Oil Exporter’s Oil-Spill Fund  Payment an ‘Unconstitutional Export Tax,’ Court Holds. But the Decision Goes Without Precedent 

A three-judge panel of the U.S. Court of Appeals for the Fifth Circuit has decided that payments by oil exporters into an oil-spill remediation fund are unconstitutional export taxes.

Or at least Judge James C. Ho, writing singularly for a would-be majority, held.

Judge Jacques Weiner concurred in the judgment without opinion and Judge James Graves dissented.

And perhaps the shame of it – an opinion without heft – is that Judge Ho in a five-page windup that might have been longer than Lin-Manuel Miranda’s original Hamilton script made sure that readers who skipped long lines and high prices would not escape an appreciation of his lost effort to prevent the Constitutional Convention from adopting the export tax ban.

Judge Ho, in the case styled Trifigura Trading v. U.S., reasoned that Hamilton lost his fight for an export tax at the Constitutional Convention almost 235 years ago and that proceeds going to the Oil Spill Liability Trust Fund could not be considered a user fee.

“If the Constitution forbids export taxes designed to further trade policy—and it plainly does—then there’s no principled basis to allow export taxes designed to further environmental policy,” Ho wrote. “That would defy the plain text as well as the Founders’ understanding of our nation’s charter. And Alexander Hamilton would not just ‘get more than he gave’—he would get more than the Constitution permits.”

But no one joined Ho except Judge Jacques Wiener, who concurred in the judgment only. Judge James E. Graves Jr. dissented, labeling the would-be majority a plurality in a footnote because Weiner did not join the majority and the court as a result did not have a quorum.

“The Fund also covers costs incurred by federal, state, and Indian tribe trustees for natural resource damage assessment and restoration; removal costs of discharged oil from foreign offshore units; and related administrative, operational, and personnel expenses,” Ho wrote. “More still, the Fund supports, among other things, research and development for oil pollution technology; studies into oil pollution’s effects; marine simulation research; simulated environmental testing; and grants to universities and other research institutions.

The challenger in this case is Trafigura Trading, which purchases and exports crude oil from the United States, principally from Texas, Louisiana and North Dakota. According to Ho’s opinion, Trafigura paid more than $4 million into the Oil Spill Liability Trust Fund from 2014 through 2017 and requested but was denied a refund from the IRS.

Citing the Supreme Court, Ho reasoned, a charge is a user fee only if it “fairly match[es] the exporters’ use of” government services. That’s not the case with the Oil Spill Liability Trust charge, he surmised.

“Ultimately …,” Ho wrote, “Hamilton got more than he gave. And he wanted what he got. But as for the power to tax exports, he was helpless. As a result, the Constitution forbids Congress from taxing exports. And that resolves this case. The federal government insists that Trafigura Trading must pay a tax on domestic crude oil that it exports from the United States.”

The district court said no. The Fifth Circuit affirmed.

But Judge Graves wrote that he would vacate the district court’s order for Trafigura. “Because there are genuine issues of material fact as to whether [the payment] imposes a legitimate user fee, I would vacate the district court’s grant of summary judgment on liability to Trafigura Trading LLC and remand.”

Ho, in his long reminder of Hamilton’s constitutional role, wrote: “There would be no Constitution, then, unless the delegates reached a compromise on the question of export taxes. They did so by trading the power to tax exports for the power to regulate commerce.”

Chamberlain Hrdlicka’s Steven Jon Knight and Lawrence W. Sherlock represented Trafigura Trading. Representing the U.S. Justice Department were Michael J. Haungs, Judith Ann Hagley and Francesca Ugolini (Washington, D.C.) and Manuel Paul Lena (Dallas).