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Arco Alaska, Inc. et al v. State of Alaska (1/24/92), 824 P 2d 708
Notice: This is subject to formal
correction before publication in the Pacific
Reporter. Readers are requested to bring
typographical or other formal errors to the
attention of the Clerk of the Appellate
Courts, 303 K Street, Anchorage, Alaska
99501, in order that corrections may be made
prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
ARCO ALASKA, INC.; BP )
EXPLORATION (ALASKA) INC.; ) Supreme Court File No.
EXXON CORPORATION; MARATHON ) S-4155
OIL COMPANY; PHILLIPS ) Superior Court File No.
PETROLEUM COMPANY; UNION OIL ) 3AN-89-06303 Civil
COMPANY OF CALIFORNIA; and )
MOBIL OIL CORPORATION, )
) O P I N I O N
STATE OF ALASKA, COMMISSIONER )
OF REVENUE HUGH MALONE; and )
COMMISSIONER OF ADMINISTRATION)
JOHN M. ANDREWS, )
Appellees. ) [No. 3800 - January 24, 1992]
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage, Brian Shortell, Judge.
Appearances: William B. Rozell, Leon T.
Vance, and Susan R. Pollard, Faulkner,
Banfield, Doogan & Holmes, Juneau, for
Appellants. Jeffrey W. Bush, Assistant
Attorney General, and Charles E. Cole,
Attorney General, Juneau, for Appellees.
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton and Moore, Justices.
In this case, we consider whether article II, section
18 of the Alaska Constitution mandates a two-thirds vote of both
houses of the legislature for the passage of a tax statute
containing a retroactive provision.1 We hold that it does not.
The facts in this case are uncontested. Appellants,2
as producers of oil in Alaska, are subject to oil production
taxes under AS 43.55.011-.013. An oil producer's tax liability
is calculated by multiplying an amount defined in AS 43.55.011 by
the economic limit factor (ELF) as determined by a complex
formula set out in AS 43.55.013.3
In 1989, a bill modifying the ELF formula was
introduced in the state legislature.4 On March 22, 1989, the
House of Representatives passed the bill by a simple majority
vote. A separate roll was taken on a clause of the bill
providing for an immediate effective date but, because it failed
to garner the two-thirds vote necessary for passage, the
effective date clause was not adopted.5 On May 8, 1989, the
Senate passed the bill by a simple majority vote.6 The Governor
signed the bill into law on the same day.7 Section 4 of the act
provided that "[t]his Act is retroactive to January 1, 1989, and
applies to oil produced after December 31, 1988." Ch. 25, 4,
SLA 1989. Because the House vote on the immediate-effective-date
provision failed, the effective date of the statute was listed as
August 6, 1989, or ninety days after the Governor signed the
bill. Ch. 25, SLA 1989.
On July 28, 1989, the companies sued the State of
Alaska, the Commissioner of Revenue, and the Commissioner of
Administration (State), challenging the retroactive application
of the ELF amendments as a violation of article II, section 18 of
the Alaska Constitution.8 While the action was pending, the
parties stipulated that the companies would pay, under protest,
the oil production taxes under the new statute for the period
between January 1, 1989 and August 6, 1989. In return, the State
agreed to provide a credit against future tax payments should the
companies ultimately prevail in their suit. As a result of the
retroactive application of the ELF amendments, the companies paid
approximately $100,000,000 in additional oil production taxes.
On April 5, 1990, the State filed a motion for judgment
on the pleadings or, in the alternative, for summary judgment.
Five days later, the companies moved for partial summary
judgment. The superior court granted the State's motion for
summary judgment and denied the companies' motion. This appeal
The companies argue that the retroactive date included
in the ELF amendments constitutes "another effective date"under
article II, section 18, thereby triggering the two-thirds vote
requirement. They contend that because no provision of the act
received more than a simple majority vote of either legislative
house, the retroactive application of the ELF amendments violates
article II, section 18.
As a constitutional question, the issue before the
court is a question of law to which we apply our independent
judgment. Sonneman v. Knight, 790 P.2d 702, 704 (Alaska 1990).
Constitutional provisions should be given a reasonable and
practical interpretation in accordance with common sense.
Kochutin v. State, 739 P.2d 170, 171 (Alaska 1987). The court
should look at the plain meaning and purpose of the provision and
the intent of the framers. Id.
We have observed that one of the purposes of article
II, section 18 is to provide a fair opportunity to those people
affected by legislation to learn of the new laws by which they
must live. State v. A.L.I.V.E. Voluntary, 606 P.2d 769, 772
(Alaska 1980); Anchorage Mun. Employees Ass'n v. Municipality of
Anchorage, 618 P.2d 575, 580 (Alaska 1980). We believe the
framers envisaged that article II, section 18 would afford those
affected an opportunity to react to the new legislation by
challenging it either through the referendum process or through
the courts, as occurred in this case.
A careful review of the record of the constitutional
convention reveals the relationship between article II, section
18 and the referendum powers as provided in article XI, sections
1-7 of the Alaska Constitution.9 As originally proposed by the
framers, the effective date provision closely paralleled the
referendum provisions.10 After the framers debated and amended
article II, section 18 to accommodate various concerns of the
delegates,11 the final version no longer coincided perfectly with
the referendum provisions. However, there is no indication in
these deliberations that the framers intended the amendments to
article II, section 18 to expand its scope to encompass
The companies concede that the delegates to the
constitutional convention did not discuss retroactive laws during
their deliberations on article II, section 18. Nonetheless, they
argue that the delegates understood and intended the provision to
encompass retroactive laws. The thrust of this argument is that
this provision was intended by the delegates to provide a
substantive constitutional safeguard against retroactive laws.
Our review of the proceedings of the constitutional
convention leads us to conclude that the framers, in enacting
article II, section 18, did not intend to provide substantive
protection of individual rights against retroactive legislation.12
Had that been the intent of the framers, we believe they would
have done so explicitly.13 Rather, in retaining the two-thirds
vote requirement, the framers merely sought to assure that broad
legislative support existed before the legislature deviated from
the ninety-day post-enactment effective date.
Our decision finds further support in the plain meaning
of the language of article II, section 18. Webster's New
International Dictionary (2d ed. 1948)14 defined "effective"as:
1. Concerned in, or having
the function of, producing an
. . . .
6. Law. In actual
operation; -- said of a statute or
judicial order limited by its terms
to begin at a designated time.
Id. at 819. In light of these definitions, the "effective date"
of a law, as that term is used in article II, section 18, is the
date on which the law goes into actual operation or produces a
The companies' interpretation of article II, section 18
ignores, rather than accords with, common sense and the plain
meaning of the language of the provision. According to their
theory, the effective date of the ELF amendments was January 1,
1989. If correct, this would mean the statute was in actual
operation over four months before the Governor signed the act.
It defies common sense to say that a law can produce a legal
effect or can be in actual operation prior to its enactment.
A law's retroactive date and its effective date are
distinctly different concepts. "A retroactive [retrospective]
law is one which gives to pre-enactment conduct a different legal
effect from that which it would have had without passage of the
statute." Norton v. Alcoholic Beverage Control Bd., 695 P.2d
1090, 1093 (Alaska 1985) (quoting Hochman, The Supreme Court and
the Constitutionality of Retroactive Legislation, 73 Harv. L.
Rev. 692, 692 (1960)). Thus the retroactive date of the law
serves to identify that conduct to which the law will apply. A
retroactive law applies only to conduct which occurred on or
after the retroactive date. While a retroactive law applies to
pre-enactment conduct, the legal effect produced by the law
occurs only after the law's effective date.15
The companies argue that our decision in Atlantic
Richfield Co. v. State, 705 P.2d 418 (Alaska 1985) (hereinafter
ARCO), confirms their position. Specifically, they rely on the
[B]ecause two-thirds of the legislature
voted to make the [tax statute in question]
immediately effective, a separate two-thirds
vote for the act to be retroactive was not
ARCO at 438. The companies incorrectly interpret this dicta from
ARCO to mean that a separate two-thirds vote is required to pass
a retroactive provision when a two-thirds vote is not obtained
for the immediate-effective-date provision. In this passage,
however, we were merely pointing out that the procedure used by
the legislature in that case was not constitutionally defective.
Elsewhere in our opinion in ARCO we pointed out that,
with respect to retroactive statutes, "[a] two-thirds vote
requirement does not appear in [AS 01.10.090], nor elsewhere in
Alaska law."16 Id. at 438 (emphasis added). This includes the
Courts of other jurisdictions which have faced this
issue have similarly held that provisions in their state
constitutions requiring a two-thirds vote of the legislature to
deviate from the constitutionally-prescribed effective date do
not apply to tax laws having retroactive dates. See Mecham v.
State Tax Commission, 410 P.2d 1008, 1009 (Utah 1966); Homestake
Mining Co. v. Johnson, 374 N.W.2d 357, 363-64 (S.D. 1985).
For the foregoing reasons, we conclude that article II,
section 18 does not require a two-thirds vote of both houses of
the legislature for the passage of laws containing retroactive
provisions. The superior court properly granted summary judgment
for the state.
1. Alaska Const. art. II, 18 provides:
Laws passed by the legislature become
effective ninety days after enactment. The
legislature may, by concurrence of two-thirds
of the membership of each house, provide for
another effective date.
2. Appellants include ARCO Alaska, Inc., BP Exploration
(Alaska) Inc., Exxon Corporation, Marathon Oil Company, Phillips
Petroleum Company, Union Oil Company of California, and Mobil Oil
Corporation (hereinafter collectively "companies").
3. The application of the ELF reduces the oil production
tax an oil company pays as the productivity of an oil well
declines. The purpose of the ELF is to encourage the development
of marginally productive wells. However, the ELF in effect prior
to 1989 provided tax breaks to some highly productive wells.
4. H.B. 118, 16th Leg., 1st Sess. (1989). See 1989 House
5. 1989 House Journal 706-09, 726-29.
6. 1989 Senate Journal 1825-26.
7. 1989 House Journal 1888.
8. The companies also brought a due process challenge to
the retroactive application of the act. However, the companies
later waived the due process challenge in order to expedite the
appeal of the article II, section 18 issue.
9. We have previously noted the relationship between the
effective date provision contained in article II, section 18 and
the referendum provisions contained in article XI. See Walters
v. Cease, 388 P.2d 263, 267 (Alaska 1964).
10. In the original proposal for article II, section 18,
laws were to take effect ninety days after adjournment of the
legislative session, except for emergency acts, "which emergency
must be expressed in the act." Constitutional Convention
Committee Proposal No. 5, Report of the Committee on Legislative
Branch (December 14, 1955) at 6-7. The original proposal for the
referendum provisions contained the same ninety-day time period
and the same exception for emergency acts. Constitutional
Convention Committee Proposal No. 3, Report of the Committee on
Direct Legislation, Amendment and Revision (December 9, 1955) at
11. The concerns voiced by the delegates in amending the
proposed effective-date provision were: (1) that, in order to
establish an immediate effective date, the legislature should not
be forced to declare fictitious "emergencies," as was the
practice under the Territorial Organic Act; (2) that the
effective date should be tied to the date of enactment rather
than the date of adjournment of the legislative session; (3) that
the legislature should have the flexibility to declare effective
dates both earlier and later than the expiration of the ninety-
day period; and (4) that the two-thirds vote requirement
contained in the Territorial Organic Act should be retained. No
concern was expressed regarding the effects of retroactive
legislation. See 3 Proceedings of the Alaska Constitutional
Convention (PACC) 1759-60 (January 1956); 4 PACC 3104-22
12. Protection against various legislative excesses is
provided by other constitutional provisions. The specific
constitutional provisions limiting the power of the state to
enact laws which infringe on individual rights are contained in
article I, section 15 of the Alaska Constitution. These include
the prohibition of the passage of bills of attainder, ex post
facto laws, and laws impairing contractual obligations.
13. Seven state constitutions contain provisions expressly
prohibiting retroactive laws. See Ga. Const. art. I, 1, VII;
Mo. Const. art. I, 3; N.H. Const. art. I, 23; N.C. Const.
art. I, 16; Ohio Const. art. II, 28; Tenn. Const. art. I,
20; and Tex. Const. art I, 16.
14. This dictionary was recommended as a reference to the
delegates to the Alaska Constitutional Convention. See Drafting
Suggestions of the Committee on Procedure and Drafting (November
22, 1955) at 4.
15. In the present case, the ELF amendments altered the tax
consequences of oil production which occurred on or after the
retroactive date of January 1, 1989. However, the new taxes were
not due until September 20, 1989. Ch. 25, 6, SLA 1989.
Failure to meet this deadline resulted in an interest penalty.
16. AS 01.10.090 states that "[n]o statute is retrospective
unless expressly declared therein."
17. The version of the legislative drafting manual in use
during the 1989 legislative session states that "[t]he
retroactive section and the sections in the bill that are to be
retroactive should have immediate effective dates." Legislative
Affairs Agency, Manual of Legislative Drafting 28 (1989)
(emphasis added). Though this language indicates that the
practice may be highly desirable, it does not elevate it to a