The U.S. Supreme Court ruling favoring a state's right to tax energy production on Indian lands could spell death for Utah's struggling energy industry, while state coffers reap about $100 million in back taxes.
Ten oil companies drilling in San Juan County in southeastern Utah filed a suit in 7th District Court in 1979 against the state and county for relief against double taxation, similar to the claim in the New Mexico suit.At stake is between $75 million to $100 million in state taxes owed by the oil companies. A final ruling on the Utah case has been pending the U.S. Supreme Court decision.
Also, the Ute Indian Tribe, which charges a 10 percent tax on oil and gas production on their eastern Utah land, has filed a suit against the state, claiming the state has no right to tax production within Indian reservations.
"While the Cotton Petroleum decision may have cleared up some unknowns as far as state and local taxing is concerned, it certainly hasn't helped the picture of the petroleum industry," said Jim Peacock, executive director of the Utah Petroleum Association.
Unless the state and tribe can coordinate their taxing powers, Peacock said, oil and gas exploration and production in Utah won't be economically feasible and oil companies will leave Utah for states not encumbered with dual taxation.