ETC Marketing, Ltd. v. Harris County Appraisal District ( 2015 )


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  • Opinion issued May 5, 2015
    In The
    Court of Appeals
    For The
    First District of Texas
    ————————————
    NO. 01-12-00264-CV
    ———————————
    ETC MARKETING, LTD., Appellant
    V.
    HARRIS COUNTY APPRAISAL DISTRICT, Appellee
    On Appeal from the 127th District Court
    Harris County, Texas
    Trial Court Case No. 2010-71360
    OPINION
    Appellant ETC Marketing, Ltd. protested the appraisal of its natural gas
    stored in Harris County and the resulting assessment of ad valorem taxes. In the
    district court, ETC Marketing moved for summary judgment, arguing that its
    natural gas was in interstate commerce and therefore exempt from ad valorem
    taxation. Appellee Harris County Appraisal District (HCAD) also moved for
    summary judgment, arguing that the natural gas was not in interstate commerce,
    but even if it were, it was nevertheless subject to ad valorem taxation.
    The court denied ETC Marketing’s motion for summary judgment and
    granted the appraisal district’s competing motion. ETC Marketing appealed the
    rulings. We held that the stored gas was subject to ad valorem taxation, and we
    affirmed the trial court’s judgment. Represented by new counsel, ETC Marketing
    filed a motion for en banc reconsideration, raising new issues and new arguments.1
    We withdraw our prior opinion and vacate our prior judgment, and we issue this
    opinion and judgment in their stead. The disposition remains the same. The
    1
    Before filing its motion for en banc reconsideration, ETC Marketing focused
    its arguments on whether its gas was subject to taxation under the standard
    of Complete Auto Transit, Inc. v. Brady, 
    430 U.S. 274
    , 
    97 S. Ct. 1076
          (1977). This was the basis of its arguments in its motion for summary
    judgment, response to HCAD’s motion for summary judgment, appellate
    briefing on original submission, and initial motion for rehearing. The motion
    for summary judgment also included an argument that HCAD lacked
    jurisdiction to tax the property, albeit with little explanation or argument.
    The final judgment in this case granted HCAD’s motion for summary
    judgment and denied ETC Marketing’s motion for summary judgment. The
    trial court did not specify the grounds upon which its ruling was based.
    Because the issue of whether the trial court properly ruled on the competing
    motions for summary judgment was raised on the original submission of this
    case, we will address the additional argument urged in the motion for en
    banc reconsideration.
    2
    issuance of this opinion renders the motion for en banc reconsideration moot. See,
    e.g., Poland v. Ott, 
    278 S.W.3d 39
    , 41 (Tex. App.—Houston [1st Dist.] 2008, pet.
    denied); Brookshire Bros., Inc. v. Smith, 
    176 S.W.3d 30
    , 41 (Tex. App.—Houston
    [1st Dist.] 2004, pet. denied).
    Background
    ETC Marketing and its affiliate, Houston Pipeline Company, conduct
    business and maintain offices in multiple locations throughout Texas. Both entities
    have offices and employees in Houston and Dallas.
    Houston Pipeline operates an intrastate natural gas pipeline. Its system is
    located entirely within Texas, although it connects to interstate pipelines. It owns
    and stores natural gas in the Bammel reservoir, a depleted oil reservoir in Harris
    County. As such, both Houston Pipeline and its contractual partners who store gas
    at Bammel rely upon and benefit from local emergency and law enforcement
    services provided by Harris County. Houston Pipeline pays ad valorem taxes to the
    county based on the appraised value of the land, the equipment used to operate the
    Bammel reservoir, and the “cushion gas,” which is natural gas stored for the
    purpose of maintaining pressure in the reservoir and which is not sold or intended
    for sale.
    Natural gas is often traded across state lines, and title to the gas transfers to
    whomever the seller “causes [the gas] to be delivered” and at the point where it is
    3
    delivered. Because natural gas is fungible, the point of sale does not necessarily
    correspond to a physical location associated with any particular seller’s natural gas.
    Put another way, the natural gas that a marketer offers for sale is not identifiable as
    any particular molecules of gas that will be delivered to the purchaser. Instead, the
    marketer offers gas for sale, and the purchaser receives a corresponding amount of
    gas at the location where it is accepted.
    Gas owned by various marketers is physically commingled in the pipeline
    system. For example, within the Bammel reservoir, gas destined for sale in Texas
    is physically commingled with gas destined for sale in interstate commerce.
    Distinct volumes of gas are segregated by paper allocation, which is used for
    verifying compliance with contracts and pipeline requirements, reporting to the
    Texas Railroad Commission, and payment of tariffs. The pipeline system controls
    the physical movement of natural gas, and storage facilities such as the Bammel
    reservoir are necessary for the efficient movement of the gas and for the regulation
    of pipeline capacities so that sufficient quantities can be supplied to users during
    peak demand periods.
    ETC Marketing is a natural-gas marketer, which buys, sells, and markets
    natural gas. It buys natural gas from multiple sellers, principally at the “Katy Hub,”
    which is a central delivery and distribution point for natural gas into and out of
    4
    Texas. Because of the nature of the operation of the Katy Hub, ETC Marketing is
    unable to determine whether the natural gas it purchases there originated in Texas.
    When ETC Marketing purchases natural gas, it is “immediately entrusted” to
    its affiliate Houston Pipeline for storage, and ultimately for transportation to
    purchasers through the pipeline system. ETC Marketing’s storage agreement with
    Houston Pipeline allows it to buy gas and “time the market” by holding it for
    delivery at a later time. 2 Accordingly, ETC Marketing has stored gas in the
    Bammel reservoir for several months at a time, buying it during warmer months
    and selling it to northern markets in the winter months. The length of time the gas
    is stored depends on the volume, time of year, and demand for the gas.
    ETC Marketing takes the position that all of its gas stored in the Bammel
    reservoir is in interstate commerce, because its business plan is to sell all of the gas
    to out-of-state customers. Daniel Hyvl, senior counsel to both ETC Marketing and
    Houston Pipeline, testified that ETC Marketing was created for the purpose of
    buying and selling gas in the interstate market, as contrasted with the intrastate
    2
    Although Houston Pipeline operates an intrastate pipeline, it is authorized to
    provide such storage and transportation services to ETC Marketing, which
    sells some of its gas in the interstate market, without becoming subject to
    federal regulation as a natural gas company. See 15 U.S.C. § 717; 15 U.S.C.
    § 3371 (Natural Gas Policy Act of 1978, § 311). However, due to the nature
    of this authorization, Houston Pipeline gives precedence to transportation of
    intrastate-bound gas and may refuse to deliver interstate gas if necessary for
    the operation of the pipeline.
    5
    business of Houston Pipeline. He explained that all of ETC Marketing’s gas “is
    being sold in interstate commerce, because that’s the business they’re in, to market
    the gas . . . and not in competition with the pipeline who’s selling in intrastate
    marketing.” However, while ETC Marketing generally has a profit-maximizing
    motivation to sell its gas only in interstate commerce, there is no legal requirement
    that it do so. Rather, Hyvl explained that ETC Marketing is “free to sell” its gas
    wherever it could “get the best price.” He also said: “[T]here is nothing that says
    that the gas has to go to a particular location . . . . ETC Marketing has the right to
    sell” its gas stored at Bammel “anywhere it wants to sell it.”
    HCAD appraised the value of approximately 33 billion cubic feet of natural
    gas owned by ETC Marketing and stored in the Bammel reservoir for the calendar
    year 2010, and it assessed ad valorem taxes on the value of that gas. ETC
    Marketing has admitted that it owns the natural gas that was stored in the Bammel
    reservoir and was the subject of HCAD’s appraisal. 3 Yet ETC Marketing protested
    the tax to the Harris County Appraisal Review Board (ARB), challenging it, in
    part, on the legal basis that the gas was entirely exempt from taxation because it
    was in interstate commerce. The ARB upheld the inclusion of the natural gas on
    3
    In its original petition, ETC Marketing alleged that it “owns Property within
    the Defendant’s jurisdictional boundaries for the tax year.” “Property” is a
    defined term in the original petition: it means “the property and/or properties
    listed in Exhibit ‘A’.” Exhibit A to the original petition identifies the
    “Property” as “Bammel Working Gas-32,267,485.”
    6
    the appraisal rolls, and ETC Marketing appealed to the district court. The appeal
    was premised entirely on the legal argument that the gas was exempt from taxation
    because it was in interstate commerce. CR 3–8 (original petition); CR 23–32 (ETC
    Marketing’s motion for summary judgment).
    In the district court, the parties filed competing motions for summary
    judgment. As summary-judgment evidence, ETC Marketing attached to its motion
    several affidavits, explaining the facts relating to the storage and transportation of
    the natural gas at issue and establishing the amount of ad valorem property tax paid
    by Houston Pipeline for the 2009 and 2010 tax years. HCAD took positions
    opposite from ETC Marketing: that the gas was not in interstate commerce, but
    even if it were, it would nevertheless be subject to taxation under the standard of
    Complete Auto Transit, Inc. v. Brady, 
    430 U.S. 274
    , 
    97 S. Ct. 1076
    (1977). After
    considering the arguments made by the parties, the trial court denied ETC
    Marketing’s motion for summary judgment, and it rendered a final judgment in
    favor of HCAD. ETC Marketing appealed.
    Analysis
    On appeal, ETC Marketing contends that the trial court erred by denying its
    motion for summary judgment and by granting HCAD’s motion for summary
    judgment. To prevail on appeal, ETC Marketing must demonstrate both that its
    natural gas was in interstate commerce, and that the trial court erred in its
    7
    determination that the gas was subject to ad valorem taxation. We conclude that
    even if ETC Marketing’s stored gas was in interstate commerce, it has presented
    no compelling legal argument that the gas was immune from local taxation.
    Accordingly, we will address that issue directly, and we need not separately
    resolve whether the gas was actually in interstate commerce (including a subsidiary
    evidentiary issue relevant to that issue 4). See TEX. R. APP. P. 47.1.
    We review de novo the trial court’s ruling on a motion for summary
    judgment. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 
    289 S.W.3d 844
    , 848 (Tex. 2009). When both sides move for summary judgment, and the trial
    court grants one motion and denies the other, reviewing courts consider both sides’
    summary-judgment evidence, determine all questions presented, and render the
    judgment the trial court should have rendered. Gilbert Tex. Constr., L.P. v.
    4
    One of the exhibits submitted by ETC Marketing in support of its motion for
    summary judgment was an affidavit and report from its designated expert
    witness, Richard Smead. Among other things, the Smead report opined that
    all of the gas “handled by ETC Marketing that traveled to the Bammel Field
    was destined for interconnections with interstate pipelines to be carried to
    out-of-state markets,” and therefore was “in interstate commerce.” The
    district court sustained HCAD’s objection to Smead’s report on the grounds
    that his opinions were “unsupported, conclusory, [and] subjective,” and that
    his “legal conclusions that the gas is in interstate commerce are ipse dixit,”
    and are not competent summary-judgment evidence under Rule 702 of the
    Texas Rules of Evidence and Rules 192.3 and 194.2(f) of the Texas Rules of
    Civil Procedure. In light of the disposition of this case, we need not resolve
    the issue of whether the trial court erred by sustaining HCAD’s objection to
    the report. See TEX. R. APP. P. 47.1.
    8
    Underwriters at Lloyd’s London, 
    327 S.W.3d 118
    , 124 (Tex. 2010). Each party
    moving for traditional summary judgment bears the burden of showing that no
    genuine issue of material fact exists and that it is entitled to judgment as a matter
    of law. TEX. R. CIV. P. 166a(c); see Provident Life & Accident Ins. Co. v. Knott,
    
    128 S.W.3d 211
    , 215–16 (Tex. 2003). When a plaintiff moves for summary
    judgment on its own claim, it must conclusively prove all essential elements of its
    cause of action. See Rhone–Poulenc, Inc. v. Steel, 
    997 S.W.2d 217
    , 223 (Tex.
    1999); City of Houston v. Clear Creek Basin Auth., 
    589 S.W.2d 671
    , 678 (Tex.
    1979). A defendant moving for summary judgment must conclusively negate at
    least one essential element of each of the plaintiff’s causes of action or
    conclusively establish each element of an affirmative defense. Sci. Spectrum, Inc.
    v. Martinez, 
    941 S.W.2d 910
    , 911 (Tex. 1997).
    The Texas Constitution provides that “all . . . tangible personal property in
    this State, unless exempt as required or permitted by this Constitution . . . shall be
    taxed in proportion to its value, which shall be ascertained as may be provided by
    law.” TEX. CONST. art. VIII, § 1(b). Under the Tax Code, unless exempt by law,
    tangible personal property is taxable if it is located in the taxing unit “for longer
    than a temporary period,”5 as the gas in this case was.6 If federal law exempts
    5
    TEX. TAX CODE § 11.01; see also 
    id. § 21.02.
    With respect to the date of the
    valuation, which is not a disputed issue in this appeal, the “owner of an
    9
    inventory” “may elect to have the inventory appraised at its market value as
    of September 1 of the year preceding the tax year to which the appraisal
    applies.” 
    Id. § 23.12;
    see Enron Corp. v. Spring Indep. Sch. Dist., 
    922 S.W.2d 931
    , 933 (Tex. 1996). ETC Marketing elected a September 2009
    valuation for the purposes of the 2010 tax year.
    6
    In its motion for en banc reconsideration, ETC Marketing argued that
    HCAD lacked jurisdiction to impose the tax at issue because the natural gas
    was not located in Harris County for “longer than a temporary period.” The
    Tax Code does not define “longer than a temporary period.” See TEX. TAX
    CODE § 11.01; see also 
    id. § 21.02.
    When resolving disputes about what
    constitutes a “temporary period,” Texas courts have considered whether the
    property is in interstate commerce, whether there was an interruption in
    transportation, and whether such stoppage was necessary to facilitate
    transportation or occurred to accommodate “the business purposes and
    profits of the company.” Friedrich Air Conditioning & Refrigeration Co. v.
    Bexar Appraisal Dist., 
    762 S.W.2d 763
    , 769 (Tex. App.—San Antonio
    1988, no writ); see Midland Cent. Appraisal Dist. v. BP Am. Prod. Co., 
    282 S.W.3d 215
    , 220–22 (Tex. App.—Eastland 2009, pet. denied); Dallas Cnty.
    Appraisal Dist. v. L.D. Brinkman & Co. (Tex.), Inc., 
    701 S.W.2d 20
    , 21–22
    (Tex. App.—Dallas 1985, writ ref’d n.r.e.); cf. Virginia Indonesia Co. v.
    Harris Cnty. Appraisal Dist., 
    910 S.W.2d 905
    , 912 (Tex. 1995) (determining
    whether goods bound for export were subject to ad valorem taxation).
    Contrary to the new assertions in the motion for en banc reconsideration, the
    summary-judgment evidence showed that the gas that ETC Marketing stored
    in the Bammel Reservoir was not presold and could be sold both within
    Texas and out of state. ETC Marketing contracted to store the gas in
    Houston Pipeline’s facilities, located entirely within Texas, for its own
    business purposes of timing the market and selling the gas at higher prices
    out of state during cold months. This interruption in transportation was not
    necessary to facilitate transportation of the gas but occurred to accommodate
    the profit-maximizing business purposes of the company. The evidence
    further showed that the gas was stored for up to several months. Thus, it was
    not merely “briefly” passing through Harris County on its way out of state.
    Accordingly, ETC Marketing’s natural gas stored in Harris County was not
    exempt from taxation due to its presence for a mere “temporary period.”
    10
    property from ad valorem taxation, then it is also exempt from the state tax. TEX.
    TAX CODE § 11.12.
    The Commerce Clause grants Congress the power to regulate interstate
    commerce, see U.S. CONST. art. I, 8, cl. 3, and it has been interpreted by the United
    States Supreme Court to include a “dormant” Commerce Clause, an implicit
    prohibition on a state’s imposition of discriminatory burdens on interstate
    commerce. 7 The Dormant Commerce Clause does not relieve those engaged in
    interstate commerce from their “just share of the state tax burden even though it
    increases the cost of doing business.” 8 “The ‘just share of state tax burden’
    includes sharing in the cost of providing ‘police and fire protection, the benefit of a
    trained work force and the advantages of a civilized society.’” 9 The burden is on
    the taxpayer to prove that a tax is invalid under the Dormant Commerce Clause,
    but to do so the taxpayer need only prove that the tax fails one prong of the
    7
    Am. Trucking Ass’ns, Inc. v. Michigan Public Svc. Comm’n, 
    545 U.S. 429
    ,
    433, 
    125 S. Ct. 2419
    , 2422–23 (2005); see also In re Nestle USA, Inc., 
    387 S.W.3d 610
    , 624–25 (Tex. 2012).
    8
    Western Live Stock v. Bureau of Revenue, 
    303 U.S. 250
    , 254, 
    58 S. Ct. 546
    ,
    548 (1938); accord Commonwealth Edison Co. v. Montana, 
    453 U.S. 609
    ,
    623–24, 
    101 S. Ct. 2946
    , 2956–57 (1981); see also Am. Trucking 
    Ass’ns, 545 U.S. at 438
    , 125 S. Ct. at 2425.
    9
    Commonwealth 
    Edison, 453 U.S. at 624
    , 101 S. Ct. at 2957 (quoting Exxon
    Corp. v. Wisconsin Dep’t of Revenue, 
    447 U.S. 207
    , 228, 
    100 S. Ct. 2109
    ,
    2123 (1980)).
    11
    Complete Auto test. 10 Under the Complete Auto standard, a state tax on interstate
    commerce ordinarily “will not survive Commerce Clause scrutiny if the taxpayer
    demonstrates that the tax (1) applies to an activity lacking a substantial nexus to
    the taxing State; (2) is not fairly apportioned; (3) discriminates against interstate
    commerce; or (4) is not fairly related to the services provided by the State.” 11
    As explained above, for the purposes of our analysis we assume without
    deciding that the natural gas at issue is in the stream of interstate commerce. We
    also assume, as admitted by ETC Marketing, that it owns an amount of gas stored
    in Harris County, at the Bammel reservoir, equivalent to the amount of gas
    appraised by HCAD. 12 The primary argument advanced by ETC Marketing to
    10
    Barclays Bank PLC v. Franchise Tax Bd. of Cal., 
    512 U.S. 298
    , 310–11, 
    114 S. Ct. 2268
    , 2276 (1994); Midland Cent. Appraisal 
    Dist., 282 S.W.3d at 223
    .
    11
    Barclays 
    Bank, 512 U.S. at 310
    –11, 114 S. Ct. at 2276 (citing Complete
    
    Auto, 430 U.S. at 279
    , 97 S. Ct. at 1079).
    12
    Some of ETC Marketing’s arguments are premised upon the physical nature
    of the gas and the pipeline system, effectively suggesting that its gas is not
    actually contained within the Bammel reservoir, but that instead it at all
    times flows freely throughout the interstate pipeline system. Our legal
    analysis accepts ETC Marketing’s admission that it owns the gas located at
    Bammel, just as both parties assumed this fact for the purposes of the
    appraisal, and just as ETC Marketing itself assumes for accounting and
    regulatory purposes. The Tax Code permits a taxpayer protest on the basis
    that property should not be included on the appraisal records. See, e.g., TEX.
    TAX CODE § 41.41(a)(3). But the challenge raised by the appeals to the
    district court and to this court cannot fairly be considered a challenge to the
    factual determination that ETC Marketing owned and stored gas at Bammel;
    12
    evade the application of ad valorem taxation is the operation of the dormant
    Commerce Clause, as measured by the four prongs of the Complete Auto test. See
    Appellant’s Br. at 32–46.
    I.       Substantial nexus to the taxing state
    The first prong of the Complete Auto test considers whether the tax applies
    to an activity that has a substantial nexus with the taxing state. Complete 
    Auto, 430 U.S. at 279
    , 97 S. Ct. at 1079. ETC Marketing had offices and employees in Harris
    County and elsewhere in the state of Texas. The natural gas at issue was purchased
    in Texas at the Katy Hub, and it was transported by Houston Pipeline, which also
    has offices and employees in the state of Texas. Houston Pipeline’s entire system
    is located within Texas, including the Bammel reservoir. The natural gas in
    question was owned by ETC Marketing and stored for up to several months at a
    time in the Bammel reservoir, pursuant to a storage agreement with Houston
    Pipeline.
    These factors establish that ETC Marketing had a substantial physical
    presence in Harris County, and they therefore distinguish this case from one it
    relies upon in this appeal, Peoples Gas, Light, & Coke Co. v. Harrison Cent.
    Appraisal Dist., 
    270 S.W.3d 208
    (Tex. App.—Texarkana 2008, pet. denied). In
    instead the appeals assert a legal challenge to HCAD’s assessment of a tax
    on that gas based upon ETC Marketing’s legal contention that the gas is in
    interstate commerce and therefore exempt from local taxation.
    13
    Peoples Gas, the court of appeals held that a tax assessment on stored natural gas
    was invalid under Complete Auto because a substantial nexus with Texas was
    lacking. 
    Id. at 219.
    But unlike this case, Peoples Gas had no physical facilities,
    employees, representatives, or customers in Texas. 
    Id. at 218.
    Its only connection
    to Texas was through the “structure and location” of the separately owned pipeline,
    which made the decision about where to store the gas and paid its own ad valorem
    taxes on the facility and equipment used for storage of natural gas in Texas. 
    Id. at 218–19.
    In contrast, ETC Marketing had a physical presence in Harris County
    including employees, offices, and—most significantly—natural gas that it had
    specifically contracted to store with Houston Pipeline. Unlike the pipeline at issue
    in Peoples Gas,13 Houston Pipeline’s facilities are located entirely within Texas,
    including the Bammel reservoir in Harris County. There was no evidence that the
    gas was already bound for another state when it was committed to Houston
    Pipeline. 14 Moreover, unlike the scenario in Peoples Gas, in which the court
    13
    Peoples Gas, Light, & Coke Co. v. Harrison Cent. Appraisal Dist., 
    270 S.W.3d 208
    , 211 (Tex. App.—Texarkana 2008, pet. denied) (pipeline at
    issue had “many” associated “storage facilities” that were “operated ‘in the
    aggregate,’” such that the pipeline’s storage and transportation of gas did not
    “use any particular storage field exclusively”).
    14
    In contrast, in Peoples Gas the appellant had purchased natural gas and paid
    for its “contractual storage in the Iowa-Illinois zone,” “transportation to the
    Iowa–Illinois zone,” and the contractual right to physical delivery in
    Chicago, Illinois. 
    Id. at 213–14.
    14
    emphasized that the owner of the gas made no decision to store gas in Texas to
    serve its own business purpose,15 here there was evidence that ETC Marketing
    contracted to store the gas in Houston Pipeline’s facilities, located entirely within
    Texas, for its own business purposes of timing the market and selling the gas at
    higher prices out of state during cold months.16 And although ETC Marketing
    asserts that Houston Pipeline had the contractual right to control where the gas was
    stored, the record contains no evidence that Houston Pipeline had storage capacity
    for the appraised volume of gas at any location other than at the Bammel reservoir.
    The prolonged physical presence of ETC Marketing’s gas, deliberately
    stored in Texas, also distinguishes this case from the circumstances presented in
    Midland Central Appraisal District v. BP America Production Co., 
    282 S.W.3d 15
          
    Id. at 216
    (“Since Peoples has no control over where that natural gas is
    stored and how much is stored at any given location, we cannot say that
    Peoples made the decision to store gas at North Lansing in order to serve its
    business purpose.”).
    16
    Our dissenting colleague contends that by observing the differences between
    this case and Peoples Gas, we have “implicitly” concluded that the gas at
    issue was not in interstate commerce. Not so. Still, we observe the
    distinction between the cases because it is ETC Marketing’s express
    contention that its gas is in interstate commerce even while it is being stored
    at Bammel pending its later decision of where and when to sell the gas. See
    Appellant’s Br. at 27. The circumstances that inform a decision about
    whether goods are “in transit” also may inform a court’s decision about
    whether the first and fourth nexus requirements of Complete Auto are met.
    See Diamond Shamrock Ref. & Mktg. Co. v. Nueces Cnty. Appraisal Dist.,
    
    876 S.W.2d 298
    , 302 (Tex. 1994).
    15
    215 (Tex. App.—Eastland 2009, pet. denied), in which ad valorem tax was
    improperly assessed on oil passing in interstate commerce through an interstate
    pipeline, but temporarily held in a tank farm located in Texas. Unlike ETC
    Marketing’s natural gas deliberately stored at Bammel to facilitate timing the
    natural gas market, the oil at issue in the Midland case was not held in the tank
    farm for storage purposes or for any business purpose of the owner other than its
    transmission through the pipeline. 
    See 282 S.W.3d at 221
    –23.
    ETC Marketing argues that the United States Supreme Court has held that
    physical presence does not satisfy the substantial nexus test in ad valorem cases.
    We disagree. ETC Marketing relies on Quill Corp. v. North Dakota By & Through
    Heitkamp, 
    504 U.S. 298
    , 
    112 S. Ct. 1904
    (1992), which reaffirmed that physical
    presence satisfies the first prong of the Complete Auto test in sales-and-use tax
    cases. See 
    id. at 317–18,
    112 S. Ct. at 1916. Texas cases have come to the same
    conclusion in other contexts and expressly rejected ETC Marketing’s argument.
    See, e.g., Rylander v. 3 Beall Bros. 3, Inc., 
    2 S.W.3d 562
    , 570 (Tex. App.—Austin
    1999, pet. denied) (franchise tax case, citing Quill 
    Corp., 504 U.S. at 312
    –14, 
    112 S. Ct. 1904
    ).17
    17
    Moreover, this issue was presented to the Supreme Court of Texas in
    Virginia Indonesia Co. v. Harris County Appraisal Dist., 
    910 S.W.2d 905
          (Tex. 1995), a case that challenged HCAD’s assessment of ad valorem taxes
    on goods stored in Harris County while in transit intended for foreign export.
    16
    The Commerce Clause requirement of a substantial nexus with the taxing
    state is satisfied for purposes of an ad valorem tax by the taxpayer’s physical
    presence in the state in the form of physical storage of tangible personal property.
    Because ETC Marketing was physically present in the state, and the activity being
    taxed—ownership and storage of natural gas—occurred in Harris County, 18 there is
    a substantial nexus between the activity being taxed and the state of Texas.
    The Court’s majority resolved that appeal by concluding that the tax violated
    the federal constitution’s Import-Export Clause, U.S. CONST. art. 1, § 10,
    cl. 2, expressly declining to address whether the tax also offended the
    Commerce Clause. See 
    VICO, 910 S.W.2d at 915
    . But in his dissenting
    opinion, then-Justice Nathan Hecht did reach the issue, joined by then-
    Justice Priscilla Owen. And Justice Hecht observed in that case: “The goods
    clearly have a nexus to this state. They are present for relatively prolonged
    periods during which they receive local services such as police and fire
    protection.” 
    Id. at 925
    (Hecht, J., dissenting); see also Peoples 
    Gas, 270 S.W.3d at 218
    (“The Commerce Clause requirement of a substantial nexus
    with the taxing state is satisfied by the taxpayer’s physical presence in the
    state.”).
    18
    Notably, in similar circumstances the supreme courts of both Oklahoma and
    Kansas have recently found the required substantial nexus to exist based
    solely on the physical presence of the gas and without regard to any of the
    owner’s other activities within the state. See In re Assessment of Pers. Prop.
    Taxes Against Missouri Gas Energy, Div. of S. Union Co., for Tax Years
    1998, 1999, & 2000, 
    234 P.3d 938
    , 959 n.84 (Okla. 2008) (expressly
    declining to follow Peoples Gas), cert. denied sub nom. Missouri Gas
    Energy v. Schmidt, 
    559 U.S. 970
    , 
    130 S. Ct. 1685
    (2010); In re Appeals of
    Various Applicants from a Decision of Div. of Prop. Valuation of State for
    Tax Year 2009 Pursuant to K.S.A. 74-2438, 
    313 P.3d 789
    , 799 (Kan. 2013)
    (also declining to follow Peoples Gas: “There is axiomatically a substantial
    nexus between Kansas and the gas stored in this state.”), cert. denied, 135 S.
    Ct. 51 (2014).
    17
    Accordingly, we conclude that the tax in this case applies to an activity that has a
    substantial nexus with the taxing state. See Complete 
    Auto, 430 U.S. at 279
    , 97 S.
    Ct. at 1079.
    II.        Fair apportionment
    The second prong of the Complete Auto test is whether the tax is fairly
    apportioned. 
    Id. “The central
    purpose behind the apportionment requirement is to
    ensure that each State taxes only its fair share of an interstate transaction.”
    Goldberg v. Sweet, 
    488 U.S. 252
    , 260–61, 
    109 S. Ct. 582
    , 588 (1989). To
    determine “whether a tax is fairly apportioned” we examine “whether it is
    internally and externally consistent.” 
    Id. at 261,
    109 S. Ct. at 589.
    a.     Internal consistency. A tax is internally consistent when it is
    “structured so that if every State were to impose an identical tax, no multiple
    taxation would result.” 
    Id. We consider
    the text of the challenged statute and
    determine whether multiple taxation would ensue if other States had identical
    statutes. 
    Id. Here, the
    relevant provisions of the Texas Tax Code impose taxes on
    “tangible personal property” that is located in the taxing unit on the date of
    valuation “for longer than a temporary period.” TEX. TAX CODE §§ 11.01, 21.02. It
    has been conceded for purposes of this appeal that ETC Marketing owned the gas
    at issue and that it was located in Harris County at the time its value was assessed.
    We have also explained that the gas was present in Harris County for longer than a
    18
    temporary period. See supra note 6. There is no argument that ETC Marketing
    contracted to store its gas in any other state. There is no argument that any other
    taxing jurisdiction has attempted to impose an ad valorem tax on the gas at issue
    for a period of time that overlaps the assessment at issue. 19 Because the record does
    not suggest that ETC Marketing attempted to store its gas in two different states at
    the same time, its value could not be taxed by another jurisdiction at the same time,
    and thus we conclude on this record that the tax is internally consistent. See
    Goldberg, 488 U.S. at 
    261, 109 S. Ct. at 589
    .
    b.     External consistency. “The external consistency test asks whether the
    State has taxed only that portion of the revenues from the interstate activity which
    reasonably reflects the in-state component of the activity being taxed.” 
    Id. at 262,
    109 S. Ct. at 589. “We thus examine the in-state business activity which triggers
    the taxable event and the practical or economic effect of the tax on that interstate
    19
    Dan Hyvl, senior counsel to ETC Marketing, specifically testified that the
    company had no concern about another state imposing ad valorem tax while
    the gas was in transit because once the gas leaves the state, it belongs to the
    purchaser. This refutes the suggestion, made in the motion for en banc
    reconsideration, that our holding in this case would subject all “natural gas
    suppliers” to multiple taxation as natural gas in commerce traverses multiple
    jurisdictions. Moreover, ETC Marketing does not suggest that all interstate
    natural gas sales involve the particular facts that are dispositive in this case,
    including the deliberate storage of gas for more than a “temporary period,”
    within one taxing jurisdiction, for reasons that serve the owner’s business
    purposes as opposed to being merely incidental to the interstate
    transportation of the gas to facilitate its sale.
    19
    activity.” 
    Id. HCAD argues
    that the tax is externally consistent because it has a
    right to impose the ad valorem tax and because the gas is stored for months rather
    than simply being present on the date of assessment or valuation. ETC Marketing
    argues that the tax is externally inconsistent because it is not possible to determine,
    at any given time, the actual, physical location of its natural gas. It says in its brief:
    “Given the ethereal nature of gas, it is impossible to determine what portion of the
    gas to which ETC has a right, if any, is actually located under Harris County.”
    Likewise, it contends that it is not possible to determine whether or how much of
    its natural gas originated in Texas. But as we have already explained, we must
    reject this reasoning because ETC Marketing has acknowledged its ownership of
    the 33 billion cubic feet of natural gas stored in the Bammel reservoir as to which
    HCAD assessed taxes. In light of this record, ETC Marketing’s argument that the
    tax was externally inconsistent because it was not possible to determine the
    location of particular molecules of its gas must fail. The tax reflects the in-state
    component of the storage of the entire volume of gas and is externally consistent.
    Accordingly, we conclude that the tax in this case was fairly apportioned. See
    Complete 
    Auto, 430 U.S. at 279
    , 97 S. Ct. at 1079.
    III.   Discrimination against interstate commerce
    The third prong of the Complete Auto test is whether the tax discriminates
    against interstate commerce. 
    Id. A tax
    is nondiscriminatory under Complete Auto
    20
    when it “places no greater burden upon interstate commerce than the state places
    upon competing intrastate commerce of like character.” 
    Id. at 282,
    97 S. Ct. at
    1081. Based on its argument that the tax is not fairly apportioned, ETC Marketing
    concludes that the tax discriminates “in practical effect.” We have explained why
    its arguments as to fair apportionment are not meritorious. HCAD taxed only that
    quantity of gas stored in Harris County on the date of taxation and as to which
    ETC Marketing acknowledged its ownership. Nothing in the record indicates that
    these taxes were selectively imposed on interstate commerce or that the rates of
    taxation were different or more onerous for property in interstate commerce.
    Nothing in the record indicates any lack of uniformity or unfairness in the process
    of assessing ad valorem taxes on ETC Marketing’s gas which we assume to be in
    interstate commerce as compared with like property purely in intrastate commerce.
    Accordingly, we conclude that the ad valorem taxes here were nondiscriminatory.
    See Nueces Cnty Appraisal Dist. v. Diamond Shamrock Refining & Marketing Co.,
    
    853 S.W.2d 212
    , 217–18 (Tex. App.—Corpus Christi 1993) (“Clearly, this
    nondiscriminatory tax passes this test because the taxing state only taxed that
    property which was present within its boundaries and received governmental
    services regardless of its origin or its destination.”), aff’d, 
    876 S.W.2d 298
    (Tex.
    1994); see also Vinmar, Inc. v. Harris Cnty. Appraisal Dist., 
    947 S.W.2d 554
    , 559
    (Tex. 1997) (Hecht, J., dissenting) (“The tax in this case is nondiscriminatory; that
    21
    is, it does not single out property awaiting export. It is imposed on all personal
    property in Harris County on January 1 each year.”); cf. Michelin Tire Corp. v.
    Wages, 
    423 U.S. 276
    , 287, 
    96 S. Ct. 535
    , 542 (1976) (noting that
    “nondiscriminatory ad valorem” and other types of taxes share “the characteristic
    that they cannot be selectively imposed and increased so as substantially to impair
    or prohibit importation”); Dep’t of Revenue of State of Wash. v. Ass’n of Wash.
    Stevedoring Cos., 
    435 U.S. 734
    , 748, 
    98 S. Ct. 1388
    , 1398 (1978) (“The
    Commerce Clause balance tips against the tax only when it unfairly burdens
    commerce by exacting more than a just share from the interstate activity.”)
    The tax at issue in this case is an ad valorem tax of general application, and
    we hold that it was not discriminatory. See Complete 
    Auto, 430 U.S. at 279
    , 97 S.
    Ct. at 1079.
    IV.   Fair relation to State-provided services
    The fourth and final prong of the Complete Auto test is whether the tax is
    fairly related to the services provided by the state. 
    Id. “The fair
    relation prong of
    Complete Auto requires no detailed accounting of the services provided to the
    taxpayer on account of the activity being taxed, nor, indeed, is a State limited to
    offsetting the public costs created by the taxed activity.” Okla. Tax Comm’n v.
    Jefferson Lines, Inc., 
    514 U.S. 175
    , 199–200, 
    115 S. Ct. 1331
    , 1345–46 (1995); see
    also In re Nestle USA, Inc., 
    387 S.W.3d 610
    , 625 (Tex. 2012). “[P]olice and fire
    22
    protection, along with the usual and usually forgotten advantages conferred by the
    State’s maintenance of a civilized society, are justifications enough for the
    imposition of a tax.” Jefferson 
    Lines, 514 U.S. at 199
    –200, 115 S. Ct. at 1345–46.
    ETC Marketing argues that the “fairly related” prong is not satisfied because
    the gas was entrusted to Houston Pipeline, which pays taxes on the Bammel
    reservoir and the equipment related to it. It further argues that Houston Pipeline
    has complete and exclusive control over the activity being taxed, which is the
    storage of the gas in the reservoir. However, the summary-judgment evidence
    showed that ETC Marketing retained control over the disposition of the gas for its
    own business purposes.
    ETC Marketing has the burden of proof on this Complete Auto issue. See
    Barclays 
    Bank, 512 U.S. at 314
    , 114 S. Ct. at 2278. It owns the gas while it is
    stored at Bammel, and it enjoys the benefit of public services which facilitate gas
    storage, which in turn allows it to accomplish its business objective of buying
    natural gas and holding it for sale at some later point in time. Accordingly, we
    conclude that the summary-judgment evidence shows that the tax in this case is
    fairly related to the services provided by the state. See Complete 
    Auto, 430 U.S. at 279
    , 97 S. Ct. at 1079; accord In re Assessment of Pers. Prop. Taxes Against
    Missouri Gas Energy, Div. of S. Union Co., for Tax Years 1998, 1999, & 2000, 
    234 P.3d 938
    , 959 n.84 (Okla. 2008) (“suffice it to say that both the pipeline company
    23
    and the owner of gas stored in an underground storage facility benefit from the
    state’s services and protection”), cert. denied sub nom. Missouri Gas Energy v.
    Schmidt, 
    559 U.S. 970
    , 
    130 S. Ct. 1685
    (2010); In re Appeals of Various
    Applicants from a Decision of Div. of Prop. Valuation of State for Tax Year 2009
    Pursuant to K.S.A. 74-2438, 
    313 P.3d 789
    , 799 (Kan. 2013), cert. denied, 135 S.
    Ct. 51 (2014).
    24
    Conclusion
    Although the parties have vigorously disputed whether the natural gas being
    stored at the Bammel reservoir was in interstate commerce for the purposes of
    evaluating the validity of an ad valorem tax imposed upon it, it is not necessary for
    us to resolve that dispute, or the related evidentiary issue concerning the
    admissibility of ETC Marketing’s expert report, in order to resolve this appeal.
    Even assuming that the gas is in interstate commerce, it was nevertheless
    appropriate for an ad valorem tax to be imposed when the owner stored the gas in
    Texas for the business purpose of selling the gas at a higher price at a later time of
    the owner’s choosing. Accordingly, we affirm the judgment of the trial court.
    Michael Massengale
    Justice
    Panel consists of Justices Keyes, Higley, and Massengale.
    Justice Keyes, dissenting. Dissenting opinion issued January 13, 2015.
    25