Hallanan v. Eureka Pipe Line Co.

Background

A pipeline company sued West Virginia officials to stop enforcement of a state law that taxed anyone transporting oil in pipelines. The company moved about 22 million barrels in one year; about 1,239,000 barrels both started and ended in West Virginia. Lower courts disagreed about whether the state tax law could be applied only to the in-state oil or whether the whole law was invalid if part of it could not be applied.

Reasoning

The Supreme Court reviewed whether oil that actually flowed out of West Virginia was part of interstate commerce and therefore immune from the state privilege tax. The Court explained that oil produced in the State that formed part of a stream flowing out was interstate commerce even if some owners could later divert small amounts. The Court sent the case back to the state court to sort out the remaining issues under state law. The West Virginia court then affirmed the lower federal court’s injunction against the tax, treating the question of whether a partly invalid tax law could stand as a matter of state law.

Real world impact

The Supreme Court declined to force the West Virginia court to change its judgment and denied the State’s request for further review. That leaves the state-court decision in place that restricts collection of the disputed pipeline privilege tax. The national Court stated that questions about whether a partly invalid tax law cancels the whole statute are for the state courts to decide.