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Williams Production RMT Co. v. State of Wyoming Dep't of Revenue3/2/2005
[ ] This is a W.R.A.P. 12.09(b) certification of a petition for review of administrative action in which the underlying question is the point of valuation for severance tax purposes of coal bed methane gas. We affirm the determination of the Wyoming State Board of Equalization.
BACKGROUND
[ ] Barrett Resources Company (Barrett) began producing coal bed methane gas (CBM) in Campbell County, Wyoming, in 1999. Williams Production RMT Company (Williams) is Barrett's successor in interest through merger. CBM is subject to the severance tax imposed in Wyo. Stat. Ann. § 39-14-203 (LexisNexis 2003), the relevant portions of which read as follows:
(a) Taxable event. The following shall apply:
(i) There is levied a severance tax on the value of the gross product extracted for the privilege of severing or extracting crude oil, lease condensate or natural gas in the state. The tax imposed by this subsection shall be in addition to all other taxes imposed by law including, but not limited to, ad valorem taxes imposed by W.S. 39-13-101 through 39-13-111.
(b) Basis of tax. The following shall apply:
(i) Crude oil, lease condensate and natural gas shall be valued for taxation as provided in this subsection;
(ii) The fair market value for crude oil, lease condensate and natural gas shall be determined after the production process is completed. Notwithstanding paragraph (x) of this subsection, expenses incurred by the producer prior to the point of valuation are not deductible in determining the fair market value of the mineral;
(iv) The production process for natural gas is completed after extracting from the well, gathering, separating, injecting and any other activity which occurs before the outlet of the initial dehydrator. When no dehydration is performed, other than within a processing facility, the production process is completed at the inlet to the initial transportation related compressor, custody transfer meter or processing facility, whichever occurs first;
(v) If the crude oil, lease condensate or natural gas production as provided by paragraphs (iii) and (iv) of this subsection are sold to a third party, or processed or transported by a third party at or prior to the point of valuation provided in paragraphs (iii) and (iv) of this subsection, the fair market value shall be the value established by bona fide arms-length transaction[.]
Pursuant to Wyo. Stat. Ann. §§ 39-13-102(m)(i) and 39-13-103(b)(iv) (LexisNexis 2003), the same valuation is used for ad valorem tax purposes.
[ ] In 2001, the Wyoming Department of Audit (DOA) began an audit of Barrett's 1999 CBM production. The audit was completed after Williams succeeded to Barrett's interests. At the conclusion of the audit, the Department of Revenue (Department) determined that Williams owed an additional $170,747.15 in severance taxes, plus interest of $58,304.00, and the Department certified to Campbell County an increase in taxable value for ad valorem tax purposes of $3,392,635.00. Williams paid the severance taxes under protest and filed a timely appeal with the Wyoming State Board of Equalization (Board) on September 23, 2002. After a contested case hearing, the Board affirmed the Department's determination. Williams then filed a petition for review in the district court pursuant to Wyo. Stat. Ann. § 16-3-114(a) (LexisNexis 2003). The district court subsequently granted the Department's motion to certify the matter to this Court pursuant to W.R.A.P. 12.09(b), and this Court accepted certification on March 17, 2004. Oral argument was heard on October 4, 2004.
ISSUES
[ ] We rephrase Wi
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