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Wyodak Resources Development Corp. v. State Board Of Equalization8/14/2000
the reclassification of these costs from indirect to direct was inconsistent with how they were treated in 1989 when most of the costs associated with the first relocation were categorized as indirect costs. Any concern we had about this inconsistency was resolved once we realized that § 39-2-209(d), which specifically defined the two types of costs, did not go into effect until the 1990 production year.
Wyodak next asserts that the 1991 expenses were actually accruals of expenses that will be incurred to move State Highway 51 back to its original location, which will not occur until sometime in the future. It insists that these accruals should not be classified as direct costs because they could not have been incurred prior to the mouth of the mine. The Department of Revenue counters that the accrued costs were, by virtue of the agreement, specifically attributable to the mining operations to extract the coal under and around the right-of-way.
Wyodak relies on a State Board of Equalization opinion in In re Appeal of Exxon Coal U.S.A., Inc., No. 93-107, 1994 WL 569436 (Wyo. St. Bd. Eq. Oct. 6, 1994), to support its argument that accrued costs should not be classified as direct costs. In that case, the issue presented was whether Exxon Coal's final reclamation accruals should have been classified as indirect costs pursuant to § 39-2-209(d)(iv). The State Board of Equalization concluded:
7. The crux of the issue presented concerns interpretation of whether final reclamation accruals by Petitioner "are specifically attributable" to mining, processing or transportation of coal" [W.S. 39-2-209 (d) (ii), 209 (d) (iii)], or "cannot be specifically attributed to an operational function without allocation," W.S. 39-2-209 (d) (iv). If the accruals are "specifically attributable" to one of the three described functions, they are considered "direct" costs and are utilized in deriving a direct cost ratio. On the other hand, if the accruals "cannot be specifically attributed . . . without allocation," the same are indirect costs and are allocated by the direct cost ratio. It is our conclusion these reclamation accruals cannot be attributed to an operational function without allocation, and therefore are indirect costs to be allocated to taxable value by the direct cost ratio.
8. Initially we should emphasize the costs at issue are "final reclamation accruals," as opposed to the costs of annual, on-going reclamation, which both the Department and Petitioner agree are direct costs, and thus utilized in the direct cost ratio. Final reclamation accruals differ however in that they are not current, out-of-pocket expenses, but rather estimates of the final costs for reclaiming the entire mine site upon the secession of mining operations . . . . In re Appeal of Exxon Coal U.S.A., Inc., 1994 WL 569436, at *2-*3.
In that case, Exxon Coal made yearly accruals for its final reclamation costs. In re Appeal of Exxon Coal, U.S.A., Inc., 1994 WL 569436, at *2. In the case at bar, the accrued expenses were not an estimate for reclaiming the entire mine site. As the State Board of Equalization pointed out in its order in this case, "reclamation by definition indicates the process of returning something to a natural state. . . . ince Petitioner was returning a manmade object, specifically State Highway 51, to a prior location, a reclamation argument is inapposite." We concur and add that the 1988 agreement forces the conclusion that the relocation and replacement expenses were direct costs because they were or will be incurred as a condition of mining the specific coal under and around the right-of-way. Wyodak moved the highway so that it could mine the coal. The fact that ongoing mining
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