Citing 'Hamilton,' court says trading firm cannot be taxed on oil exports

March 25 (Reuters) - A federal appeals court judge didn't throw away his shot to fill a ruling holding that a commodities trading firm's domestic crude oil exports could not be taxed with a history lesson about Alexander Hamilton and lyrics from his namesake Broadway musical.

U.S. Circuit Judge James Ho of the 5th U.S. Circuit Court of Appeals cited Hamilton's failed efforts during the 1787 Constitutional Convention to allow the federal government to tax exports in Thursday's 2-1 ruling he penned favoring Trafigura Trading.

"Alexander Hamilton was non-stop," Ho wrote, paraphrasing a lyric from "Hamilton" by Lin-Manuel Miranda. "There were a million things he wanted done. So when he was chosen for the Constitutional Convention, he spoke like he was running out of time."

But the Southern states feared export taxes would harm their economies. Delegates "knew they would have to holler just to be heard," Ho wrote, borrowing a line from another of the musical's songs, "My Shot."

Ultimately, the U.S. Constitution instead included a "sweeping" ban on Congress imposing any export taxes, Ho wrote, which meant Trafigura Trading was unconstitutionally taxed.

Trafigura had sued the federal government for a refund of the $4.22 million it paid from 2014 to 2017 to the Internal Revenue Service for the Oil Spill Liability Trust Fund, which helps companies and the government address and prepare for oil spills.

The tax was calculated at 8 or 9 cents per barrel, depending on the year, for domestic crude oil "used in or exported from the United States."

Ho, a conservative appointee of former Republican President Donald Trump, said if the Constitution forbids export taxes to further trade policy, "then there's no principled basis to allow export taxes designed to further environmental policy."

"That would defy the plain text as well as the Founders’ understanding of our nation’s charter," he wrote. "And Alexander Hamilton would not just 'get more than he gave'—he would get more than the Constitution permits."

Steven Knight, Trafigura's lawyer at Chamberlain Hrdlicka, did not respond to requests for comment. The U.S. Justice Department had no comment.

U.S. Circuit Judge Jacques Wiener, an appointee of former Republican President George W. Bush, concurred only in the judgment, which U.S. Circuit Judge James Graves in a dissent said meant Ho's opinion is not precedent.

Graves, an appointee of former Democratic President Barack Obama, said the U.S. Supreme Court allows exporters to be charged so-called user fees and stressed the need for anti-pollution measures.

"There would be no oil spills, resulting damage, or need for research and development regarding oil pollution if oil was not exported," he wrote.

The case is Trafigura Trading v. United States, 5th U.S. Circuit Court of Appeals, No. 21-20127.

For Trafigura Trading: Steven Knight of Chamberlain Hrdlicka

For the United States: Judith Hagley of the U.S. Justice Department

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