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Bosque Disposal Systems, LLC v. Parker County Appraisal District

Supreme Court of Texas

May 25, 2018

Bosque Disposal Systems, LLC, Agnus SWD Services, L.P., Gordon SWD Services, L.P., and Bob Phillips d/b/a/ Phillips Water Hauling, Petitioners,
Parker County Appraisal District, Respondent

          Argued February 28, 2018

          On Petition for Review from the Court of Appeals for the Second District of Texas


         The plaintiffs are taxpayers who own land in Parker County. Each tract at issue in this case contains a saltwater disposal well, in which wastewater from oil and gas operations can be injected and permanently stored underground. When valuing these tracts for property tax purposes, the Parker County Appraisal District assigned one appraised value to the wells and another appraised value to the land itself. The taxpayers contend that separate appraisal of the wells and the land amounts to illegal double taxation of the wells as a matter of law. The trial court rendered summary judgment for the taxpayers, but the court of appeals reversed and remanded in favor of the District. Applying our prior decision in Matagorda County Appraisal District v. Coastal Liquids Partners, L.P., 165 S.W.3d 329 (Tex. 2005), we conclude that the District did not employ a facially unlawful means of appraising the taxpayers' property, which based on the record before us appears to derive much of its market value from the wells. We therefore affirm the judgment of the court of appeals and remand the case to the trial court to address any other pending challenges.

         I. Background

         The taxpayers are Bosque Disposal Systems, LLC, Agnus SWD Services, L.P., Gordon SWD Services, L.P., and Bob Phillips d/b/a/ Phillips Water Hauling. Each owns land in Parker County. Their properties contain saltwater disposal wells, in which wastewater containing salt and other chemicals is injected deep underground and permanently stored in subsurface layers of rock. The manufactured components of these wells include a well bore, down-hole tubing, surface pumps, pipes, and tanks used to inject wastewater underground.

         In 2012, 2013, and 2014, the District appraised the wells separately from the surface land, creating distinct appraisal accounts for "saltwater disposal facilities" apart from the existing appraisal accounts for the surface land. The District estimated the wells' market value based on the income generated from their commercial operation. According to the taxpayers' motion for summary judgment, the District appraised the four wells at approximately $7 million total. The District appraised the four tracts of surface land at approximately $700, 000 total. After the taxpayers unsuccessfully challenged the appraisals of the saltwater disposal wells with the county appraisal review board, they sought review in the district court. See Tex. Tax Code §§ 42.41(a), 42.21.

         The taxpayers moved for summary judgment, arguing that the Tax Code does not permit the County to appraise the wells separately from the land itself where both interests are owned by the same person and have not been severed into discrete estates. The District filed a cross-motion for summary judgment, arguing that the Tax Code permitted the District to estimate the total market value of each taxpayer's property by combining two separate appraisals-one for the well and one for the land. The trial court granted the taxpayers' summary judgment motion and denied the District's motion. It signed an order stating that "'estate or interest' ad valorem accounts associated with the" the saltwater disposal wells "are declared void as illegal double taxation." The apparent effect of the trial court ruling was that the taxpayers' property taxes for 2012, 2013, and 2014 would be based only on the value of the surface land apart from the wells. The taxpayers would not owe property taxes attributable to whatever additional market value might arise from the presence of the disposal wells on the land.

         The court of appeals, sitting en banc, concluded that controlling authority from this Court did not support the taxpayers' contention that "they were subject to illegal multiple assessments for the same land." Parker Cty. Appraisal Dist. v. Bosque Disposal Sys., LLC, 506 S.W.3d 665, 674 (Tex. App.-Fort Worth 2016, pet. granted) (relying on Coastal Liquids and other authorities). It reversed the trial court's judgment and rendered judgment in favor of the District on that issue, upholding the separate assessment of the land and the saltwater disposal wells. Id. Three justices dissented. Id. at 675-76. The court of appeals remanded the case to the trial court for further proceedings on issues raised by the taxpayers but not reached by the trial court. We granted the taxpayers' petition for review.

         II. Legal Framework

         The parties do not dispute the facts relevant to our review. The outcome of the case turns entirely on questions of law, which we review de novo. Colorado Cty. v. Staff, 510 S.W.3d 435, 444 (Tex. 2017). The parties offer competing interpretations of the Texas Constitution and the Texas Tax Code. "When interpreting our state Constitution, we rely heavily on its literal text, " Republican Party of Tex. v. Dietz, 940 S.W.2d 86, 89 (Tex. 1997), and our goal is to "give effect to its plain language." City of Beaumont v. Bouillion, 896 S.W.2d 143, 148 (Tex. 1995). Likewise, when interpreting a statute, "[t]he text is the alpha and the omega of the interpretive process." BankDirect Capital Fin., LLC v. Plasma Fab, LLC, 519 S.W.3d 76, 86 (Tex. 2017). While we have often stated that our objective in statutory interpretation is to give effect to the Legislature's intent, Staff, 510 S.W.3d at 444, we have also acknowledged that "the Legislature expresses its intent by the words it enacts and declares to be the law." Molinet v. Kimbrell, 356 S.W.3d 407, 414 (Tex. 2011).

         Article VIII, section 1(b) of the Texas Constitution provides that "[a]ll real property and tangible personal property in this State . . . shall be taxed in proportion to its value." This taxation "shall be equal and uniform." Tex. Const. art. VIII, § 1(a). The Tax Code implements these constitutional commands. It provides that "[a]ll real and tangible personal property that this state has jurisdiction to tax is taxable unless exempt by law." Tex. Tax Code § 11.01(a). Much of the parties' dispute concerns the Tax Code's definition of "real property." As used in the Tax Code, "'Real property' means: (A) land; (B) an improvement; (C) a mine or quarry; (D) a mineral in place; (E) standing timber; or (F) an estate or interest . . . in a property enumerated in Paragraphs (A) through (E) of this subdivision." Id. § 1.04(2). An "improvement" includes "a building, structure, fixture, or fence erected on or affixed to land." Id. § 1.04(3)(A).

         The Tax Code establishes appraisal districts in each county, such as the Parker County Appraisal District, and makes these districts "responsible for appraising property in the district for ad valorem tax purposes." Id. § 6.01 (a), (b). Chapter 23 of the Tax Code instructs appraisal districts on how to appraise property. "[A]ll taxable property is appraised at its market value . . . ." Id. § 23.01(a). "The market value of property shall be determined by the application of generally accepted appraisal methods and techniques." Id. § 23.01(b). "[E]ach property shall be appraised based upon the individual characteristics that affect the property's market value, and all available evidence that is specific to the value of the property shall be taken into account in determining the property's market value." Id. The Code requires the appraiser to "consider the cost, income, and market data comparison methods of appraisal and use the most appropriate method." Id. § 23.0101.

         III. ...

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