Tax on oil tankers declared unconstitutional

WASHINGTON — The city of Valdez, Alaska, will have to return millions it has collected in taxes since it began in 2000 assessing a tax on oil tankers that on Monday was found to be unconstitutional by the U.S. Supreme Court.

The court struck down as unconstitutional a tax imposed on oil tankers by the city of Valdez, the port town of 4,500 at the end of the trans-Alaska oil pipeline. Polar Tankers Inc. operated five double-hull tankers for its parent company, Conoco Phillips, Alaska's biggest North Slope oil producer. An estimated 24 oil tankers and four other vessels were covered by the tax.

Just how much money the city will have to return is unclear, though, and the city would not disclose that information Monday.

In February, Valdez City Manager John Hozey said the city anticipated collecting about $8 million this year in revenues from the tanker tax — or about 20 percent of the annual budget of about $40 million.

Since Polar first challenged the tax, the money paid in taxes has been held in escrow so Valdez couldn't spend it while the suit made its way through the courts, said Mayor Bert Cottle. The city's tanker tax was first imposed in 2000 to compensate for declining property-tax revenue from the aging Alyeska oil storage and loading complex.

"The last few years, maybe three, that money has been paid directly to the court, to prevent any problems," Cottle said, adding "it's not a blow to the economy. We haven't spent the money."

Polar's parent company, Conoco Phillips, had no comment on the decision. A lawyer for the company, Charles Rothfeld, said he sees broader implications for the decision: Local governments will be unable to assess property taxes on vessels within their taxing jurisdiction.

"It's clear that for property taxes, you cannot simply impose a property tax on a ship because it uses your port," Rothfeld said.

However, Rothfeld also pointed out the court's 7-2 decision was based on two fundamentally different points of view on the constitutionality of the tax.

The lead opinion, written by Justice Stephen Breyer, found the tanker tax was unconstitutional because it does not apply to other, similar property — just oil tankers. The vessels subject to the city tax are "not taxed in the same manner as other personal property," Breyer wrote, and is therefore the kind of tax forbidden by the "tonnage clause" of the Constitution without the consent of Congress.

The opinion is the first written on the tonnage clause since 1935.

But others on the court, including Chief Justice John Roberts, said the lack of a uniform tax on all similar property doesn't matter. The Constitution prohibits states from assessing tonnage charges on ships unless approved by Congress. That particular clause of the Constitution, which also bars states from entering treaties with foreign countries or engaging in war, essentially bans ports from assessing taxes on vessels entering the port, based on their tonnage. It doesn't prohibit dockage fees or other assessments for using the port or its services.

"If states wish to use their geographical position to tax national maritime commerce, they must get Congress's consent," Roberts wrote.

In other action, the court:

Stepped into a property-rights dispute between beachfront homeowners and local authorities over plans to rebuild eroded beaches on Florida's Gulf Coast.

Resolved a split among federal appeals courts by ruling that immigration officials do not need to have a jury determine the financial impact of an immigrant's crime to find that a fraud was large enough to warrant deportation.

Agreed to decide whether student loans can be dismissed through bankruptcy without proving that paying the money back would cause an "undue hardship."

Declined to review the convictions of five Cuban intelligence agents who say they did not receive a fair trial on espionage conspiracy and other charges because of strong anti-Castro sentiment in Miami. One man also was convicted of murder conspiracy in the deaths of four Miami-based pilots whose planes, part of the Brothers to the Rescue organization, were shot down by Cuban fighter jets in 1996 off the island's coast.

Refused to get involved in local Texas governments' fight against hundreds of miles of fencing along the U.S.-Mexico border.

Turned away a challenge by Los Angeles, Dubuque, Iowa, and other local governments to Federal Communications Commission rules that make it easier for new cable-TV competitors to gain local franchises.

Additional information from The Associated Press