Maryland and seven other states filed suit in the Supreme Court yesterday challenging Louisiana's efforts to tax natural gas that passes through the state in underground pipelines, a tax that would add $3.3 million to the annual gas bills of Washington-area consumers.
The lawsuit argues that the tax, which would also affect the bills of millions of consumers elsewhere in the East and Midwest, unconstitutionally interferes with interstate commerce.
If upheld, the tax could lead other states to impose retaliatory taxes and result "in a very complicated, and frankly ugly warfare among the states," Maryland Attorney General Steven H. Sachs said yesterday.
Louisiana Govt. Edwin Edwards yesterday defended the tax as "not only constitutional, but equitable," and said his state will fight the attempt to have it overturned.
Maryland, which coordinated the lawsuit, and the seven other states filed it under a rarely used constitutional provision that gives the high court jurisdiction in disputes between states.
The lawsuit chares that the tax, imposed on gas produced on the federally controlled outer continental shelf off Louisiana's coast, will cost consumers in Eastern and Midwest states about $225 million annually. Edwards argued, however, that the cost would be $160 million.
The tax would cost the average residential heating customer in the Maryland or Virginia suburbs and Washington between $4 and $5 annually, according to a spokesman for the Washington Gas Light Co. The tax, set to go into effect in Louisiana Sunday, will affect gas bills immediately, the spokesman said.
The tax unconstitutionally interferes with interstate commerce by "exposing natural gas flowing in interstate commerce to the threat of multiple taxation," the suit charges. "If Louisiana is permitted to impose this tax, every subsequent state will be invited to tax the volume of gas passing through its territory," according to the lawsuit.
Further, although the tax "purports" to be a tax on the use of natural gas within Louisiana, it "is in fact a tax on the privilege of transmitting" natural gas through the state, the lawsuit asserts.
Edwards, however, argued that the tax is actually on the pipeline companies' use of Louisiana's property, facilities and such government resources as roads and police. The tax also compensates Louisiana for the "environmental risks" of having underground pipelines running through the state.
The tax is actually imposed on the gas pipeline companies, which, under a recent ruling by the Federal Energy Regulatory Commission, can pass the cost on to the gas distributors, who, in turn, pass it to consumers.
Joining Maryland in the lawsuit are Illinois, Indiana, Massachusetts, Michigan, New York, Rhode Island nd Wisconsin.
The lawsuit asks the high court to forbid Louisiana to collect the tax, and asks a ruling that it is unconstitutional, and an order returning any collected revenues to consumers.