By Olga Jane Goldberg and Open Weaver Banks

A Texas court ruled that natural gas stored in an underground reservoir is subject to property tax, whether or not the gas is in interstate commerce. Without actually deciding whether the natural gas was in interstate commerce, the Houston Court of Appeals (1st District) held that tax on the stored gas did not violate the Commerce Clause of the U.S. Constitution. The court took care to distinguish Peoples Gas, Light, and Coke Co. v. Harrison Central Appraisal District, 270 S.W.3d 208, 218-19 (Tex. App. – Texarkana 2008, pet. denied), in which the Texarkana Court of Appeals exempted natural gas from property tax because its owner, a natural gas marketer, had no substantial nexus with Texas. The Houston court stressed that Peoples Gas did not have any employees or facilities in Texas; did not have any control over where the unrelated, interstate pipeline company stored Peoples’ natural gas; and had an existing contract to deliver the gas to Chicago. Conversely, ETC Marketing, Ltd., maintained offices and employees in Harris County, Texas; specifically contracted to store its natural gas with its intrastate affiliate, Houston Pipeline; and had not pre-sold the gas stored in the Harris County reservoir to any out-of-state customers. Thus, the court found ETC Marketing had substantial nexus because it purposefully chose to store the gas in Texas “to serve its own business purpose.” ETC Marketing, Ltd. v. Harris County Appraisal District, No. 01-12-00264-CV, 2015 WL 2090399 (Tex. App. – Houston [1st Dist.] May 5, 2015)