West Virginia Supreme Court hears arguments in horizontal drilling taxation case involving Antero

Brian Skinner Courts, Gas and Oil, Tax Policy

WV Supreme Court

WV News — By Matt Harvey — October 6, 2020

CHARLESTON, W.Va. (WV News) — West Virginia’s Supreme Court justices heard arguments Tuesday on whether oil and gas companies owe tax on items like sleeping quarters, rented portable toilets and industrial-size trash containers at horizontal drilling sites.

At issue is a consumer sales tax assessment of around $1 million the West Virginia State Tax Department has levied on Antero Resources Corp. The state agency contends the energy producer owes the money for renting the toilets and trash bins, as well as docking Antero tax on two-thirds of the trailers where directional drillers stay during two-week shifts.

Steptoe & Johnson attorney Ancil Ramey argued for Antero.

The toilets, crew quarters and trash bins all are necessary for Antero to conduct the horizontal drilling operations, and as such, Antero deserves the tax exemption for materials directly used to produce natural resources, Ramey argued.

Chief Justice Tim Armstead appeared to side with Ramey, especially on the point that horizontal drilling is a much different animal than the type of energy exploration going on when the tax break rules were last modified in 1993.

But a sticking point could be Armstead’s old colleague in the West Virginia Legislature, Justice Evan Jenkins. While he didn’t tip his hand, Jenkins was asking questions about whether this wouldn’t be a matter best left up to state lawmakers to decide by giving an update on the rules.

Assistant Attorney General Wayne Williams argued the Tax Department’s case, and insisted portable toilets, crew quarters and trash bins shouldn’t receive the break.

“There’s no way on earth you can take a Porta Potty, and use that to drill and oil-and-gas well,” Williams said. “You just can’t do it. The same thing with the trash Dumpsters.”

On appeal before the court is Kanawha County Circuit Judge Charles E. King’s ruling that reinstates the tax on Antero by overruling the finding of an administrative appeal. It was following that administrative appeal that Antero took the case to the state’s high court.

The justices have arguments in other cases Wednesday, then a decision conference on Thursday. A decision in the Antero matter could follow any time after that, and likely before the end of the term on Nov. 20.

The justices also on Tuesday heard arguments in a case that dates back more than a decade, and involves a lawsuit in which property owners at the Crystal Ridge Development in Bridgeport allege damage due to widespread soil movement.

Pittsburgh attorney Avrum Levicoff showed up late and saw his time to argue the case on behalf of Dan Ryan Builders cut almost in half.

At issue: Can Dan Ryan Builders compel the property owners into arbitration. That’s a process that much more closely resembles a potentially expensive courtroom battle than mediation, which is more akin to two neighbors having a third neighbor helping try to decide their issue.

Previously, Harrison Circuit Judge Chris McCarthy ruled Dan Ryan Builders couldn’t compel arbitration, a ruling that could finally send the matter to mediation, and then trial if that doesn’t work.

Justice John Hutchison honed in on the earlier adverse arbitration ruling and the length of time in the case, sounding as though he was skeptical whether Dan Ryan even had the grounds to appeal at this time.

Levicoff fell back on an agreed order in 2012. In it, the sides agreed to toll the statute of limitations on an appeal by Dan Ryan Builders regarding that issue, pending development of the case.

But attorney Deborah Varner, who represents the property owners, cited a precedent-setting case by the state Supreme Court in 2013. That case “made it unequivocally clear how to handle an order from a lower court on a motion to dismiss and compel arbitration,” Varner argued.

Varner had been replying to Justice Jenkins, who had questions about whether the 2012 waiver was in effect.

The justices also are likely to rule in this case before the end of the term.

Also Tuesday, the justices heard arguments over a Harrison County Circuit Court civil jury award of nearly $1 million to a Bridgeport man and his wife. The man was injured when a pickup truck backed into him.

In this case, the issue is whether Roof Service of Bridgeport Inc. is liable for the actions of the pickup driver, Bruce A. Wilfong. Wilfong was the foreman on a job at the property of accident victim Robert Joseph Trent, 86, and wife Charlotte Trent, 79.

Wilfong was backing up the truck when Mr. Trent was struck. The appeal has several subplots: Whether the fact that Wilfong was off the clock should weigh in favor of Roof Services, or whether he was doing work implied through the contract; whether Trent was partially at fault for getting hit; whether Trent was on his own property or public property; and whether Trent should be due any future damages.

Ramey and Clarksburg attorney Scot Dieringer were at odds on all those issues.

The justices seemed to be split on the case. Jenkins raised the issue of whether there’s any precedent for Ramey’s argument regarding a bright line between when an employer relationship reverts to an independent contractor situation.

Jenkins indicated there’s a case on point where when disputes and facts are at question in cases like this, it should go to the jury, as it did.

Hutchison, meanwhile, called into question whether it was proper for the lower court to have allowed lay testimony that contradicted medical expert testimony contending Mr. Trent’s accident injuries wouldn’t impact him in the future.

Roof Services’ insurance policy was reportedly much larger than that of Wilfong.

Again, the justices are likely to rule by the end of the term.

Justice Margaret Workman appeared remotely, while justices Armstead, Hutchison, Jenkins and Beth Walker were at the court.


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