Page 12: of Maritime Reporter Magazine (June 2022)

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Crude Oil Export Tax

Jettisoned by Courts s recently as February 2022, Russia exported more exported crude oil) were $5.67 billion, while other receipts crude oil than any other country except Saudi Ara- totaled $3.77 billion ($2.13 billion from ? nes and penalties, bia. That same month, the United States was the $1.28 billion from cost recoveries, and $362 million from in-

A fourth-largest exporter of crude oil. With the ever- terest). In 2021, the United States imported an average of 6.11 increasing sanctions against Russia, crude oil exporters in the million barrels per day of crude oil while exporting an average

United States are racing to ? ll the supply gap. However, a nov- of 2.90 million barrels per day. el decision rendered by a federal appeals court regarding how crude oil exports are taxed under the Oil Pollution Act of 1990 The Lawsuit and Decision may have a signi? cant impact on those exporters’ net pro? ts. Between 2014 and 2017, Tra? gura Trading LLC exported approximately 50 million barrels of crude oil from the United

The Act States. Tra? gura remitted over $4 million to the Internal Rev-

As a result of the infamous 1989 Exxon Valdez oil spill, enue Service for these exports, as required under 26 U.S.C. sec-

Congress enacted the Oil Pollution Act of 1990. The Act cre- tion 4611(b), a provision of the Internal Revenue Code that cor- ated the Oil Spill Liability Trust Fund, which is administered responds with the Oil Pollution Act of 1990. After its request for by the U.S. Coast Guard’s National Pollution Funds Center a refund was denied by the IRS, Tra? gura ? led suit to challenge to fund responses to oil spills and threatened spills. The pri- the constitutionality of the tax and for a refund of the funds it mary expenditures of the fund are state access for removal paid to the IRS. The trial court ruled in Tra? gura’s favor, ? nding actions, payments to government trustees to administer natu- the tax unconstitutional and granting a refund to Tra? gura. ral resource damage assessments and restorations, payment of The United States appealed the trial court’s decision to the claims for uncompensated removal costs and damages (made United States Court of Appeals for the Fifth Circuit, which when the party responsible for the spill is unknown or can- has jurisdiction over Texas, Louisiana, and Mississippi. On not pay for the response), and research and development. The March 24, 2022, after a lengthy history about the United fund pays for containment, cleanup, and damages from spills States Constitutional Convention of 1787 and Alexander or threatened spills up to $1 billion (or the balance of the fund, Hamilton’s involvement therein, a three-judge panel of the whichever is less) for any single incident. Fifth Circuit held that the United States’ tax on crude oil ex-

Except for the years between 1994-2006 and 2019, the ports is unconstitutional and, therefore, unenforceable. In af- fund’s primary source of revenue has been a ? ve-to-nine- ? rming the trial court’s ruling, the Fifth Circuit held that the cents-per-barrel fee (amount depending on year) on imported, provision functions as a “tax” rather than a “user fee,” and is domestic, and exported oil. Other sources of revenue to the therefore unconstitutional in violation of the Export Clause of fund are ? nes and penalties, cost recovery from parties re- the United States Constitution. The Export Clause states: “No sponsible for spills, and interest. Between 2007 and 2018, the Tax or Duty shall be laid on Articles exported from any State.” fund’s total excise tax receipts (from domestic, imported, and Because of this Fifth Circuit opinion, Tra? gura is entitled to 12 Maritime Reporter & Engineering News • June 2022

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