Whether West Virginia's refusal to allow natural gas producers to deduct actual post-production expenses for property tax purposes, which favors in-state sellers over out-of-state sellers, violates the dormant Commerce Clause

QUESTION PRESENTED For the tax assessments at issue in these appeals, West Virginia did not allow owners of natural gas wells to deduct their actual post-production expenses, including those incurred to process and transport their natural gas, oil, and natural gas liquids (“postproduction expenses”) for tax purposes. Instead, the State permitted only an “average” deduction for all operators. Owners who sell gas only within the State have far lower post-production expenses than those who sell out of state. That is mainly because transportation and other costs are much lower for in-state sellers since the gas does not travel as far. Thus, the “average” deduction is much lower than the actual postproduction expenses for out-of-state sellers. This resulted in a windfall and competitive advantage for in-state sellers because they not only have lower costs but in some cases they also got to deduct a higher amount than their actual costs. The State admitted to using this approach to favor in-state sellers. Although West Virginia’s Legislature has temporarily changed the calculation method for tax years 2022 through 2024 only, its high court blessed the discriminatory approach and the State has enforced it against Antero for the tax years at issue. The question presented is: Whether West Virginia’s refusal to allow natural gas producers to deduct actual post-production expenses for property tax purposes, which favors in-state sellers over out-of-state sellers, violates the dormant Commerce Clause.