High Noon for an Oil Tax

Legal experts were scratching their heads last week over a startling decision by an obscure but respected 82-year-old U.S. district court judge in Wyoming: the windfall profits tax on oil is unconstitutional. The problem, wrote Judge Ewing Kerr, is that the legislation says that "one state, Alaska, is not subject to the same tax at the same rate as all the other states. This is a clear violation of the constitutional requirement of uniformity." The ruling, which came in a suit brought by the Independent Petroleum Association of America and other oilmen, could force the U.S. Treasury to return some $23 billion collected from oil companies since the tax took effect in 1980. Worse yet, from the Government's standpoint, the judge's Nov. 4 decision could shut off permanently an important source of revenue. Says one Treasury official: "We're worried. In fact, we're very worried."

Oil producers were jubilant, even though they still must pay the tax pending the outcome of any appeals. But the ruling puts the White House between a rock and a hard place. Although President Reagan has opposed the tax, Administration spokesmen say the decision will be appealed. Meanwhile, some Congressmen are urging that it be allowed to stand.

Alternatively, Congress could revise the windfall tax. But such a move would require Administration backing, and that could prove hard to get.

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