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June 3, 2022

Fifth Circuit denies rehearing request on its decision that federal oil spill tax on exported crude oil is unconstitutional

A panel of judges of the US Court of Appeals for the Fifth Circuit recently held that the federal oil spill liability tax imposed by IRC Section 4611(b) on crude oil that is exported outside of the US violated the Export Clause of the US Constitution (Export Clause).1 On May 23, 2022, the Fifth Circuit denied the government's request to rehear the case with a full panel.


IRC Section 4611(a) imposes the federal oil spill liability tax on crude oil received at a US refinery and petroleum products imported into the US for consumption, use or warehousing. IRC Section 4611(b) further imposes the tax on domestic crude oil used in or exported from the US, provided that the tax was not imposed before such use or export. The oil spill liability tax rate is 8 cents or 9 cents per barrel, depending on the year.2 Revenues from the tax are deposited into the Oil Spill Liability Trust Fund.3

Between 2014 and 2017, Trafigura Trading LLC (Trafigura), a commodity trading company, exported approximately 50 million barrels of crude oil from Texas, Louisiana and North Dakota to locations outside of the United States. After remitting $4,215,924 in taxes pursuant to IRC Section 4611(b), Trafigura requested a refund of the amount paid, contending that IRC Section 4611(b) imposes an unconstitutional tax under the Export Clause.

The Export Clause provides that "No Tax or Duty shall be laid on Articles exported from any State."4 The US Supreme Court has interpreted the Export Clause to prohibit any tax on exports, but permit user fees "designed as compensation for Government-supplied services, facilities, or benefits."5 Charges that are proportionate to the value of the goods exported or unconnected to government-provided services or facilities are more likely to be considered unconstitutional taxes on exports, while charges not based on the quantity or value of goods exported and that fairly relate to the services received by the exporter are more likely to be considered constitutional user fees.6

After the IRS denied Trafigura's refund request, Trafigura challenged the denial of its refund as well as the constitutionality of IRC Section 4611(b). The US District Court for the Southern District of Texas agreed with Trafigura, finding that the tax assessed on oil exported by Trafigura was an unconstitutional tax on exports. The government appealed.

Trafigura decision

On March 24, 2022, a panel of the Fifth Circuit upheld the district court's decision.7 The appeals court found that the federal oil spill liability tax "is based on the volume of oil transported" because it is imposed on a per-barrel basis, and that crude oil exporters were being "forced to subsidize activities that are not 'services used or usable by the exporter.'"8 These factors led the appeals court to hold that IRC Section 4611(b) imposes a tax on exports, and not a permissible user fee, in violation of the Export Clause and therefore, may not be enforced.

The government filed a Petition for a Rehearing En Banc on May 6, 2022; the appeals court denied the petition on May 23, 2022. The government still has the option of appealing the appellate panel's decision to the US Supreme Court, but as of June 2, 2022, the government has not yet filed an appeal.


The Trafigura decision is significant as it is the first appellate decision to hold that IRC Section 4611(b) imposes an unconstitutional tax on crude oil exported from the United States. Given the uncertainty surrounding the continued imposition of the tax, affected taxpayers should discuss the impact of the case on their current tax liabilities and evaluate available options with their tax advisors, including whether they should file protective refund claims.


Contact Information
For additional information concerning this Alert, please contact:
Excise Tax
   • Ashley Scheele – Excise Tax Leader (
   • Scott Louie (
   • Lynn Avila (
   • Greg Richards (


1 Trafigura Trading, LLC v. United States, 29 F.4th 286 (5th Cir. 2022) (Trafigura II).

2 IRC Section 4611(c)(2)(B).

3 IRC Section 9509(b)(1).

4 U.S. Const., Art. I, Section 9, cl. 5.

5 United States v. US Shoe Corp., 527 U.S. 360, 363 (1998) (citing Pace v. Burgess, 92 U.S. 372 (1876)).

6 See id.; Pace v. Burgess, 92 U.S. 372 (1876).

7 Because Judge Wiener concurred only in the judgment, the opinion does not have a quorum and may not constitute precedent in the Fifth Circuit. See Indest v. Freeman Decorating, Inc., 168 F.3d 795, 796 n.1 (Wiener, J., concurring).

8 Id. at 293.