[Federal Register Volume 63, Number 98 (Thursday, May 21, 1998)]
[Notices]
[Pages 27941-27942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-13487]
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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
[Docket No. SA98-83-000]
The Trees Oil Company; Notice of Petition for Adjustment
May 15, 1998.
Take notice that on May 7, 1998, The Trees Oil Company (Trees)
filed a petition, pursuant to section 502(c) of the Natural Gas Policy
Act of 1978, for relief from making Kansas ad valorem tax refunds to
Northern Natural Gas Company (Northern). The refunds are required by
the Commission's September 10, 1997 order, in Docket No. RP97-369-000
et al.,\1\ on remand from the D.C. Circuit Court of Appeals,\2\ that
directed First Sellers to make Kansas ad valorem tax refunds, with
interest, for the period from 1983 to 1988. Alternatively, if it is not
relieved from making the subject refunds, Trees requests that the
Commission permit Trees to amortize its refund obligation over a 5-year
period. Trees petition is on file with the Commission and open to
public inspection.
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\1\ See 80 FERC para. 61,264 (1997); Order Denying Rehearing
issued January 28, 1998, 82 FERC para. 61,058 (1998).
\2\ Public Service Company of Colorado v. FERC, 91 F.3d 1478
(D.C. 1996), cert. denied, Nos. 96-954 and 96-1230 (65 U.S.L.W. 3751
and 3754, May 12, 1997).
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Trees states that Northern sent Trees a Statement of Refunds Due
for $192,815.47 in principal and $301,471.37 in interest, computed
through December 31, 1997, for a total of refund liability of
$494,286.84. Trees states that the Northern Statement covers seven
wells, from which Trees made sales to Northern from 1983 to July 1,
1987. Trees asserts that the Statement includes an amount that Trees
previously refunded to Northern \3\ and Kansas ad valorem tax
reimbursements on one well (the Warner well) that did not result in a
price in excess of the applicable maximum lawful price (MLP).
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\3\ Trees explains that Northern's Statement includes a payment
of $26,083.44 that Northern made to Trees on April 7, 1989, for 1988
taxes, an amount that Trees subsequently refunded, with interest, on
July 1, 1994.
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Trees also states that during the applicable 1983-1987 period, 37.5
percent of the working interest in these wells was owned by a
Pennsylvania Trust which was subsequently terminated, liquidated, and
closed in 1991. Trees asserts that the Kansas ad valorem tax
reimbursements distributed to this trust are unrecoverable, and that,
once the necessary revisions are made to remove (a) the previously
refunded principal and interest, (b) the Kansas ad valorem taxes that
did not exceed the applicable MLP, and (c) the unrecoverable
Pennsylvania Trust reimbursements, Trees refund liability consists of
$99,611.52 in principal and $162,013.50 in interest, computed through
December 31, 1997.
Trees also suggests that this $99,611.52 amount should be further
reduced because it: 1) includes the principal and interest on pre-
October 1983 production, the liability for which has been disputed
before the U.S. Court of Appeals for the Fifth Circuit in Anadarko
Petroleum Corporation v. FERC and Union Pacific Resources Company v.
FERC, Case No. 98-60043; and (2) includes unrecoverable royalty
amounts. Trees asserts that when the reimbursements attributable to
pre-October 1983 production are excluded, along with the royalties
attributable to the Pennsylvania Trust's working interest, the
principal amount of its refund obligation to Northern is $80,538.82.
Trees also states that it is a small ``mother and daughter
operation'' with no other administrative personnel. Trees explains that
the subject wells were priced at the relatively low, NGPA section 104,
flowing gas rate, which provided Trees with little, if any, income
during the period from 1983-1987. Trees includes condensed December 31,
1983-1987 income statements to support its assertions, and states that
the revenues shown on these statements include revenues from Trees'
other oil and gas interests, and that the expenses include (a) its own
share of the operating costs, (b) intangible drilling costs, (c)
administrative costs, including salaries, rent, payroll taxes, and
other office expenses, and (d) other expenses, including travel costs,
seminars, licenses, and legal fees. Trees contends that, because these
estimates show losses for four of the five years, despite small
salaries and little, if any, drilling and exploration expense, they
demonstrate how important the tax reimbursements were to Trees'
economic viability and survivability during that period.
Trees also provides another condensed income statement for the year
ending December 31, 1997, and notes that it plans to drill five wells
in 1998 and convert a well to salt water disposal. Trees states that it
is pursuing this drilling program in part out of consideration of the
implied obligations of the leases for further development and to
protect against drainage. Trees contends that this drilling program
will tax its cash flow and financial resources, regardless of whether
Trees is required to make Kansas ad valorem tax refunds. Trees adds
that two of the committed wells have already been drilled, and that the
total cost to drill and equip all five wells (if they are successful),
and to convert the other, will be approximately $1,900,000, of which
Trees' share of the costs will be $475,000. Trees contends that it has
no monetary cushion to pay its drilling costs and also pay the Kansas
ad valorem tax refunds.
Therefore, Trees contends that it should be relieved from having to
refund any of these tax reimbursements. In the alternative, Trees
requests permission to amortize its refund obligation over a 5-year
period.
[[Page 27942]]
Any person desiring to be heard or to make any protest with
reference to said petition should on or before 15 days after the date
of publication in the Federal Register of this notice, file with the
Federal Energy Regulatory Commission, 888 First Street, N.E.,
Washington, D.C. 20426, a motion to intervene or a protest in
accordance with the requirements of the Commission's Rules of Practice
and Procedure (18 CFR 385.214, 385.211, 385.1105, and 385.1106). All
protests filed with the Commission will be considered by it in
determining the appropriate action to be taken but will not serve to
make the protestants parties to the proceeding. Any person wishing to
become a party to a proceeding or to participate as a party in any
hearing therein must file a motion to intervene in accordance with the
Commission's Rules.
Linwood A. Watson, Jr.,
Acting Secretary.
[FR Doc. 98-13487 Filed 5-20-98; 8:45 am]
BILLING CODE 6717-01-M
