Prohibited Tax on Exports or Valid User Fee? Fifth Circuit Nixes Charge on Oil to Support Oil Spill Liability Trust Fund
Trafigura Trading LLC v. United States, 29 F.4th 286 (5th Cir. 2022)
The Oil Pollution Act of 19901 established the Oil Spill Liability Trust Fund to pay for cleanup costs, natural resource damage assessments and restoration, research of oil pollution technology due to oil pollution.2 A charge on each barrel of oil exported or used in the United States supports the Fund.3 However, Article I, Section 9, clause 5 of the Constitution4 unambiguously prohibits Congress from imposing an export tax or duty from any state.5
Supreme Court jurisprudence addressing this provision of the Constitution distinguishes between an export tax and a user fee. Trafigura paid the charge on 50 million barrels of crude oil from oilfields in Texas, Louisiana, and North Dakota from 2014 to 2017. Trafigura then sought a refund from the IRS which was denied. It then sued the United States in federal court asserting that the charge was an unconstitutional export tax. The trial court granted summary judgment for Trafigura. The United States appealed.
The Fifth Circuit affirmed the trial court. Judge Ho, along with Judge Wiener, agreed that the charge was an impermissible tax under Article I, Section 9, clause 5 as it is not a value for value transaction unlike user fees. The charge requires exporters to pay for “reimbursements to federal, state, and Indian tribe trustees for assessing natural resource damage; research and development for oil pollution technology; studies into the effects of oil pollution; marine simulation research; and research grants to universities.”6
Judge Graves dissented asserting there are issues of material fact precluding summary judgment and disagreed with the plurality that the court should only look at the services provided by the charge.7
1 33 U.S.C. § 2701 et seq.
2 33 U.S.C. § 2702
3 26 U.S.C. § 4611(b)-(c)(2)(B).
4 "No Tax or Duty shall be laid on Articles exported from any State." U.S. Const. art. I, § 9, cl. 5.
5 Judge Ho began the opinion with a brief history of the controversy over export taxes and federal regulation of commerce. As with much of the Constitution, Northern and Southern factions struck a compromise resulting in the prohibition against export taxes and a simple majority vote on regulation of commerce.
6 2022 U.S. App. LEXIS 7796 at *16
7 Id. at *27
