ELK HILLS POWER v. BOARD OF EQUALIZATION (Mihara and Miller, JJ., justices pro tempore; Baxter and Werdegar, JJ., not participating)Respondent, Board of Equalization, OppositionCal.August 10, 2012Jn the Supreme Court of the State of Caltfornia ELK HILLS POWER,LLC, Plaintiff and Appellant, Vv. CALIFORNIA STATE BOARD OF EQUALIZATION AND COUNTY OF KERN, Defendants and Respondents. Case No. $194121 SUPREME COURT FILED AUG 10 2012 Frank A. McGuire Clerk Deputy Fourth Appellate District, Division One, Case No. D056943 San Diego County Superior Court, Case No. 37-2008-00097074-CU- MC-CTL, The Honorable Ronald L. Styn, Judge RESPONDENT’S OPPOSITION TO MOTION FOR JUDICIAL NOTICE FILED BY APPELLANT ELK HILLS POWER, LLC KAMALAD. HARRIS Attorney General of California PAUL D. GIFFORD Senior Assistant Attorney General FELIX E. LEATHERWOOD Supervising Deputy Attorney General TiM NADER Deputy Attorney General State Bar No. 106093 110 West A Street, Suite 1100 San Diego, CA 92101 P.O. Box 85266 San Diego, CA 92186-5266 Telephone: (619) 645-2210 Fax: (619) 645-2489 Email: Tim.Nader@doj.ca.gov Attorneysfor Defendant and Respondent TABLE OF CONTENTS Page [ INTRODUCTION|...eeceecceneceesreeneeeeseeeeneceseeeensaeeseseenseeens 1 i. ARGUMENT...oc ececceeeeeeeeteecersnseseeeeseeesnnssesssesneseseeseeeeeaeees 2 A. The Court Should Not Take Judicial Notice Of Exhibit 1 And Exhibit 7 Because They Are Not Certified Or Properly Authenticated. 00...2 B. Judicial Notice Should Not Be Taken Of Exhibit 1, Exhibit 5, Exhibit 6, Exhibit 7, Exhibit 8, And Exhibit 9 Because They Are Irrelevant And HaveLittle Probative Value. .............. 3 C. Judicial Notice Should Not Be Taken Of Exhibits 2, 3, And 4 Because They HaveSlight Probative Value, Are Hearsay,Irrelevant, And Not Judicially Noticeable Facts Within Common Knowledge...ceeeeelenessseeseesessereseesees 5 CONCLUSION......cccccccsccsscsseeseseseenenesseeesnesesecenesssenecsseesaeenseetiesenaeetesrereates 8 TABLE OF AUTHORITIES Page CASES Brosterhous v. State Bar (1995) 12 Cal.4th 315 ooeeeeeeeteeeesececcanseaseeceeevecsesacuuvateceseeneranss 3 Herrera v. Deutsche Bank Nat. Trust Co. (2011) 196 Cal.App.4th 1366.0...cc eeecnecnseeenessesesneeeneerseeesneetaeeens 2 In re Tobacco Cases IT (2007) 41 Cal.4th 1257 occ cccescceseeereeeneeseesesseneeessessesssesecseensengees 1 Ketchum v. Moses (2001) 24 Cal.4th 1122 oo.reeerect terete nrssereenenaeseneeeey 1 Mangini v. R. J. Reynolds Tobacco Co. (1994) 7 Cal. 4th 1057 oesessessseseeneessecsesseneesseeesseeseesseenees 1,2 Varjabedianv. City ofMadera (1977) 20 Cal. 3d 285... ceecsseescecnerersensceseeseeseesesesssseesseneseaseenseseiees 3 STATUTES Evidence Code § 403, sub. (A)(3) ..eceeeeececerceeeseeceneeeeeeteeeseaeereeesesstesevsessrerssseessesnsensats 3 SASeecccccsccccsseessrecsensesnscenseeseesseeeeersaeeesnesrsseeenecseeeesseesneessesenenteetegs 1 § 45D oo ececcesssccesceeeceeeenereaeeersenevaneceeeeseeseersaeesssisesanecaseseseaseeeessesseeenes 1 § 452, SUBGIVISION (C) ....... ec eeeceeesseeeeeeseceeceeseeeesseesereseseesseteeesseeeereners 1,6 § 452, subdivision ()........ccccceseccseceeeeeceeeneeereeresseeeseeeseseeesneeneessA, 7 § L280... ceeccccceescssseceesseeseecsseessecscenseseaeecsieeesnsaseasengeseseseesessaesenseesneensaes 6 Revenue and Taxation Code § 110, subdiViSiON (€) 0... eececeseeesececeseeeeteeeeseeessenseeserteesneseesaeenas 5,8 § 110, subdivisions (f)......cccecesssseeeceeeeeeeeseceeeneesneeeecseeenssesenseeneeensaes 8 COURT RULES California Rules of Court Rule 8.520(2)... ceeecccceseesneeseecneeesnseeensaeeseneeesseesnessseeeeentesenneseneeseegeges 1 li I INTRODUCTION Respondent California Board of Equalization ("the Board") objects to the Requests for Judicial Notice (RIN)filed by Appellant Elk Hills Power LLC (“Elk Hills). The Board submits that these requests should be denied on a variety of grounds,including the lack of relevance, lack of foundation, hearsay, failure to meetthe criteria for judicially noticeable facts and the outweighing ofanyslight probative value by undue consumptionoftime. Judicial notice by a reviewing court is authorized by Evidence Code sections 451 and 452’ and California Rules of Court, Rule 8.520(g). Evidence to be judicially noticed, regardless of the ground on which judicial notice is based, must meet a thresholdtest of relevance to determination of the legal issues at hand. (Mangini v. R. J. Reynolds Tobacco Co. (1994) 7 Cal. 4th 1057, 1063, overruled on other groundsin Jn re Tobacco Cases II (2007) 41 Cal.4th 1257, 1276; see also Ketchum v. Moses (2001) 24 Cal.4th 1122, 1135, fn.1, matter to be judicially noticed must be relevant to a material issue.) In this case, Elk Hills advances twobasesforits request for judicial notice: section 452, subdivision (c) (“official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States”) and section 452, subdivision (h) (“facts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy”). Section 452, subdivision (c) authorizes a court to take judicial notice of the existence of official documents, but not necessarily ofthe truth of statements within those documents, which may still be excludable as hearsay. Documents of which the Court has ' All statutory references are to the Evidence Code unless otherwise stated. discretion to take judicial notice maystill be objectionable and excluded on recognized grounds of evidence law. For example, in Mangini, supra, this Court held that while it could take judicial notice of the issuance of a report by the United States Surgeon General regarding the health consequencesof smoking, it could not take judicial notice of the truth of the conclusions stated in the report, which were hearsay notwithstanding that they were contained in an official document. (Mangini v. R. J. Reynolds Tobacco Co., supra, 7 Cal. 4th at pp. 1063-1064; see also, Herrera v. Deutsche Bank Nat. Trust Co. (2011) 196 Cal.App.4th 1366, 1375, judicial notice of official document does not make hearsay within the documentjudicially noticeable.) _ Byits terms, judicial notice under section 452 is discretionary even if the proffered evidence meets the relevance standard. This Court,like trial court, retains discretion to reject proffered evidenceif its probative value is outweighed by undue consumption of time. (§ 352; Mangini v. R. J. Reynolds Tobacco Co., supra at 1063, citing Mozzetti v. City ofBrisbane (1977) 67 Cal.App.3d 565, 578.) This Court should deny Elk Hills’s request for judicial notice. Il. ARGUMENT A. The Court Should Not Take Judicial Notice Of Exhibit 1 And Exhibit 7 Because They Are Not Certified Or Properly Authenticated. Objection: Lacks proper foundation as not certified or otherwise properly authenticated. The proffered exhibits purport to be decisions of the California Energy Commission (CEC). They are neither signed nor certified, and appear to be proposed decisions prepared by staff but not necessarily adopted by the Commission as proposed. The exhibits do not disclose whether the proposed orders were approved as written or amended prior to CEC action. Because these exhibits are not properly authenticated, Elk Hill’s request for judicial notice of exhibits 1 and 7 should be denied. (See Evid. Code, § 403, subd. (a)(3), proponent of evidence has burden of proving authenticity.) B. Judicial Notice Should Not Be Taken Of Exhibit 1, Exhibit 5, Exhibit 6, Exhibit 7, Exhibit 8, and Exhibit 9 Because They Are Irrelevant And HaveLittle Probative Value. Objection: Irrelevant; slight probative value outweighed by undue consumption of time (§ 352). The CEC “orders”, even if identical to orders ultimately adopted by the CEC, and the Authorities to Construct issued by the San Joaquin Valley Air Pollution Control District (the District) are irrelevant to the issues in this case as framed by the Petition for Review and thebriefs of the parties. These exhibits apparently are offered to support Elk Hills’s new claim, made for thefirst time in its Reply Brief, that the ERCs were not required for construction of the Elk Hills plant and that even if permits required for construction of the plant are includable as part of replacement value for property tax assessment purposes, permits for operation are not. But that belated argument is not properly before the Court, because it is newly raised in the Reply Brief. (Varjabedian v. City ofMadera (1977) 20 Cal.3d 285, 295, fn. 11.) Thus, both the allegation that ERCs were not required for construction and the argument claiming a distinction between “construction permits” and “operating permits” are improper. Moreover, the new factual allegation is improper because it was never raised below and is in conflict with Elk Hills’s prior admissions and stipulations. (Brosterhous v. State Bar (1995) 12 Cal.4th 315, 325.) It also conflicts with Elk Hills prior admissions. For these reasons alone, the proffered material is irrelevant to issues properly before this Court. Because the parties had long agreed that there are no material undisputed facts at issue, both parties filed briefs indicating that this case . addressed purely issues of law. Now,at this late date, Elk Hills tries for the first time to claim that there are material facts in dispute. But the specific timing of the issuance and surrender of ERCsis irrelevant, because there is no legitimate dispute that it was necessary for Elk Hills to deploy ERCsto beneficially and productively use its powerplant at its highest and best use. (See Respondent’s Answer to Amicus Brief filed by Independent Energy Producers, at pp. 19-21, and Respondent’s Consolidated Answer to Amicus Brief filed by Broadband,et al. at p. 17-21.) The proffered exhibits do not even support Elk Hills’s argument. While Elk Hills quotes one portion of its new Exhibit 1 in support ofits belated claim that ERCs were not required until operation of the plant, another portion clearly states: AQ — 24 Atleast thirty (30) days prior to the construction of permanent foundations, the project ownershall provide the [San Joaquin Valley Air Pollution Control] District with: written documentation that all necessary offsets [ERCs} have been acquired or that binding contracts to secure such offsets have been enteredinto. The same condition appears in Elk Hills’s Exhibits 5 and 6, the Authorities to Construct issued by the District. (See e.g., page 3 in each exhibit) | Thus, even if these additional documents were accepted at face value, they would not contradict the undisputed fact upon which this case was decided in the trial court, namely that the deployment of ERCsin this case was necessary to construct and operate Elk Hills’s power plant at highest and best use. Elk Hills acknowledgedthis fact in the trial court (I CT 126, 143) and again in its petition and opening brief before this Court. (Petition, pp. 11-12; AOB 9-10, 54.) Evenif, as Elk Hills now belatedly claims, Exhibits 7, 8 and 9 show that the ERCs ultimately required to be surrendered were fewer than those initially called for in the Authority to Construct (because Elk Hills was able to further reduce its emissions even after compliance with “Best Available Control Technology” requirements), the exhibits are still irrelevant. This fact is not probative as to any matter at issue in this appeal. Moreover, it has always been undisputed that the first assessment year at issue in this case was 2004. (I CT 39.) As of the 2004 lien date, the ERCs weresurrendered and applied to the powerplant real property. Assuming there is some probative value to be found in these documents on issues before the Court, any minimal value is outweighed by the undue consumption of time, and the Court therefore has discretion to exclude the proffered evidence. (§ 352.) The issues before the Court can be best decided on the existing record. Andif the Court entertains argument based on this proffer of evidence, the Board would be prejudiced by the denial of the opportunity to conduct discovery that would have been affordedit if the material had been timely offered in the trial court. C. Judicial Notice Should Not Be Taken Of Exhibits 2, 3, and 4 Because They HaveSlight Probative Value, Are Hearsay,Irrelevant, and Not Judicially Noticeable Facts Within Common Knowledge. _ Objection: Irrelevant (§ 350), slight probative value outweighed by consumption of time (§ 352), hearsay (§ 1200), and not judicially noticeable facts within common knowledge (§452, subd.(f)). This material is irrelevant because issues of environmental or energy policy are relevant only insofar as they may shedlight onlegislative intent. If this Court finds ambiguity in the language of Revenue and Taxation Code section 110, subdivision (e) (“Taxable property may be assessed and valued by assuming the presence of intangible assets or rights necessary to put the taxable property to beneficial or productive use”), legislative history and public policy issues mayassist in determining legislative intent. Legislative history and public policy are only relevant, however,if thereis ambiguity in the statute (as claimed in this case by Elk Hills but denied by the Board). | With these exhibits (and other exhibits in Elk Hills’ Motion, discussed infra), Elk Hills crosses a line from debating the impact of different constructions of the statute on public policy (a matter properly considered in the courts), to debating the merits of policy (a matter properly considered in the Legislature). Assuming for the sake of argumentthe truth of everything in the exhibits, the Board submits that these documents shed no light on the appropriate construction of the statutes at issue here. The exhibits at most indicate that natural gas is cleaner than other fossil fuels, less clean than renewable resources, and likely to be an important part of the world’s energy supply for the foreseeable future. But neither the Board nor any amici have argued any of these points, and therefore they are not before the Court in this case. These exhibits are also objectionable hearsay. Although United States government documents, their contents are not government records within the meaning of Evidence Code section 1280, nor “official acts” of the _ government within the meaning of Evidence Code section 452, subdivision (c). Far from being records of events that have occurred, these documents are in the nature ofintelligence assessments and forecasts, and thus constitute expert opinion from a federal agency. The documents themselves frequently acknowledge that their conclusions are subject to change with time, events, and other unpredictable factors. While these assessments may be useful to policy makers, they are not relevant to the issue of state statutory construction before this Court, and do notreflect official acts or “records” of the government. Anyslight probative value in these documents is also outweighed by the consumption of time involved. These documents analyze complex and controversial issues of tangential significanceto this case and, by their own acknowledgment, are based on assumptions regarding complex variables. For example, Exhibit 2 acknowledgesit has not accounted for the impacts of the Fukushima nuclear disaster (Exhibit 2, p. 2), future limits on sreenhouse gas emissions (Exhibit 2, p. 3), and governmentpolicies and incentives which may either encourage or discourage the growth of renewable energy alternatives to fossil fuels (Exhibit 2, pp. 5-6, 8, 10-1 1). The same exhibit notes that currently, while construction costs of non- fossil fuel renewable energy sourcesare higherrelative to conventional fuels, their operating costs are lower (Exhibit 2, p. 6), further complicating the business of making accurate forecasts. All ofthis is to say that for the Court to analyze these documents and the numerous assumptions made therein is an effort unlikely to be justified by the minimal light they will shed on construction of the statutes at issue in this case. Finally, the exhibits obviously do not meetthe criteria of Evidence Code section 452, subdivision (h), “Facts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy”. As discussed above,the proffered reports contain numerous acknowledgments that manyof their conclusions are uncertain and may be affected by unknownvariables. Indeed, this Court, were it relevant, could more appropriately take judicial notice of the fact that issues underlying energy policy, ranging from the relative economicfeasibility of various fuels to the environmental impact of their use, are not undisputed and are the subject of daily, vigorous debate. Whatis not subject to dispute is that it is the policy of both the federal and state governmentto reduce air emissions in Clean Air Act non- attainmentareas, andit is the policy of California to tax property in accordance with fair market value. These documents shed no light on how rival constructions of Revenue and Taxation Code section 110, subdivisions (e) and (f) would affect either policy. CONCLUSION For the above reasons, the Board objects to the Requests for Judicial Notice of Elk Hills, and respectfully asks that these requests be denied. Dated: August 8, 2012 $D2012802026 80668147.doc Respectfully submitted, KAMALAD. HARRIS Attorney General of California PAUL D. GIFFORD Senior Assistant Attorney General FELIX E., LEATHERWOOD Supervising Deputy Attorney General TIM NADER Deputy Attorney General Attorneysfor Defendant and Respondent CERTIFICATE OF COMPLIANCE I certify that the attached RESPONDENT’S OPPOSITION TO MOTION FOR JUDICIAL NOTICE FILED BY APPELLANT ELK HILLS POWER, LLCusesa 13 point Times New Romanfont and contains 2,656 words. Dated: August 8, 2012 KAMALA D. HARRIS Attorney General of California ber TIM NADER Deputy Attorney General Attorneysfor Defendants and Respondents DECLARATION OF SERVICE BY U.S. MAIL Case Name: EJk Hills Power v. CA State Board of Equalization,et al. No.: 8194121 I declare: 1 am employedin the Office of the Attorney General, which is the office of a memberof the California State Bar, at which member's direction this service is made. I am 18 years of age or older and not a party to this matter. I am familiar with the businesspractice at the Office of the Attorney General for collection and processing of correspondence for mailing with the United States Postal Service. In accordance with that practice, correspondence placedin the internal mail collection system at the Office of the Attorney General is deposited with the United States Postal Service with postage thereon fully prepaid that same dayin the ordinary course of business. On August 9, 2012, I served the attached RESPONDENT’S OPPOSITION TO MOTION FOR JUDICIAL NOTICE FILED BY APPELLANT ELK HILLS POWER, LLC by placing a true copy thereof enclosed in a sealed envelope in the internal mail collection system at the Office of the Attorney General at 110 West A Street, Suite 1100, P.O. Box 85266, San Diego, CA 92186-5266, addressed as follows: Paul J. Mooney, Esq. Mooney, Wright & Moore, PLLC MesaFinancial Plaza, Suite 16000 1201 South Alma School Road Mesa, AZ 85210-0001 Jerri S. Bradley County of Kern Public Defender 1115 Truxtun Avenue, Fourth Floor Bakersfield, CA 93301 Julian W. Poon Gibson, Dunn & Crutcher LLP 333 South Grand Avenue Los Angeles, CA 90071-3197 Peter W. Michaels Law Offices of Peter Michaels 6114 La Salle Avenue, Suite 445 Oakland, CA 94611-2802 Robert W. Lambert Assistant Chief Counsel Board of Equalization - Legal Division P.O. Box 942879 MIC:82 Sacramento, CA 94279-0082 The Honorable Ronald L. Styn San Diego County Superior Court Hall of Justice THIRD FLOOR Department SD-62 330 West Broadway San Diego, CA 92101 Fourth Appellate District Court Division One 750 B Street, Suite 300 San Diego, CA 92101 Cris K. O’Neall Cahill, Davis & O’Neall, LLP 550 S. Hope Street, Suite 1650 Los Angeles, CA 90071 Attorneysfor California Taxpayer's Association Douglas Mo Prentiss Wilson, Jr. Sutherland, Asbill & Brennan, LLP 500 Capitol Mall, 19th Floor Sacramento, CA 95814 Eric S. Tresh Sutherland, Asbill & Brennan, LLP 999 Peachtree NE,Suite 2300 . Atlanta, GA 30309 Attorneysfor Broadband Tax Institute Steve Mitra, Esq. Deputy County Counsel County of Santa Clara 70 West HeddingSt., 9th Floor, East Wing San Jose, CA 95110 Attorneyfor Amici Curiae California State Association ofCounties and California Assessors' Association John F. Krattli Albert Ramseyer Los Angeles County Assessor 500 West Temple Street, Room 648 Los Angeles, CA 90012-2713 Attorneysfor Los Angeles County Assessor Kurt R. Wiese Barbara Baird So. Coast Air Quality Management District 21865 Copley Drive Diamond Bar, CA 91765 Attorneysfor South Coast Air Quality Management District Wm. Gregory Turner Council on State Taxation 1415 L Street, Suite 1200 Sacramento, CA 95814 Attorneyfor Council on State Taxation Paul Hastings, LLP Peter Weiner Gordon E. Hart Sean D. Unger Jill E.C. Yung 55 SecondStreet, 24th Floor San Francisco, CA 94105 Attorneysfor Independent Energy Producers Edward G. Summers Middle Class Taxpayers Association 3737 Camino Del Rio North San Diego, CA 92108-4007 Attorneyfor Middle Class Taxpayers Association Richard R. Patch Jeffrey Sinshmeimer _ Charmaine G. Yu Coblentz, Patch, Duffy & Bass LLP One Ferry Building, Suite 200 San Francisco, CA 94111-4213 Attorneysfor California Cable and Telecommunications Association John Stump Sierra Club 85 Second St., 2nd Floor San Francisco, CA 94105 Attorneyfor Sierra Club Mardiros H. Dakessian Margaret M. Grignon Reed Smith LLP 355 South Grand Ave., Suite 2900 Los Angeles, CA 90071-1514 Attorneysfor Institute for Professionals in Taxation Richard N. Wiley 775 E. Blithedale Ave., Ste. 369 Mill Valley, CA 94941 Attorneyfor Wirelessco., L.P. Michael Wall Alex Jackson Natural Resources Defense Council 111 Sutter St., 20th FI. San Francisco, CA 94110 Attorneysfor Natural Resources Defense Council Ann Hancock Climate Protection Campaign P.O. Box 3785 520 Mendocino Ave., Suite 260 Santa Rosa, CA 95402 Attorneyfor Climate Protection Campaign I declare under penalty of perjury underthe laws of the State of California the foregoingis true and correct and that this declaration was executed o K. Marugg Declarant SD2012802026 80668484.doc n August 9; WW San Diego, California. po Signatuye
