Judgment summary
The case concerned the validity of a re-assessment decision issued by the Oil Taxation Office (Oljeskattekontoret) on 1 November 2023 regarding TotalEnergies EP Norge AS's (TEPN) taxable income for 2014-2017 [1]. The dispute centred on whether TEPN's intra-group short-term sales of dry gas to its UK sister company, TotalEnergies Gas & Power Ltd (TGP), were conducted on arm's length terms under skatteloven § 13-1 [1].
The Oil Taxation Office had increased TEPN's special-tax income by NOK 217 million, applying a flexibility mark-up of EUR 0.55 per MWh derived from comparison with independent volume-flexible agreements [1].
Sør-Rogaland tingrett had earlier held, on 28 March 2025, that the decision was invalid and ordered the State to pay TEPN's costs of NOK 6,343,690.25 [1]. The State appealed to Gulating lagmannsrett.
Gulating lagmannsrett found that the conditions for discretionary assessment under § 13-1 first paragraph were satisfied, because the intra-group arrangement in practice gave TGP a priced-relevant access and supply-security position that was not properly remunerated [9.5.6, 10]. However, the court found that the Oil Taxation Office's chosen comparison basis, independent volume-flexible agreements, did not accurately reflect the type of advantage present in the controlled transaction, so the assessment itself rested on an incorrect application of the law [11]. The decision was accordingly annulled, and the State's appeal was dismissed [11, Domsslutning].
Background
TEPN is a wholly owned subsidiary of TotalEnergies Holdings Europe S.A.S. and forms part of the Total group, whose parent, Total S.A., is resident in France [2]. TEPN produces oil and gas on the Norwegian continental shelf, including interests in swing fields such as Troll, Oseberg and Åsgård [2].
TGP is resident in the United Kingdom and forms part of the group's gas and power segment, carrying out portfolio and trading functions, reportedly conducted from Geneva [2].
In the period 2014-2017, TEPN sold dry gas to TGP under a framework agreement dated 14 February 2002, supplemented by individual transaction agreements fixing price, delivery point, delivery period and volume [5]. Around 1,800 transactions were entered into, with a total sales value of approximately NOK 7.8 billion [5]. About 70% of transactions by number (and about 50% by volume) were priced against hub index/closing references, with the remainder priced at fixed prices [5].
The Oil Taxation Office issued its amended assessment decision on 1 November 2023, finding that the internal transaction was not consistent with the arm's length principle and identifying an income reduction under skatteloven § 13-1 [1]. TEPN lodged a complaint on 13 December 2023, a meeting was held on 21 March 2024, and TEPN issued a notice of legal action on 19 April 2024, with a writ filed on 30 April 2024 [1]. Sør-Rogaland tingrett ruled in TEPN's favour on 28 March 2025, and the State appealed to Gulating lagmannsrett on 8 May 2025 [1]. The appeal hearing was held from 17 to 27 March 2026 [1].
Core dispute
The central question was whether TEPN's intra-group short-term gas sales to TGP under the 2002 framework agreement were carried out on arm's length terms as required by skatteloven § 13-1, or whether TGP received an unpriced advantage, described by the State as flexibility relating to delivery timing, delivery location, volume and pricing concept [1, 6].
The State argued that the controlled transaction had to be assessed as the aggregate of dealings under the framework agreement, that TGP enjoyed a preferential right to short-term volumes and considerable flexibility not reflected in the hub-indexed price, and that comparable independent volume-flexible agreements showed a market premium for such flexibility, justifying the EUR 0.55/MWh uplift applied in the decision [6].
TEPN argued that each transaction had to be assessed individually as sales of flat standardised products, priced correctly against hub index or closing prices consistent with external sales to independent parties, that nomination and matching bound the delivery market so that no optionality was actually transferred to TGP, and that the comparison used in the decision, involving volume-flexible agreements with a MIN/MAX mechanism, was factually and legally the wrong benchmark [7].
Court findings
The Court of Appeal held that it could review in full whether the conditions for discretionary assessment under § 13-1 first paragraph were met, while the exercise of discretion under the third paragraph was subject to the more limited standard of review applicable to free administrative discretion [8].
On transaction delineation, the court held that the arm's length analysis could not be confined to each individual delivery in isolation but had to be conducted on the basis of the aggregate dealings under the framework agreement, since the relevant flexibility arose from the combination of transactions over time [9.2].
Examining the factual substance of the dealings, the court found that TGP in practice enjoyed stable access to TEPN's short-term volumes within a flexible delivery framework, evidenced by trading patterns, internal mandates favouring sales to TGP, the absence of consistent optimisation, and significant gaps in TEPN's documentation of why particular markets, timings and pricing concepts were chosen [9.3.2, 9.3.3, 9.3.4, 9.3.5]. The court noted TEPN's own internal 2019 memorandum stating that TEPN did not keep documentation proving sales went to the highest-priced markets [9.3.4].
The court found that this access and supply-security position could not have been fully replicated through ordinary hub trading, given liquidity constraints, bid-ask spreads and market impact risk, particularly in less liquid hubs such as PEG Nord [9.4].
On comparability, the court rejected the Oil Taxation Office's use of independent volume-flexible Month Ahead agreements as the CUP benchmark, because those agreements priced a contractually defined buyer's right to vary offtake against a fixed reference price (an MA/DA arbitrage mechanism), which was a different economic feature from the access and delivery-security advantage identified in the TEPN-TGP dealings [9.5.3, 11]. The court also found that TEPN's external sales under open framework agreements were not sufficiently comparable, since TGP had priority over external buyers under TEPN's own internal mandate [9.5.4].
The court gave weight to agreements between TGP and an independent supplier, submitted with the consent of the Directorate of Taxation, which showed a premium over index pricing for secure physical delivery, and to TEPN's 2024 auction process showing a premium was paid by an independent buyer for forward-priced volume [9.5.5, 9.5.6]. On this basis, the court found that income reduction under § 13-1 was proven, and that causation was established because it was the intra-group relationship that explained the unremunerated advantage given to TGP, though the State had not proven that any missed reoptimisation gains were attributable to the affiliation [10].
Having found the conditions for discretionary assessment satisfied, the court nonetheless concluded that the Oil Taxation Office's actual exercise of discretion rested on an incorrect legal application, because it benchmarked the transaction against volume-flexible agreements pricing a different type of option than the one actually present in the controlled transaction [11].
Outcome
The Court of Appeal held that the conditions for discretionary income assessment under skatteloven § 13-1 first paragraph were met. However, it found that the Oil Taxation Office's decision of 1 November 2023 was based on an incorrect application of the law because the comparison basis used, independent volume-flexible agreements, did not accurately reflect the economic characteristics of the controlled transaction [11].
The decision was accordingly annulled, and the State's appeal was dismissed ("Anken forkastes") [Domsslutning]. The court did not give directions on how any new discretionary assessment should be carried out [11].
As neither party succeeded fully or substantially, the court ordered that each party bear its own costs for both the Court of Appeal and the district court [IV].
Tp method highlighted
The parties agreed that the Comparable Uncontrolled Price (CUP) method was the appropriate methodological starting point [8]. The Oil Taxation Office had used hub index/closing prices as a baseline reference and applied an uplift derived from independent volume-flexible agreements, setting the flexibility value at EUR 0.55 per MWh within an identified range of EUR 0.31-0.55 per MWh [11].
The Court of Appeal accepted that hub index prices reflect only a flat standardised product and do not capture supply-security or access-related features, so some adjustment to index pricing could be appropriate under OECD Guidelines paragraph 2.20 [9.5.2]. However, it found that the specific comparator used by the Oil Taxation Office, volume-flexible Month Ahead agreements granting a contractual right to vary offtake against a fixed price (enabling arbitrage between Month Ahead and Day Ahead prices), priced a materially different type of option and risk than the access and delivery-security advantage actually present in the TEPN-TGP dealings [9.5.3, 11].
The court instead found greater relevance in agreements between TGP and an independent supplier, and in TEPN's 2024 auction results, both showing that the market pays a premium over index for secured physical delivery, though it did not itself quantify the correct armlengde mark-up, leaving this to a fresh assessment by the tax authority [9.5.6, 11].
Major issues / areas of contention
- Whether the controlled transaction should be assessed as roughly 1,800 individual transaction agreements or as the aggregate dealings under the 2002 framework agreement.
- Whether TEPN's intra-group gas sales to TGP conferred an unpriced flexibility, access or supply-security advantage beyond a flat standardised hub-indexed product.
- Whether such an advantage, if it existed, could have been replicated by TGP through ordinary hub trading without additional cost.
- Whether income reduction under skatteloven § 13-1 first paragraph was established, including the relevance of alleged missed optimisation and reoptimisation opportunities.
- Whether causation between the interest community and any income reduction was proven, separate from the income reduction test itself.
- Whether independent volume-flexible Month Ahead agreements were an appropriate CUP benchmark for the flexibility identified in the controlled transaction.
- Whether TEPN's external sales to independent buyers under open framework agreements provided a valid internal comparison.
- The evidentiary significance of TEPN's documentation deficiencies and TGP's refusal to disclose resale pricing and contract information.
- The scope of judicial review applicable to the threshold condition under § 13-1 first paragraph as against the exercise of discretion under the third paragraph.
- Whether the Oil Taxation Office's specific exercise of discretion, based on the chosen comparators, was legally sound even though the threshold conditions for assessment were met.