.55.110(g).
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19
property of math, and its regulations, a producer choosing to use a sliding scale tax
credit to reduce its tax liability could not reduce its tax liability below the minimum tax.
The Department explained that this was the case even though a producer could use a
combination of other tax credits to reduce its liability to zero. According to the
Department, using the sliding scale tax credits, alone or in combination with other tax
credits, "creates a 'hard floor' as limited by [the minimum tax] to the effect that, 'no
matter what,' the '4 percent minimum tax on the gross is retained.' " The Department
stated that the bulletin was "issued for the information and guidance of producers,
explorers, and other interested persons . . . and as provided in AS 43.55.110(g),
interpretations stated in this advisory bulletin are not binding on the Department or
others." The advisory bulletin's practical effect is that it cautions producers about using
sliding scale credits to reduce tax liability to the minimum amount and then using other
tax credits to reduce tax liability below the minimum amount.
3. Enforcement of the oil tax statutes
Production tax payments are made in monthly installments, and tax returns
20 The Department is authorized to audit returns to determine whether
are filed monthly.
a producer has paid the correct tax amount.21 If the Department determines that a
producer has failed to pay the correct amount, the Department assesses the amount due
(an assessment).22 The Department generally must make an assessment within six years
19 Commutative, B LACK'S LAW DICTIONARY (9th ed. 2009) ("The substitution
of one form of payment for another.").
20 AS 43.55.020(a)(5); 15 AAC 55.520(a). Producers also are required to file
an annual return. See AS 43.55.030(a).
21 See AS 43.55.040-.060.
22 AS 43.05.245.
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23
after a return is filed. A producer disputing an assessment may request an informal
24
conference with the Department.
In limited circumstances a producer may appeal an
informal conference's outcome directly to the superior court, but generally a producer
25 A producer then may appeal an
first must seek review in an administrative hearing.
administrative hearing's outcome to the superior court.26
B. Proceedings
Exxon Mobil Corporation is a New Jersey corporation conducting oil and
gas exploration and development. Exxon is subject to the production tax on its oil and
gas activities in Alaska, and it is subject to the minimum production tax.27 Exxon has tax
credits it can use to reduce its tax liability, including sliding scale tax credits under
AS 43.55.024(j) and $5 per barrel tax credits under AS 43.55.024(i).
Exxon brought suit against the Department, seeking relief under
AS 44.62.300(a), the judicial review provision of the APA, and AS 22.10.020(g), the
Declaratory Judgment Act. Exxon alleged that issuing the advisory bulletin violated
APA rulemaking requirements, that the bulletin is contrary to law, and that equitable
estoppel should bar the Department from applying the bulletin retroactively. Exxon
23 AS 43.55.075(a).
24 AS 43.05.240(a).
25 AS 43.05.241; AS 43.05.242(a)-(b) ("An appeal [directly to the superior
court] may be taken from an informal conference decision only with respect to an issue
in the assessment for tax, interest, and penalties that the taxpayer raises upon the ground
that a tax statute or regulation is (1) violative of the United States Constitution; (2)
violative of the state constitution; or (3) preempted by federal statute, regulation, or
treaty.").
26 AS 43.05.480.
27 See AS 43.55.011(e)-(f).
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----------------------- Page 8-----------------------
asked the superior court to declare the bulletin void and to enjoin the Department from
28
enforcing it. Both parties sought summary judgment.
The superior court granted the Department's summary judgment motion.
The court stated that under AS 22.10.020(g), it could hear the request for declaratory
judgment only if an actual controversy were presented. The court concluded that there
was no actual controversy because Exxon's claims were not ripe. The court noted that
Exxon had neither suffered an injury nor shown that a hardship would occur if the court
did not reach the merits of the claims. The court further noted that "[t]he normal risks
associated with deciding hypothetical cases [were] present" because Exxon was "not
seeking relief from unspecified taxes but rather asking for a determination on the
meaning of the law." The court concluded that "[t]he risks of decision greatly outweigh
[Exxon's] need for decision." The court also noted that even after the Department
assesses a tax Exxon must exhaust its administrative remedies under the tax code before
29 Without explaining why Exxon's APA claim failed, the court
seeking judicial review.
granted the Department summary judgment on Exxon's claims.
Exxon appeals, arguing that the superior court erred by concluding that
Exxon's claims were not ripe and that exhaustion was required. Exxon also argues that
the advisory bulletin is a regulation contrary to law and that, even if it is not contrary to
law, it cannot be applied retroactively.
28 See Alaska R. Civ. P. 56(c) (providing party is entitled to summary
judgment if there is no genuine issue of material fact and party is entitled to judgment as
matter of law).
29 See AS 43.05.480(a).
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III. STANDARD OF REVIEW
30
We review a grant of summary judgment de novo,
and we review whether
31
an issue is ripe for judicial decision de novo.
IV. DISCUSSION
A. The Department Is Entitled To Summary Judgment On The APA
Claim Because The Advisory Bulletin Is Not A Regulation.
The APA's judicial review provision states: "An interested person may get
a judicial declaration on the validity of a regulation by bringing an action for declaratory
32
Exxon argues that the advisory bulletin is a regulation that
relief in the superior court."
was not properly adopted under the APA. Although the superior court did not explain
why the Department was entitled to summary judgment on the APA claim, we conclude
that the APA claim fails as a matter of law because the advisory bulletin is not a
regulation under the APA.
A regulation is "every rule, regulation, order, or standard of general
application or the amendment, supplement, or revision of a rule, regulation, order, or
standard adopted by a state agency to implement, interpret, or make specific the law
33 " '[R]egulation' includes . . . 'guides to enforcement,'
enforced or administered by it."
'interpretative bulletins,' 'interpretations,' and the like, that have the effect of rules,
orders, regulations, or standards of general application,"34 but "not every agency action
30 RBG Bush Planes, LLC v. Kirk , 340 P.3d 1056, 1060 (Alaska 2015).
31 Id.
32
AS 44.62.300(a).
33 AS 44.62.640(a)(3).
34 Id.
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----------------------- Page 10-----------------------
35
or decision constitutes a regulation." An agency's interpretation is a regulation under
36
the APA if it meets two criteria.
First, the interpretation must "implement[], interpret[],
37 Second, the
or make[] specific the law enforced or administered by the agency."
interpretation must "affect[] the public" or be "used by the agency in dealing with the
public."38 Obvious, common sense interpretations of existing law are not regulations
under the APA.39
Pointing to the definition of regulation, Exxon argues that the advisory
bulletin is, "at the very least, an 'interpretative bulletin' or an 'interpretation.' "40 The
Department responds that the advisory bulletin is not a regulation because it is a
nonbinding, common sense interpretation of existing law.
We conclude that the advisory bulletin is not a regulation because it does
not satisfy the second prong; the advisory bulletin does not affect the public, and the
Department does not rely on the bulletin in its interactions. The legislature expressly
authorized the Department to issue advisory bulletins interpreting the oil production tax
41 Advisory bulletins under AS 43.55.110(g) are, by definition,
statutes and regulations.
limited in their ability to affect parties or be relied on by the Department in dealing with
35 Chevron U.S.A., Inc. v. State, Dep't of Revenue, 387 P.3d 25, 35-36 (Alaska
2016).
36 Id. at 36.
37 Id. (quoting State, Dep't of Nat. Res. v. Nondalton Tribal Council, 268 P.3d
293, 300-01 (Alaska 2012)).
38 Id. (quoting Nondalton Tribal Council, 268 P.3d at 301).
39 Id. at 36-37.
40 See AS 44.62.640(a)(3).
41 AS 43.55.110(g).
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----------------------- Page 11-----------------------
parties: The Department is prohibited from making an advisory bulletin binding on the
42
Department or a regulated party without going through the APA rulemaking process.
The Department conceded that it "cannot solely base any assessment decision" on its
advisory bulletin, and we agree that the Department may not treat the advisory bulletin
as a dispositive interpretation of the oil tax code in future enforcement actions.
The legislature chose to authorize the Department to issue interpretations
of oil production tax statutes "for the information and guidance of producers" without
going through the APA's rulemaking procedures.43 The legislature chose to prioritize
the efficient distribution of Department guidance over the benefits of notice and
comment rulemaking.44 And, in light of this policy decision, it is illogical that the
42 Id. ("Unless otherwise provided by the [D]epartment by regulation,
interpretations stated in the advisory bulletins are not binding on the [D]epartment or
others.").
43 See id. ("Notwithstanding AS 44.62, the [D]epartment may issue . . .
advisory bulletins stating the [D]epartment's interpretation of provisions of this chapter
and of regulations adopted under this chapter." (emphasis added)). The Department
unpersuasively argues that "[n]otwithstanding AS 44.62" means that advisory bulletins
are exempt from the APA entirely. "Notwithstanding" means "in spite of."
Notwithstanding, BLACK 'S LAW DICTIONARY (11th ed. 2019). Alaska
Statute 43.55.110(g) thus permits the Department to issue advisory bulletins despite the
APA'S rulemaking provisions that otherwise would require additional actions. See
AS44.62.180-.290 (providingproceduresfor adoptingregulations);AS44.62.640(a)(3)
(defining "regulation" as including " 'interpretative bulletins' . . . that have the effect of
rules, orders, regulations, or standards of general application").
44 See AS 43.55.110(g). Because of this legislative policy choice, our case
law holding that common sense interpretations of law are not regulations under the APA
is inapplicable in this case. Common sense interpretations of law are not regulations
because they are so obvious that requiring rulemaking, designed to provide notice to
regulated parties and to give them an opportunity to comment, would be redundant. See,
e.g., Chevron U.S.A., 387 P.3d at 36. The legislature has made a policy decision not to
(continued...)
-11- 7536
----------------------- Page 12-----------------------
legislaturewould haveintended nonbinding advisory bulletins tobesubjecttoimmediate
judicial review under the APA. We thus hold that a nonbinding interpretive advisory
bulletin under AS 43.55.110(g) is not a regulation under the APA.
The advisory bulletin is not a regulation, and the Department was entitled
to summary judgment on Exxon's APA claim. Because we conclude that the nonbinding
advisory bulletin is not a regulation under the APA, we also reject Exxon's argument that
45
the advisory bulletin is a prohibited retroactive regulation.
B. The Department Is Entitled To Summary Judgment On Exxon's
Declaratory Judgment Claim Because It Is Not Ripe.
The Alaska Declaratory Judgment Act, AS 22.10.020(g), provides:
In case of an actual controversy in the state, the superior court, upon
the filing of an appropriate pleading, may declare the rights and
legalrelations ofan interested party seeking thedeclaration, whether
or not further relief is or could be sought. The declaration has the
force and effect of a final judgment or decree and is reviewable as
such. Further necessary or proper relief based on a declaratory
judgment or decree may be granted, after reasonable notice and
hearing,againstan adversepartywhoserights havebeen determined
by the judgment.
"The 'actual controversy' limitation in Alaska's declaratory judgment act
46
reflects a general constraint on the power of courts to resolve cases." The actual
44 (...continued)
require rulemaking procedures for these nonbinding advisory bulletins, and whether the
advisory bulletin is sufficiently "obvious" is not relevant in this case.
45 See AS 44.62.240 (limiting retroactive application of regulations).
46 State v. ACLU of Alaska , 204 P.3d 364, 368 (Alaska 2009) (footnote
omitted).
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----------------------- Page 13-----------------------
controversy requirement is not satisfied if a case is not ripe. 47
The superior court dismissed Exxon's request for declaratory relief,
concluding that it had failed to present an actual controversy. Specifically, the court held
that Exxon's claim was not ripe because the Department had not yet assessed a tax
against Exxon. The court noted that, in any event, Exxon would have to exhaust its
administrative remedies if a tax were assessed.
Exxonarguesthat its challengeto theDepartment'sadvisory bulletin is ripe
for review because the advisory bulletin "retroactively expos[es Exxon] to tax liability
and civil penalties on tax filings it had already made prior to 2017[] and expos[es] Exxon
to future liability for taxes in 2018 and beyond (that Exxon has since been obliged to file
and pay)." (Emphasis in original.) Exxon emphasizes that the issue is fit for judicial
review because whether the advisory opinion is contrary to law "is a purely legal
question that will never get more ripe." Exxon argues that it needs to know the legal
status of the advisory bulletin because otherwise, "[it] is left with two bad choices: either
pay taxes it does not legally owe, or disregard the 2017 [a]dvisory [b]ulletin and 'risk
enforcement penalties.' " Exxon contends that the risks of granting declaratory relief are
minimal because no further factual development will aid in the decision and "further
agency action would 'shed little if any light on these questions.' "
The Department responds that Exxon's claim does not present an actual
controversy. The Department contends that Exxon is "seek[ing] relief from taxes,
penalties, and interest in unspecified amounts that [the Department] has not assessed."
48 the Department argues that our decision stands for the
Pointing to Hickel v. Halford,
47 Id.
48 872 P.2d 171, 186 (Alaska 1994) (holding "administrative proceeding" as
used in article IX, section 17 of the Alaska Constitution "begins, for tax purposes, with
(continued...)
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conclusion that tax cases are not ripe unless and until the Department has issued a tax
assessment following an audit. The Department also points out that it "is not required
to follow" and "cannot solely base any assessment decision" on the advisory bulletin.
The Department adds that Exxon faces little hardship from the declaratory judgment
claim's dismissal because Exxon will have an opportunity to appeal any taxes that are
assessed. The Department emphasizes that all taxpayers, including Exxon, "ha[ve]
uncertain tax liability in [their] unaudited returns."
"[R]ipeness depends on 'whether . . . there is a substantial controversy,
between parties having adverse legal interests, of sufficient immediacy and reality to
49 In analyzing whether a dispute is
warrant the issuance of a declaratory judgment.' "
ripe, "[w]e examine 'the fitness of the issues for judicial decision' and 'the hardship to
50 Issues are not fit for judicial decision
the parties of withholding court consideration.' "
if an injury is too speculative.51 Although " 'pure legal questions that require little
factual development are more likely to be ripe,' a party bringing a preenforcement
challenge must nonetheless present a 'concrete factual situation.' "52
48 (...continued)
the issuance of an assessment to the taxpayer").
49 ACLU of Alaska , 204 P.3d at 369 (alteration in original) (quoting Brause
v. State, Dep't of Health & Soc. Servs. , 21 P.3d 357, 359 (Alaska 2001)).
50 Id. (quoting Brause, 21 P.3d at 359).
51 See RBG Bush Planes, LLC v. Kirk, 340 P.3d 1056, 1066-68 (Alaska 2015)
(due process claimwas not ripe because plaintiff had failed to avail himself of procedural
safeguards designed to remedy complained of tribunal bias).
52 ACLU of Alaska , 204 P.3d at 368 (quoting Alaska Right to Life Political
Action Comm. v. Feldman , 504 F.3d 840, 849 (9th Cir. 2007)).
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We described the point at which tax disputes are appropriate for judicial
review in Hickel, although the issue before us was not precisely the same as the one now
53 We defined and analyzed the term "administrative proceeding" as used in
before us.
article IX, section 17(a) of the Alaska Constitution, and we determined that an essential
attribute of an administrative proceeding is that "a dispute must exist for the proceeding
to resolve."54 We concluded that a dispute arose in the tax collection context when a tax
assessment was issued, but not before:
Prior to the time that an assessment is issued, the taxpayer has
either filed or failed to file a return. If the taxpayer has filed
a return, this may be considered an assertion by the taxpayer
that the amount stated, and only the amount stated, is due
. . . . If [the Department] then issues an assessment to the
taxpayer, demanding additional tax payments (with interest
and penalties), then there has been 'an assertion of a right,
claim or demand on one side, met by contrary claims or
allegations on the other' and a dispute exists.[55]
And in Standard Alaska Production Co. v. State, Department of Revenue we specifically
rejected a Department argument that a taxpayer's claim was not ripe because "the
Department ha[d] already taken action against [the taxpayer] by levying a tax which [the
taxpayer] must either pay or appeal."56
Exxon's claimis not fit for judicial decision because there is no existing tax
dispute between the parties, and any injury Exxon eventually may suffer is speculative.
53 872 P.2d at 178-82.
54 Id. at 178.
55 Id. at 181-82 (footnote omitted) (quoting Dispute, BLACK 'S LAW
DICTIONARY (6th ed. 1990)).
56 773 P.2d 201, 210 n.14 (Alaska 1989).
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----------------------- Page 16-----------------------
Exxon attempts to present the advisory bulletin's validity as a purely legal question, but
the advisory bulletin is not the Department's final legal determination of Exxon's tax
liability. We decided that the advisory bulletin is not a binding regulation; the bulletin's
57
interpretation, by its terms and by statute, is not binding on the Department or Exxon.
If and when the Department disputes Exxon's tax returns or payments by issuing an
assessment, a dispute will arise. As the superior court correctly pointed out, once a
dispute arises Exxon likely will need to exhaust its administrative remedies.58 There is
a clear benefit to the Department using its administrative expertise about the oil
production tax framework to consider issues and defend or alter its current interpretation
in the administrative process. The issue thus is not yet fit for judicial decision.
Exxon also will experience little hardship from denial of declaratory relief.
The "legal and regulatory uncertainty" Exxon complains of is not unique. All taxpayers
- whether oil companies or individuals - read the tax code (often with the help of
licensed professionals) and determine what tax amount the law requires them to pay.
When a tax credit or a write-off is claimed, there is a risk that the taxing authority will
disagree with the taxpayer's interpretation of the law and that the taxpayer will be
required to pay the correct tax plus penalties and interest. Exxon's position is no
different.59 The advisory bulletin provided Exxon additional information that may have
57 See AS 43.55.110(g).
58 See supra notes 23-25 (describing administrative appeals process).
59 Exxon argues that its challenge is similar to the pre-enforcement challenge
in State v. Native Village of Tanana, 249 P.3d 734 (Alaska 2011). But that case is
readily distinguishable. In Native Village of Tanana we held that a dispute about
inherent tribal sovereignty relating to child custody proceedings under ICWA was ripe
because, unlike the abstract constitutional challenge at issue in a previous case, "Indian
(continued...)
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----------------------- Page 17-----------------------
changed its risk calculation, but a nonbinding guidance document does not create a
hardship if there was none before. The bulletin is beneficial; it provides guidance to
producers trying to make sense of a very complicated set of statutes and regulations and
helps producers assess the likelihood of a dispute with the Department.
Exxon complains that by denying declaratory relief, the superior court
intimated: "Exxon should sit idly by and let interest and penalties accrue while it waits
for an enforcement audit (which can take up to six years) and only then challenge the
threshold legal issue through an administrative appeal of the audit." But Exxon
conceded at oral argument to us that it has another remedy if it wishes to begin the
administrative process sooner - Exxon is permitted to pay production taxes under
60 Exxon's claim therefore is not
protest and then request a refund from the Department.
ripe, and the superior court properly granted the Department summary judgment on the
declaratory judgment claim.
V. CONCLUSION
We AFFIRM the superior court's entry of summary judgment.
59 (...continued)
children may [have been] at risk of harm because of the State's refusal to coordinate and
cooperate with tribes regarding reports of harm" and Indian children and their parents
faced a possibility of "legal limbo" due to "the State's refusal to give full faith and credit
to tribal adoption decrees." Id. at 749. The harm Exxon faces as a taxpayer awaiting an
audit and assessment is clearly not the same as children and families facing uncertainty
about the legal validity of child custody proceedings.
60 See AS43.10.210(a); seealso 15 AAC05.050(a) ("Ifthe[D]epartmentfails
to act on a refund claim within six months from the date of filing the claim, the taxpayer
may file a protest under 15 AAC 05.010.").
-17- 7536
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