BEFORE THE STATE BOARD OF EQUALIZATION
FOR THE STATE OF WYOMING
IN THE MATTER OF THE APPEAL OF )
AMOCO PRODUCTION COMPANY FROM A )
CHANGE OF VALUATION METHOD ) Docket No. 2000-156
DECISION BY THE MINERALS DIVISION OF )
THE DEPARTMENT OF REVENUE )
(Anschutz Ranch East Field) )
IN THE MATTER OF THE APPEAL OF )
AMOCO PRODUCTION COMPANY FROM A )
NOTICE OF VALUATION FOR TAXATION ) Docket No. 2001-151
PURPOSES DECISION OF THE MINERALS )
DIVISION OF THE DEPARTMENT OF )
REVENUE(Production year 2000, )
Anschutz Ranch) )
_______________________________________________________________________________________
FINDINGS OF FACT
CONCLUSIONS OF LAW
DECISION AND ORDER
________________________________________________________________________________________________
APPEARANCES
Jesse R. Adams, III, and Nicole Crighton, of Oreck, Bradley, Crighton, Adams & Chase, for Petitioner, Amoco Production Company, (Petitioner or Amoco).
William F. Russell and Cathleen D. Parker, Assistant Attorneys General, for Respondent, Department of Revenue, (Department).
Bruce A. Salzburg, Herschler, Freudenthal, Salzburg & Bonds, for Uinta County Board of County Commissioners, (Intervenor).
DIGEST
This matter came on for hearing on September 23, 2002, by the State Board of Equalization (Board), consisting of Chairman Edmund J. Schmidt, Vice Chairman Roberta A. Coates (Chairman at the time of Decision and Order), and Board Member Sylvia Lee Hackl. Chairman Schmidt and Member Hackl resigned from the Board prior to the Decision and Order. Vice Chairman Alan B. Minier and Member Thomas R. Satterfield have considered the matter by reviewing the file, exhibits and transcript, and participated in the Decision and Order. This appeal arises from the Department of Revenue’s selection of the “comparable value method” for the valuation of gas products processed through the Anschutz Ranch gas processing facility located in Uinta County, Wyoming, for production years 2000 through 2002 and the Notice of Valuation for production year 2000.
JURISDICTION
Upon application of any person adversely affected, the Board must review final Department actions concerning state imposed taxes and “[h]old hearings after due notice in the manner and form provided in the Wyoming Administrative Procedure Act and its own rules and regulations of practice and procedure.” Wyo. Stat. Ann. §39-11-102.1(c)(viii).
The Board must “[d]ecide all questions that may arise with reference to the construction of any statute affecting the assessment, levy and collection of taxes, in accordance with the rules, regulations, orders and instructions prescribed by the department.” Wyo. Stat. Ann. §39-11-102.1(c)(iv). The Rules of Practice and Procedure for Appeals before the Board involving tax matters contemplate appeals from final administrative decisions of the Department. Rules, Wyoming State Board of Equalization, Chapter 2, § 3. The Rules require that appeals be filed with the Board within thirty days of any final administrative decision. Rules, Wyoming State Board of Equalization, Chapter 2, § 5(e).
DISCUSSION
Petitioner appealed the Department of Revenue’s selection of the comparable value method for the valuation of its gas products processed through the Anschutz Ranch gas processing facility located in Uinta County, Wyoming for production years 2000 through 2002. The comparable value method is used for valuing oil and gas which is not sold at or prior to the point of valuation by bona fide arms-length sale.
Petitioner reported the value of its natural gas to the Department using the proportionate profits method. The Petitioner excluded production taxes and royalties from the proportionate profits formula.
The Department rejected the value reported by the Petitioner for production year 2000 and used a contract processing fee to establish processing costs for the gas. The Department then calculated a value using the comparable value method.
This case is closely allied to the proceedings of In the Matter of the Appeal of Union Pacific Resources Company from a Change Of Valuation Method Decision by the Minerals Division of the Department of Revenue, Docket No. 2000-149 et. al., September 30, 2003 (hereafter Painter). The Petitioner, Department, and Intervenor, all of whom were parties in two companion cases, stipulated to the incorporation of most of the evidence of In the Matter of the Appeal of Union Pacific Resources Company from a Change of Valuation Method Decision by the Minerals Division of the Department of Revenue, Docket No. 2000-147, June 9, 2003,(Whitney Canyon) and Painter into this case. [Stipulations of the Parties, ¶F.1.]. To underscore the point, several witnesses have individually reaffirmed their prior testimony. Most of the legal and factual issues raised in Whitney Canyon and Painter have been raised again in this case. The facts in this case and the Painter case have similarities because both processing plants are designed to process sweet gas and recover nitrogen, and have common pipeline connecting the two plants.
The issues presented in this case are similar to those in Painter, supra, and are as follows:
1. Was the Department able to secure reliable information from which reasonable estimates could be made regarding processing fees which would be paid by a specific taxpayer had it been in the position of a third party producer requiring the services of a gas processing plant?
Yes.
2. Is the Department precluded from using the comparable value method because of the prior decision of Amoco Production Company, Board Case No. 93-104, and various legal theories?
No.
3. Is the Board of County Commissioners for Uinta County a proper intervenor?
Yes.
4. Does allowing other taxpayers to report gas production using the proportionate profits method, subject to audit, result in a lack of uniformity?
Based on the information presented at the hearing the Department was not arbitrary in accepting the use of the proportionate profits methodology from the other taxpayers.
FINDINGS OF FACT
I. OVERVIEW
1. The Petitioner is a producer of sweet natural gas and who also owns a facility that processes that gas for sale by basically removing nitrogen. Petitioner assumes that this circumstance has the effect of limiting the methods available to the Department for the determination of the fair market value of the gas, and represents to the Board that, out of five statutory possibilities (the fifth being mutual agreement of the Department and taxpayer), the only two applicable methods for determining fair market value are the comparable value method and the proportionate profits method. The role of the Board in the first instance is to determine whether the Department properly selected the comparable value method. The Petitioner contends that the proportionate profits method is the only method by which a value can be determined for the gas.
2. Amoco also appealed the taxable value of its gas for tax year 2000 because the Department determined the value using a comparable value processing deduction that is plant operating costs plus a fee of $0.26 per thousand cubic feet of gas measured at the inlet of the Anschutz Plant (we will refer to this formula as the $0.26 per MCF formula). The Department determined the formula was a comparable processing fee.
3. The Parties stipulated to the incorporate the testimony of the following witnesses in the Whitney Canyon case, Dockets 2000-147, 151 and154, and 2001-114 and 149, and the Painter case, Dockets 2000-149,150 and 155, and 2001-113 and 150, including direct examination, cross examination, confidential examinations, Board questions and objections:
a. Paul Syring;
b. Clyde Miller;
c. Randy Bolles;
d. Craig Grenvik;
e. Elwood Soderlind; and
f. Derek Weekly.
[Stipulations of the Parties, ¶F1]. When we reference the Whitney Canyon record we will refer to it as Whitney Transcript or Whitney Exhibit and when we reference the Painter record we will refer to it as Painter Transcript or Painter Exhibit.
II. GENERAL PLANT INFORMATION
4. The Anschutz Ranch East Unit Gas Processing Plant (Anschutz Plant) is located in Uinta County, Wyoming. [Stipulation of the Parties, ¶A1]. This plant processes gas that is “sweet” gas. However, the gas is contaminated with nitrogen and is unmarketable at the well head. [Transcript, Vol. I, pp. 33-34].
5. The Anschutz Unit is a retrograde condensate reservoir. If the pressure within the formation falls below a certain point, heavier hydrocarbons in the gas will liquefy, adhere to the rock formation and be forever unrecoverable. To maintain the reservoir pressure, the working interest owners instituted a nitrogen injection project. In a nitrogen injection project, nitrogen is injected into the formation, cycles through the reservoir rock and is reproduced along with hydrocarbons. [Transcript, Vol. I, pp. 34-35, 42].
6. As the nitrogen injection project matures, the background level of nitrogen in the produced hydrocarbons increases to as high as 80% to 90% of the total gas produced. [Transcript, Vol. I, p. 35].
7. The Anschutz Plant was placed in operation in 1983. [Stipulations of the Parties, ¶A1]. In 2000, the average inlet rate at the Anschutz Plant was approximately 230 million cubic feet (230,000 MCF) per day. [Transcript, Vol. I, p. 44, Vol. II, 230-231].
8. The Anschutz Ranch East Unit (Anschutz Unit) is comprised of two participating areas: the West Participating Area and the East Participating Area. The participating areas were unitized in 1982. [Transcript, Vol. I, pp. 33-34]. The Anschutz Unit is located partly in Utah and partly in Wyoming. The producers and the States of Utah and Wyoming entered a tripartite agreement to allocate production on a proportionate basis of the hydrocarbon pore volume analysis. Because there is tertiary production (nitrogen is injected to force more gas out of the formation) it was determined Wyoming would be entitled to tax 1.62 percent of the production and Utah would tax the remainder. [Exhibits 515, 527; Transcript, Vol. I, pp. 137-138].
9. The Anschutz Plant is operated by Petitioner, Amoco, currently BP America Production Company. The purpose of the Anschutz Plant is to process natural gas from the Anschutz Unit. The processing at the Anschutz Plant consists primarily of the recovery of liquid hydrocarbons and rejection of nitrogen from the produced gas. [Stipulations of the Parties, ¶A2]. The gas processed is “sweet,” having no significant levels of hydrogen sulfide.
10. The Anschutz Plant was constructed and is operated pursuant to the terms of a Unit Operating Agreement (Unit Operating Agreement) dated December 1, 1982, and a Letter Agreement dated November 11, 1982, which provide for, among other things, the treatment of Anschutz Plant costs. Pursuant to those Agreements, the expenses of construction, and the current expenses of operation of the Anschutz Plant are shared by the owners of the Plant in proportion to their ownership in the Unit.
a. In 1999, the Anschutz Plant ownership was as follows:
| Owner | Plant Share |
| Amoco | .4774765 |
| RME | .1172242 |
| Mobil | .1837901 |
| Forest | .0835866 |
| FBA Trust | .0112443 |
| BWAB | .0112443 |
| Chevron | .0015223 |
| Headington | .1139117 |
[Stipulations of the Parties, ¶A3; Exhibits 113, 114, 528, 529; Transcript, Vol. I, pp. 38, 64, 68-69].
11. Monthly operating costs for the Anschutz Plant are accounted for by the operator, Amoco. Each Anschutz Plant owner is allocated a share of the monthly expenses through the joint interest billing system. [Stipulations of the Parties, ¶A3c]. The share of the monthly expenses allows the owners to process their gas from the Anschutz Unit without an additional charge. [Stipulations of the Parties, ¶A3d]. The owners of the Anschutz Unit never pay a fee for processing their gas through the Anschutz Plant. Their only processing expense is their proportionate share of Anschutz Plant operating expenses. [Stipulations of the Parties, ¶A3d; Transcript, Vol. II, pp. 202, 212-213]. Thus, Amoco’s share of the Anschutz Plant operating expenses is 47%. [Stipulations of the Parties, ¶A3; Transcript, Vol. I, pp. 91-92].
12. The agreement was described by Mr. Clyde Miller, the lead assurance engineer for Amoco for this region, as:
It’s arms length in that the intent of the agreement is only to cover incremental operating expenses incurred by the owners of the West PA [Participating Area] for processing the gas. There may be a few-cent margin over direct operating costs which more or less help recover accounting expenses, but from that respect, the agreement would be arms length.
[Transcript, Vol. I, p. 74].
13. Amoco’s share of the direct processing costs in 2000 were around $13.8 million and that does include depreciation according to Paul Syring, tax representative for Amoco. [Transcript, Vol. I, pp. 148-149]. This is 47% of the total operating costs of the Anschutz Plant so that the total direct operating costs for the Anschutz Plant in 2000 was $29 million or $81,000 per day. [Transcript, Vol. II, pp. 230-231]. By dividing the average daily Anschutz Plant costs ($81,000) by the average daily inlet volume (230,000 MCF), it can be determined that the average cost for the Anschutz Plant owners to process on MCF of gas through the Anschutz Plant during Production year 2000 was $0.35 per MCF. [Transcript, Vol. II, p. 231].
III. SELECTION OF COMPARABLE VALUE METHOD
14. On August 31, 1999, the Administrator of the Mineral Tax Division, Wyoming Department of Revenue, Randy Bolles, notified Petitioner pursuant to Wyo. Stat. Ann. §39-14-203(b)(vi), that it should calculate the value of its production using the comparable value method for 2000, 2001, and 2002. The Department had issued similar notifications in 1990, 1993 and 1996. [Stipulations of the Parties, ¶C.1; Exhibits 100, 121,123, 132, 500, 510, 511, 512].
15. Wyoming Statute Annotated Section 39-14-203(b)(vi) provides:
(vi) In the event the crude oil, lease condensate or natural gas production as provided by paragraphs (iii) and (iv) of this subsection is not sold at or prior to the point of valuation by bona fide arms-length sale, or except as otherwise provided, if the production is used without sale, the department shall identify the method it intends to apply under this paragraph to determine the fair market value and notify the taxpayer of that method on or before September 1 of the year preceding the year for which the method shall be employed.
Comparable value is defined in Wyo. Stat. Ann. §39-14-203(b)(vi)(B).
(B) Comparable value - The fair market value is the arms-length sales price less processing and transportation fees charged to other parties for minerals of like quantity, taking into consideration the quality, terms and conditions under which the minerals are being processed or transported;
16. By letter of October 28, 1999, Petitioner objected to the use of comparable value method because in its opinion there was no way to calculate comparable value. Instead, Petitioner verified there were no comparables and, therefore, requested the use of the proportionate profits method. [Stipulations of the Parties, ¶C.5; Exhibits 101, 501].
17. The Department requested by letter on November 16, 1999, all processing agreements/contracts which the Petitioner had with all owners or non-owners of the Anschutz Plant. [Stipulations of the Parties, ¶C.6; Exhibits 103, 503].
18. On December 16, 1999, Amoco produced some processing agreements and contracts to the Department. [Exhibit 105]. Mr. Paul Syring, tax representative for Amoco, believes that his December 16, 1999, reply to the Department included the Painter C&O Agreement. [Painter Transcript, Vol. II, p. 216]. Syring thought about producing the Anschutz Ranch East Unit Letter Agreement, but did not provide it because it was being “terminated by the end of 1999.” [Painter Transcript, Vol. II, p. 233]. We find that Amoco, acting as Anschutz Plant Operator on behalf of the Anschutz Plant owners, largely failed to provide the documents we will discuss in our Findings of Fact, and by doing so impeded the Department’s ability to fully evaluate the history and background of processing fees in the vicinity of the Anschutz Plant.
19. On February 4, 2000, after reviewing the processing agreements and contracts provided by Amoco, the Department reiterated that Amoco was required to value its Anschutz production using the comparable value method. [Exhibits 106, 505].
20. The Department determined that there were contracts that met the criteria set forth in Wyo. Stat. Ann. §39-14-203(b)(vi)(B) for comparable value. [Exhibits 505, 509]. The Department used the Gas Processing agreement, Exhibit H, which was appended to the Agreement for the Construction and Operation of the Painter Complex Gas Processing Plant, Exhibit 532, and the Letter of Agreement Regarding the Modification of the Painter Complex Gas Processing Plant Construction and Operating Agreement and the Gas Processing Agreements to process Anschutz Unit gas at the Painter Plant, dated May 19, 1993. [Exhibit 117]. The fee for gas processing in the agreements was the proportionate share of the plant operating costs, plus $0.25 per MCF, plus an additional $.01 per MCF for mercury and nitrogen removal. [Transcript, Vol. I, p. 154, Vol. II, pp. 188, 197; Stipulations of the Parties, ¶C9; Exhibits 109, 509]. During preparation for this hearing, other processing agreements for the Anschutz Plant and the Painter Plant were discovered by the Department and provide evidence that the value the Department used was reasonable.
21. The Department provided this decision to Amoco in a letter dated March 31, 2000. This was nearly a year before annual reports for 2000 were due, Wyo. Stat. Ann. §39-14-207(a)(i), and more than a year in advance of the date the annual report was actually filed, taking into account the extensions to about April 25th customarily given to taxpayers like the Petitioner. [Stipulations of the Parties, ¶C9; Exhibits 109, 509]. Despite the transparency of the Department’s intentions, some of Amoco’s witnesses have complained that they were handicapped in the application of the comparable value method by the absence of rules and regulations. [E.g., Whitney Transcript, Vol. I, pp. 78-79, Vol. II, p. 376]. As we concluded in Whitney Canyon, supra, the complaints are largely an expression of litigation posture. We give them no weight. Whitney Canyon, Findings of Fact, ¶38. Amoco’s appraisal expert, Thomas Brown, stated he could prepare his evaluation without the need for rules and regulations to define such statutory terms as “other parties,” “like quantity,” and “terms and conditions.” [Whitney Transcript, Vol. V, pp. 1038-1039]. Amoco’s expert Lesa Adair agreed that the concept of comparable value “is not that hard to understand.” [Whitney Transcript, Vol. V, p. 945].
22. As we found in Whitney Canyon, supra, Amoco was so opposed to the use of the comparable value method that the promulgation of rules would not have forestalled the dispute we decide today. Whitney Canyon, Findings of Fact, ¶39. We consider it revealing that Adair’s suggested rules would only have had the effect of prohibiting the use of the comparable value method in this case. [Whitney Transcript, Vol. V, p. 945]. For example, she suggests limiting the use of the method “where you don’t have a lot of competition at the wellhead.” [Whitney Transcript, Vol. V, p. 945]. This suggestion is being made in the context of a county in which “the bulk if not nearly the total gas production” is owned by Amoco, UPRC, and Chevron. [Whitney Transcript, Vol. IV, p. 745].
23. As we observed in Whitney Canyon, supra, Amoco’s complaint that the Department ignored an earlier statement of the comparable value method, entitled “Determinative Formula for Computation of Comparable Value,” dated July 9, 1992 is without merit. [Whitney Exhibit 150; Whitney Transcript, Vol. II, pp. 353-355]. The main point is that in 1992 the Department did not have the advantage of knowing of the existence of other agreements for processing. We find Amoco does not point to the existence of the Determinative Formula for the sake of advocating a viable alternative to the comparable value method used by the Department for production year 2000. We are aware, as is Petitioner, of the legal defects of the Determinative Formula, which were one of the subjects of Amoco Production Company v. Wyoming State Board of Equalization, 882 P.2d 866 (Wyo. 1994)(compare Whitney Exhibit 150, pp. 1-2); see Conclusions of Law, ¶¶157-177. We find that Amoco’s purpose of invoking the 1992 approach is to frustrate the selection of any method but proportionate profits. As in Whitney Canyon, supra, we accord the complaints no weight, particularly insofar as Amoco suggests it was in some way hampered in the preparation of annual reports using comparable value.
24. The Petitioner ignored the Department’s decision to use comparable value and reported the taxable value of the Anschutz Ranch production for production year 2000 using the proportionate profits method. The tax report for the 2000 production was filed prior to the Board’s decision in Appeal of Amoco Production Company, 2001 WL 770800 (Wyo. St. Bd. Eq. 2001); on reconsideration, 2001 WL 1150220 ( 2001) (Amoco, 96-216), and therefore the Petitioner’s calculation did not include production taxes and royalties in the direct cost ratio. Petitioner has not amended its returns since the Board’s decision in Amoco 96-216. [Stipulations of the Parties, ¶C10; Transcript, Vol. I, pp. 153, 164].
25. The Department valued Petitioner’s production using what the Department considered comparable value. On May 9 and as amended on May 30, 2001, the Department of Revenue issued Notices of Valuation. [Stipulations of the Parties, ¶C.11; Exhibits 149, 150, 517]. In the Notices of Valuation, the Department of Revenue valued Amoco’s Anschutz production by accepting Amoco’s statements of all values, and allowing a processing deduction based upon Amoco’s proportionate share of the Plant operating costs plus $0.25 per MCF and $0.01 per MCF for mercury removal. [Stipulations of the Parties, ¶E1]. The Department did not have information about the Anschutz Plant operation costs for 2000 so the Department used the best information it had available, the costs for 1999. [Transcript, Vol. II, pp. 198-199].
26. Amoco paid severance tax and ad valorem taxes to the County based upon its tax reports. Upon receiving the Department’s valuation, the Petitioner paid the additional taxes under protest. Petitioner timely appealed the Department’s choice of comparable value method and the Notice of Valuation for the 2000 production year. [Stipulations of the Parties, ¶C12].
27. The question that must be answered is whether the processing fee determined by adding $0.26 to Amoco’s portion of processing costs, the formula, is a processing deduction value which yields an accurate reflection of fair market value for the year 2000. We find that it does. Moreover, we find no credible evidence that the processing deduction does not yield a reasonable value. In contrast, there is evidence that the proportionate profits method yields a distorted, inflated and inaccurate value. See Findings of Fact ¶53-69.
28. In 1995 and 1996, the Department accepted the Petitioner’s assertion that there were no comparable values and allowed the Petitioner to pay taxes on a value calculated using the proportionate profits method. [Transcript, Vol. II, pp. 203, 235-237; Exhibit 151; Whitney Exhibit 500; Whitney Transcript, Vol. VI, pp. 1167-1171].
29. As we found in Whitney Canyon, Findings of Fact ¶64, several witnesses objected to the “use of your own contract on yourself” as the source of a comparable value. [Whitney Transcript, Vol. I, p. 100]. This concern does not apply to the findings of fact we have made. The comparable for Amoco is the Gas Processing Agreement of another Producer, not the Producer’s own Gas Processing Agreement.
IV. COMPARABLE VALUE AGREEMENTS
A. Anschutz Unit Letter Agreement
30. There are no fees, other than the operating expenses, charged to the owners of the Anschutz Plant when they process gas through the plant. The reimbursable expenses include supervision of construction, supervision of the operation and maintenance of the plant and an additional charge of 16% of the direct Operations and Maintenance charge. [Exhibit 528, Article III.3, Unit Operating Agreement for the Anschutz Ranch East Unit Area; Transcript, Vol. II, pp. 212-213]. The owners agreed that the liability would not be joint or collective but agreed that the agreement created a partnership for income tax purposes. [Exhibit 528, Article 23].
31. The Department did not have the Unit Letter Agreement between the owners of the Anschutz Plant when it determined the comparable value deduction. [Transcript, Vol. II, p. 201].
B. ANSCHUTZ RANCH NOT UNITIZED FIELD
32. There is a field of production that is not included in the Anschutz Unit. It is referred to as the Anschutz Ranch Field and is owned by Amoco, RME and the Anschutz Corporation (a separate corporation from the Anschutz Plant and Anschutz Unit ownership). The charge to the non-unit owners is $.09 per MCF for processing, $.06 per MCF for compression and $.06 per MCF for gathering. [Exhibit 533; Transcript, Vol. I, pp. 48-50, 104]. Therefore, the fee is approximately $0.21 per MCF.
33. This fee is a reliable source of information, or a comparable, from which we may infer and impute a reasonable processing fee which would be paid by another party for processing of gas of like quantity taking into consideration the quality, terms and conditions under which the gas was processed for all of Amoco’s plant production from the Anschutz Unit during production year 2000.
C. PAINTER
34. Gas produced from the Anschutz Unit can be processed at either the Anschutz Plant or the Painter Plant. [Transcript, Vol. I, pp. 83-84, Vol. II, p. 203; Exhibits 155, 530]. Likewise, gas produced from the Painter Fields can be processed at either the Painter Plant or the Anschutz Plant. [Transcript, Vol. I, p. 84; Exhibits 116, 155, 532]. This is because of a pipeline that was built to connect the two plants. [Exhibit 155; Painter Transcript, Vol. I, pp. 56, 107]. Sufficient similarity in quantity is assured by the fee provided in the comparable because the fee does not vary with respect to volumes processed. Sufficient similarity in quality is assured by the fact all gas processed in the Anschutz Plant is commingled, and the measure of the fee is in all instances based on the Producer’s gas at the inlet of the Painter Plant.
35. The primary purpose of the connecting pipeline was to transport nitrogen between the two facilities to maximize production rates. The ability to transport nitrogen between the facilities was important to the owners because each plant had a limited amount of nitrogen available for injection. If enough nitrogen to maintain reservoir pressure was not available, production would have to be reduced. [Painter Transcript, Vol. I, pp. 107; Exhibits 117, 155].
36. The producers of the Anschutz Unit and the owners of the Painter Processing Plant entered into an agreement to process Anschutz gas at the Painter Plant. Some of the producers of the Anschutz Unit are owners of the Painter Processing Plant and some are not plant owners. In fact, approximately 42 percent of the producers of Anschutz gas are third party producers to the Painter Plant, these third party producers are treated differently than the producers of Anschutz Ranch gas who are part owners of the Painter Plant. [Transcript, Vol. I, pp. 91-94; Exhibits 117, 530].
37. At the Painter Plant, gas other than plant owner gas (third party gas) is processed according to the terms and provisions of the Gas Processing Agreement found in Exhibit H of the Painter C&O Agreement. [Transcript, Vol. I, p. 96; Exhibits 116, 532]. Third-party producers who process their gas through the Painter Plant are required to pay their proportionate share of plant operating expenses plus $0.26 per MCF. That fee represents a charge designed to provide the plant owners a return on their investment. [Transcript, Vol. I, p. 96, Vol. II, pp. 192-193; Exhibits 116, 532].
38. We find corroboration in the record for the recital that a fair “return on the investment made in the Plant” should be reduced from the $0.26 per MCF to which the parties originally agreed in 1985. We find that the Section 13.04 cap on total fees for Anschutz Unit Producers other than the Petitioner was “tied to pretty much match what [the Anschutz Unit owners] were currently paying internally to process their gas at the Anschutz Ranch Plant.” [Painter Transcript, Vol. I, p. 115]. The average cost to process Anschutz Unit gas at the time was about $0.23, and the Anschutz Corporation “saw no reason to pay a premium to process gas at Painter.” [Painter Transcript, Vol. I, p. 157]. Forty-two percent of the Anschutz Unit owners had no stake in the Painter Plant [Transcript, Vol. I, p. 92], and so they would receive no benefit from any processing charges that created a profit for the Painter Plant Owners. The third party Anschutz Unit owners clearly had a strong incentive to negotiate for a price that fairly reflected Painter Plant costs at the time.
39. For the first 17 days of January, 2000, the gas from the Anschutz Unit was processed at the Painter Plant. For the remainder of 2000 all of the gas produced from the Anschutz Unit was processed at the Anschutz Plant. [Stipulations of the Parties, ¶A3b; Transcript, Vol. I, p. 54].
40. At the Painter Plant, each owner of the plant pays only its proportionate share of plant costs to process gas up to the limit of that owner’s dedicated capacity. If an owner exceeds its dedicated capacity, it shall process the excess gas according to the terms and provisions of the Gas Processing Agreement found in Exhibit H of the Painter C&O Agreement. [Transcript, Vol. II, pp. 190-191; Painter Transcript, Vol. I, pp. 89, 90, 92; Exhibits 116, 532].
41. The owners of the Painter Unit and the Painter Plant are as follows:
OwnerPercentage
Amoco 52%
Chevron 29.5%
UPRC 18.5%
[Exhibit 532].
42. Effective January 1, 1994, the fee for Painter Plant owners’ gas processed in accordance with Exhibit H to the Painter C&O Agreement (excess capacity gas) was changed from $0.25 per MCF to $0.08 per MCF. The agreement includes a recitation of purpose describing the $.08 processing fee: “The parties recognize that the Processing Fee is designed to provide Plant Owners a return on the investment made in the Plant.” [Exhibits 116, 532, Section 13.3]. We find this to be a reliable statement of fact. The fee under existing third-party gas processing agreements remained at $0.25 per MCF. [Stipulations of the Parties, ¶D2; Transcript, Vol. I, p. 99; Vol. II, p. 192; Exhibits 116, 532].
43. Amoco claims that Chevron took “advantage of the situation” in 1993 to withhold approval of the deal if the Processing Fee were not lowered to $.08 per MCF for all processing activity of the Painter Plant Owners. [Painter Transcript, Vol. I, p. 157]. In Amoco’s view, Chevron anticipated exceeding its Dedicated Capacity for a prolonged period. [Painter Transcript, Vol. I, p. 157]. While the Chevron witness agreed that the true motivation for the 1993 Letter Agreement was the nitrogen pipeline [Painter Transcript, Vol. II, p. 273], we find that Chevron had ample motivation to negotiate for a processing fee that accurately reflected a value for return on investment in 1993 and going forward.
44. We find that the Painter Plant Exhibit H Gas Processing Agreement of RME, Chevron, Forest, Mobil, FBA Trust, and BWAB as a producer, is a reliable source of information, or a comparable, from which we may infer and impute a reasonable processing fee which would be paid by another party for processing of gas of like quantity taking into consideration the quality, terms and conditions under which the gas was processed. For all of Amoco’s plant production from the Anschutz Unit during production year 2000, that fee is a proportionate share of operating costs plus a processing fee of $.08 per MCF of all gas delivered to the Plant Operator for processing. [Exhibits 116, 532]. Sufficient similarity in quantity is assured by the fact that the fee provided in the comparable Painter Plant Exhibit H Gas Processing Agreement does not vary with respect to volumes processed. Sufficient similarity in quality is assured by the fact all gas processed in the Painter Plant is commingled, and the measure of the fee is in all instances based on the Producer’s gas at the inlet of the Painter Plant.
D. GLASSCOCK HOLLOW PROCESSING AGREEMENTS
45. On December 28, 1999, the owners of the Anschutz Plant and Amoco, as the owner of the Glasscock Hollow Unit, entered into an Agreement for the Processing of Glasscock Hollow gas in the Anschutz Plant. Pursuant to the Glasscock Hollow Agreement, the owners of the Glasscock Hollow Unit agreed to pay a processing fee of $0.20 per MCF and a compression fee of $0.05 per MCF to process their gas though the Anschutz Plant. The Glasscock Hollow gas owners also pay a $0.10 per MCF pipeline transportation fee. The Anschutz Plant owners agreed to credit the Glasscock Hollow gas owners $0.05 per MCF for each MCF of nitrogen recovered from the Glasscock Hollow gas during processing. [Stipulations of the Parties, ¶D5a; Exhibits 115, 160, 531; Transcript, Vol. I, p. 45]. Glasscock Hollow gas was processed at the Anschutz Plant in 2000. [Transcript, Vol. I, p. 100]. At most, Glasscock Hollow producers pay a fee of $0.35 per MCF and do not have to pay a portion of operating expenses.
46. The Department assumes Amoco is using the comparable value method to value Glasscock Hollow production because Amoco has not requested the use of proportionate profits for that production. [Transcript, Vol. I, pp. 152-153, Vol. II, pp. 224-225].
47. The Agreement for the Processing of Glasscock Hollow gas in the Anschutz Plant is a reliable source of information, or a comparable, from which we may infer and impute a reasonable processing fee which would be paid by another party for processing of gas of like quantity taking into consideration the quality, terms and conditions under which the gas was processed. Sufficient similarity in quantity is assured by the fact that the fee provided in the comparable agreement does not vary with respect to volumes processed. Sufficient similarity in quality is assured by the fact that all gas processed in the Anschutz Plant is commingled, and the measure of the fee is in all instances based on the Producer’s gas at the inlet of the Anschutz Plant.
E. PROCESSING OF E26-08 WELL GAS
48. In 2000, the owners of the Anschutz Plant agreed to process gas from the E26-08 well for one of the Plant owners, the Anschutz Corporation. The gas was processed for a little over 120 days in 2000. The Anschutz Corporation paid a processing fee of $.09 per MCF, a compression fee of $0.06 per MCF and a gathering fee of $0.02 per MCF. The working interest owners also paid a salt water disposal fee of $0.50 per barrel and an oil handling fee of $.20 per barrel. After the well test was completed, the well was incorporated into the East Participating Area and is now processed as part of the Anschutz Unit gas. [Exhibit 534; Transcript, Vol. I, p. 51]. The total fee was approximately $0.17 per MCF and the producer did not have to pay a portion of the operating expenses.
49. This fee is a reliable source of information, or a comparable, from which we may infer and impute a reasonable processing fee which would be paid by another party for processing of gas of like quantity taking into consideration the quality, terms and conditions under which the gas was processed for all of Amoco’s plant production from the Anschutz Unit during production year 2000.
F. THIEF CREEK WELL PROCESSING AGREEMENT
50. In late 2001 or early 2002, the Anschutz Plant owners entered into an agreement to process production from a well known as “Thief Creek.” According to the agreement the producers of Thief Creek paid a processing fee of $0.09 per MCF, a compression fee of $.06 per MCF, a salt water disposal fee of $0.50 per barrel and an oil handling fee of $0.50 per barrel. [Transcript, Vol. I, pp. 51, 53]. The Thief Creek producers do not have to pay a share of the expenses. [Transcript, Vol. I, p. 102]. Although this agreement was not in place at the time the Department determined Petitioner should use comparable value or at the time the Department valued Petitioner’s production using comparable value, this agreement is evidence that a processing fee of expenses plus $0.15 per MCF is a reasonable comparison.
51. This fee would be a reliable source of information, or a comparable, from which we may infer and impute a reasonable processing fee which would be paid by another party for processing of gas of like quantity taking into consideration the quality, terms and conditions under which the gas was processed.
G. CONCLUSION OF COMPARISON
52. There were no processing fee adjustments related to the quantity or quality of gas streams in the agreements. Petitioner admitted that no producer that processes gas at either the Anschutz Plant or the Painter Plant pays more than its proportionate share of plant operating costs plus $0.26 per MCF. [Transcript, Vol. I, p. 102].
V. PROPORTIONATE PROFITS RESULTS ARE NOT APPROPRIATE
53. The large differences in processing deduction percentages have prompted both parties to direct our attention to certain practical consequences for the uniform treatment of plants similarly situated to the Anschutz Plant. The Department’s practical valuation concern arises if the comparable value method is rejected and proportionate profits is allowed for Petitioner.
54. Amoco’s proportionate share of Anschutz Plant operating expenses for Production Year 2000 was reportedly $13.8 million. [Transcript, Vol. I, pp. 148-149]. Based on Amoco’s reported share, total operating expenses for the Anschutz Plant during Production Year 2000 were approximately $29 million. [Transcript, Vol. II, p. 230]. The average daily operating expenses for the Anschutz Plant during Production Year 2000 were approximately $81,000 per day. [Transcript, Vol. II, pp. 230-231]. The average inlet rate at the Anschutz Plant during Production Year 2000 was approximately 230,000 MCF per day. [Transcript, Vol. I, p. 44, Vol. II, p. 231]. The average cost per MCF to process gas at the Anschutz Plant during Production Year 2000, as calculated by dividing average daily plant costs by average daily volume, was approximately $0.35 per MCF. [Transcript, Vol. II, p. 231]. When the Department valued Amoco’s Anschutz gas, using the comparable value method and the best information available, 1999, it allowed a processing deduction of $0.61 per MCF.
55. When Amoco valued its Anschutz gas for Production Year 2000 using the proportionate profits method, it claimed a processing deduction of approximately three times the amount the comparable value would yield. [Confidential Transcript, Vol. II, p. 243; Confidential Exhibit 145]. This clearly demonstrates the proportionate profit calculation results in a far greater deduction from revenues than the actual processing costs and transportation costs combined. This is for a plant that was placed in operation approximately twenty years earlier. From this, we find that the comparable value calculation is nearer to fiscal reality than the proportionate profit calculation.
56. Petitioner’s own witness indicated the proportionate share of costs to process gas at Anschutz Plant is somewhere between $0.25 and $0.30 per MCF. [Transcript, Vol. I, pp. 89, 102].
57. As we did in Whitney Canyon, supra, for reasons we will address further in our Conclusions of Law, we believe that it is appropriate to consider whether the proportionate profits method accurately reflects fair market value for 2000. Conclusions of Law, ¶125. Brown testified that his opinion was not an appraisal and “we have not reached a value conclusion.” [Whitney Transcript, Vol. V, p. 1022].
58. Proportionate profits is particularly bothersome when gas prices rise. Amoco appreciated the effect of gas prices on the proportionate profits calculation. When gas prices were low in the early 1990's, proportionate profits resulted in the highest taxable value. As the price of gas goes up, the proportionate profits method will tend to undervalue the gas when compared to the netback method. [Whitney Exhibit 535]. In 2000, the prices for natural gas were the highest they had been in four years. For a definition of the netback method, the report of Amoco’s expert Adair states that:
[t]he market value of the raw gas can then be determined by netting the direct costs to gather, condition, and process the gas along with an allowance for recovery and on the capital invested in the assets required to transform the raw gas to marketable products, from the market value attributable to the products extracted.
[Whitney Exhibit 170, p. W1150]. However, as we will discuss in our Conclusions of Law, in this case the application of the netback method defined under Wyo. Stat. Ann. §39-14-203(b)(vi)(c) would apparently yield the same result as comparable value. Conclusions of Law, ¶127.
59. The Department concluded that proportionate profits does not return fair market value for tax year 2000. [Transcript, Vol. II, pp. 244-245]. When the price of gas is high, the proportionate profits method does not yield a result with a reasonable relationship to actual processing costs. [Whitney Transcript, Vol. VIII, p. 1462].
VI. APPRAISAL THEORY IS NOT APPLICABLE
60. As we found in Whitney Canyon, supra, Brown and Adair go too far in the direction of insisting that we ignore the Legislature’s definition of comparable value in favor of the expertise they have to offer. Both experts rely implicitly and heavily on experience valuing assets. Adair specifically alludes to the example of real estate when she discusses the sources of standard appraisal techniques. [Whitney Transcript, Vol. V, p. 901]. However, the value which is being sought under the statute is not an asset. It is not the value of the plant. It is not the value of the product of the Anschutz Plant, since the value of the gas sold at the tailgate is known. It is not the value of the natural gas before the inlet of the plant, since that would involve a different method, comparable sales. Wyo. Stat. Ann. §39-14-203(b)(vi)(A). The problem is to find the value of the processing deduction. Brown admits that he has no experience in trying to find a comparable value for a processing fee [Whitney Transcript, Vol. V, p. 997], or for gas production [Whitney Transcript, Vol. V, p. 1036], nor does he have “any specific training on something as fine a point as what to deduct...in concluding a gas sales price.” [Whitney Transcript, Vol. V, p. 1035]. As we noted similarly in the context of Adair’s proposals for rules, supra, ¶22, the adoption of Brown’s many views would have the practical effect of repealing the statute. In light of the limitations on his own expertise, and the absence of persuasive advice or insight in the very specific context and statutory language at issue in this case, we give no weight to Brown’s opinions, or to similar opinions of Adair. We find similar limitations in the treatises that the Department offered into evidence. [Whitney Exhibits 547, 548, 549]. Whitney Canyon, Findings of Fact, ¶75.
VII. INTERVENTION OF UINTA COUNTY
61. The Department requested that the Board of County Commissioners consider intervening in this case. [Stipulations of the Parties, ¶F1].
62. Because it was made aware of the appeal in this case, and the differential between Amoco’s reported taxable value and the value which would be certified, when preparing its annual budget in 2001, the Board of County Commissioners of Uinta County used the taxable value estimates provided by Amoco pursuant to the Rules of the Department of Revenue, Chapter 6, Section 7(a)(i)(9)(G)(III), rather than the taxable values certified by the Department of Revenue. Uinta County School District No. 1 used the value certified by the Department of Revenue and, as a result, experienced a budget shortfall in the school year following the certification of value for 2000 production because Amoco has not paid taxes to be distributed to the school in accord with the certified value. [Stipulations of the Parties, ¶F2].
VIII. UNIFORMITY WITH OTHER TAXPAYERS
63. The Petitioner complains about the valuation method available for production from certain other facilities, the most prominent being Lost Cabin. During the hearing Amoco introduced contracts for processing of natural gas at other natural gas processing Plants. [Exhibit 158]. These contracts relate to processing at the Lost Cabin Gas Plant, the Garland Gas Plant, the Oregon Basin Gas Processing Plant and the JT Gas Separation Facility. Petitioner characterizes Lost Cabin field and facility as being similar to Anschutz Ranch because Lost Cabin has gas processing contracts calling for in-kind processing fees. [Exhibit 158; Whitney Transcript, Vol. II, p. 368-371]. The Department has authorized use of the proportionate profits method for this production. The Petitioner asserts that, if the proportionate profits method is not allowed for Anschutz Ranch production, the other production will enjoy a vastly higher processing deduction. The Department answered interrogatories directed to the reasons for granting use of the proportionate profits method. [Whitney Exhibit 198]. Based on information available to the Department and information “available in the ordinary course of its business”, the Department examined contracts, particularly with respect to processing fees; considered whether gas was being processed from any wells not dedicated to the plant; and considered whether gas from the dedicated field had been processed at any other plant. [Whitney Exhibit 198]. In each instance, the Department found circumstances that distinguished Anschutz Plant from the facilities of interest to Amoco. As we found in Whitney Canyon, supra, the Department’s distinctions are reasonable, although we, like the Department, are not in a position to fully weigh the accuracy of the facts reported by other producers to the Department until an audit is completed.
64. For 2000 production, six oil and gas taxpayers in Wyoming, out of approximately eight hundred, reported using a method other than comparable value; five reported using proportionate profits, and one reported using a formula reached in settlement of litigation. [Whitney Transcript, Vol. VIII, pp. 1341-1342].
65. Amoco is the only producer at Anschutz requesting to use a method other than comparable value for its 2000 production year. [Transcript, Vol. I, pp. 170-171]. RME had appealed but withdrew its appeal on the day the hearing began.
66. Amoco owns approximately 47 percent of the Anschutz Unit and Plant. The combined interests of the remaining owners constitutes a majority. [Transcript, Vol. I, p. 170]. Both Syring, of Amoco, and Randy Bolles, Administrator of the Minerals Division of the Department, believed that the other parties did not request the use of an alternative method and they assumed that the other parties are reporting their processing deduction using comparable value. [Transcript, Vol. I, p. 170-171, Vol. II, pp. 222-223]. It would not be uniform to allow Amoco a processing deduction using the proportionate profits method and the other producers from the same field using the same processing facilities deducting a comparable value fee.
67. Since 1995, the Department allowed Burlington Resources and Marathon Oil Company to use another method to value gas processed at the Lost Cabin plant after the companies filed an attestation that there are no comparable values. [Exhibit 158; Whitney Transcript, Vol. VI, pp. 1067-1069].
68. The Department required all producers to use the comparable value methodology, including producers Burlington, Marathon and Exxon Mobil. However, it found there were no comparables for Burlington, Chevron, Marathon and Exxon Mobil. The Department allowed Exxon Mobil to use an agreed upon formula to value its production. It allowed Burlington, Chevron and Marathon to use the proportionate profits method. The Department allowed this to occur but reserved its right to change the methodologies subject to audit of these taxpayers by the Department of Audit. [Exhibit 159].
69. The Department requested from Burlington Resources and Marathon all gas processing agreements related to the minerals at issue, and the taxpayers provided the agreements. Upon review of the contracts and other information available to it, the Department concluded that, unlike Painter and Anschutz Plant, the agreements which governed processing of the minerals through the plants did not establish a fee pursuant to which the plants would process gas not owned by the plant owners, no minerals from the fields dedicated to the plants had ever been processed at any other plant, and no gas from any other field had ever been processed at the plants at issue. Therefore, the Department provisionally allowed these two taxpayers to report based on the proportionate profits method. The use of the proportionate profits method is subject to later audit, and if a comparable processing agreement is discovered, the Department will apply it for valuing the minerals. [Exhibit 159].
70. Our decision in this case recognizes that there is a difference in quality between sweet gas and sour gas. We find the same distinction between the Anschutz Plant, which processes sweet gas, and the Lost Cabin facility, which processes sour gas.
71. As important, gas was processed in the year at issue under each of the comparables we have identified for the Anschutz Plant (a statutory requirement urged by the Petitioner). There is no evidence regarding what gas, if any, was actually processed at the Lost Cabin facility under agreements that would satisfy our requirements for comparables. [Whitney Transcript, Vol. III, pp. 416-417]. The same is true for the other facilities identified by Petitioner. The Department also drew the distinctions that the Lost Cabin facility (1) does not process gas from any field other than its own; (2) has not sent gas from its field to any other plant for processing; and (3) does not have a standing arrangement in its construction and operation agreement for a fee for nondedicated gas. [Painter Transcript, Vol. III, pp. 416-417]. We find that these additional distinctions are grounded in fact.
72. A point now urged by the Petitioner is that the Lost Cabin C&O Agreement provides for a fee analogous to the processing fee in Exhibit H to the Painter C&O Agreement. [Painter Transcript, Vol. II, pp. 260-262]. This Lost Cabin fee is imposed when a producer is “underprocessed.” [Painter Transcript, Vol. II, p. 260; Exhibit 183, attached Exhibit H, Section 10.2]. The Petitioner views the Lost Cabin fee as a penalty, and characterizes the Painter C&O processing fee as a similar penalty, but for being “overprocessed.” [Painter Transcript, Vol. II, p. 261]. As we have already observed, nothing in the various Painter Gas Processing Agreements refers to the Processing Fee as a penalty. [Exhibits 116, 532, attached Exhibit H, ¶13.2]. We decline to accept Petitioner’s characterizations.
73. As in Whitney Canyon, supra, the Petitioner produced no evidence to shed light on the difference in cost structures between the Anschutz Plant and the locations at which producers were authorized to use the proportionate profits method. Whitney Canyon, Findings, ¶53. Specifically, we decline to draw conclusions about the relative expenses at the Lost Cabin and Anschutz Plants based on unsubstantiated testimony that the operating expenses at Lost Cabin “are higher but not significantly so.” [Painter Transcript, Vol. II, p. 261]. On the evidence presented to us, and without prejudging the findings and conclusions that we might make on other evidence in proceedings directly involving Lost Cabin and the testimony of witnesses with knowledge, we find that there is ample reason to distinguish the operation of the Anschutz Plant from the Lost Cabin facility.
74. The Department has correctly identified the statutory definition of the comparable value method, which is:
Comparable Value — The fair cash market value is the arms-length sales price less processing and transportation fees charged to other parties for minerals of like quantity, taking into consideration the quality, terms and conditions under which the minerals are being processed or transported.
Wyo. Stat. Ann. §39-14-203(b)(vi)(B). For Petitioner, the arms-length sales price in this case is the price charged at the tailgate of the Anschutz Plant, after processing is completed.
75. We also found in Whitney Canyon, supra, as in the case of the Anschutz Plant that there are reasons to distinguish the Anschutz Plant from the other facilities to which Amoco has directed our attention. Amoco, however, was content to confine itself to the cross-examination of Bolles on this subject, rather than calling witnesses with first hand knowledge. Amoco produced no evidence to shed light on the difference in cost structures at these locations. On the evidence presented to us, and without prejudging the findings and conclusions that we might make on other evidence in proceedings directly involving the other named facilities and the testimony of witnesses with knowledge, we find that there is ample reason to distinguish the operation of the Anschutz Plant facility from the other facilities to which Amoco has directed our attention. Whitney Canyon, Findings of Fact, ¶53.
76. Our findings related to the Painter C&O, Exhibit H, the Agreement between Anschutz producers and the Painter Plant, the Glasscock Hollow Agreement, and the E26-08 Agreement, taken together, support the decision of the Department. The Department’s selection and application of the comparable value method was free from error, and free from indications of carelessness.
77. We find no credible evidence that the Petitioner has been the object of selective enforcement procedures by the Department.
IX. CALCULATION OF VALUE IS INCORRECT
78. The Department concluded the correct processing deduction was determined by calculating the operating expenses plus $.26 per MCF. The Petitioner failed to file their tax liability using the formula demanded by the Department and instead calculated the liability using the proportionate profits formula. When the Department determined to value the production using the comparable value formula it did not have the operating expenses for the 2000 Production Year and used “best information” of 1999 expenses. [Transcript, Vol. II, pp. 199, 234]. The Department admitted that the value should be adjusted to determine the proper deduction. [Transcript, Vol. II, p. 200]. During the hearing, the expenses for the 2000 Production Year were disclosed to the Department and those expenses should be used by the Department to value the 2000 production. When the Department applied the comparable value formula it used operating expenses as reported on the tax form and it should have used processing expenses as allowed by the Painter C&O agreement therefore the value should be adjusted for those expenses. [Transcript, Vol. II, p. 260].
79. Any Conclusion of Law set forth below which includes a finding of fact may also be considered a Finding of Fact and is therefore incorporated herein by this reference.
CONCLUSIONS OF LAW
I. SCOPE OF REVIEW
A. Selection of method
80. The Department selected one of the four methods available by law for valuing natural gas production not sold at the point of valuation, as it was authorized and required to do pursuant to Wyo. Stat. Ann. §39-14-203(b)(vi). The Petitioner has appealed to this Board for a change of methods, on the ground that “the valuation method selected by the department does not accurately reflect the fair market value of the....natural gas....” Wyo. Stat. Ann. §39-14-203(b)(viii). In deciding this dispute, we return to principles generally stated in Whitney Canyon. We rely heavily on the Whitney Canyon decision in part because the Petitioner has, in this case, largely duplicated their submission of Proposed Conclusions of Law from Whitney Canyon. Petitioner’s listing of issues is characterized by the same degree of similarity.
81. The Department’s selection of method and the relation of the selected method to fair market value is the principal subject of our review. As in Whitney Canyon, the Petitioner suggests that the “accurately reflect fair market value” test applies to specific comparables. We conclude instead that the test applies to the valuation method. Whitney Canyon, Conclusions of Law, ¶106.
82. To determine whether the method selected by the Department accurately reflects fair market value, we consider whether the Department’s selected method is free from error, or is in some way marked by carelessness. Whitney Canyon, Conclusions of Law, ¶107. We also consider the relative merits of the competing methods in reaching the statutory objective of fair market value. Whitney Canyon, Conclusions of Law, ¶¶108-109.
83. The appeal has been filed pursuant to Wyo. Stat. Ann. § 39-14-203(b)(viii):
(viii) If the fair market value of the....natural gas production....is determined pursuant to paragraph (vi) of this subsection, the method employed shall be used in computing taxes for three (3) years including the year in which it is first applied or until changed by mutual agreement between the department and the taxpayer. If the taxpayer believes the valuation method selected by the department does not accurately reflect the fair market value of the....natural gas, the taxpayer may appeal to the board of equalization for a change of methods within one (1) year from the date the department notified the taxpayer of the method selected. (Emphasis supplied).
84. As we observed in Whitney Canyon, supra, there is a further and separate reason for considering the results of using the alternative methods. Whitney Canyon, Conclusions of Law, ¶109. Both parties have presented evidence and argument regarding the issue of uniformity of valuation under the Wyoming Constitution. One of the methods at issue may yield a deduction which is so excessive as to result in an artificially low price.
If such an artificially low price were utilized for purposes of taxation, the result would be a lower tax for operators [with the excessive deduction] than that paid by other operators. That lack of uniformity would be unacceptable because ‘[t]he Wyoming Constitution mandates that all [minerals] shall be uniformly taxed on the value of their gross product.’ Amax Coal West, Inc., 896 P.2d at 1332.
Wyodak Resources Development Corporation v. Wyoming Department of Revenue, 2002 WY 181, ¶34, 60 P.3d 129, 142 (Wyo. 2002).
B. Jurisdiction and Issues
85. Amoco timely filed a separate notice of appeal of its annual valuation pursuant to Wyo. Stat. Ann. §39-14-209(b) [“appeals”] and Chapter 2, Section 5 of the Board’s Rules [requirements for filing]. The relief requested was that “the Department of Revenue’s action on Amoco’s returned valuations be reversed and for Amoco’s originally returned valuations to be accepted and certified.” This is a reference to Amoco’s use of the proportionate profits method in its annual report. The Board’s decision in Appeal of Amoco Production Company, 2001 WL 770800 (Wyo. St. Bd. Eq. 2001); on reconsideration, 2001 WL 1150220 ( 2001), would have the effect of reducing the deduction claimed by Amoco. The Board’s decision increases the taxable value claimed by the Taxpayer using the proportionate profits method by requiring taxes and royalties be included as direct costs of production. However, Amoco has not accepted that decision, and we have considered this case on the basis of the relief it has requested.
86. The initial claims and contentions have been supplemented and amended during the course of the proceedings. We have taken these restatements and refinements of the issues into account in our decision of the case. However, Amoco did not identify or state theories of res judicata, judicial estoppel, and waiver until it submitted proposed findings of fact and conclusions of law following the hearing.
C. The Board’s Role
87. The Supreme Court has made it clear that the role of this Board is strictly adjudicatory:
It is only by either approving the determination of the Department, or by disapproving the determination and remanding the matter to the Department, that the issues brought before the Board can be resolved successfully without invading the statutory prerogatives of the Department.
Amoco Production Company v. Wyoming State Board of Equalization, 12 P.3d 668, 674 (Wyo. 2000). The Board’s duty is to adjudicate the dispute between Amoco and the Department, and nothing more.
D. Burden of Proof
88. “The burden of proof is on the party asserting an improper valuation.” Amoco Production Company v. Wyoming State Board of Equalization, 899 P. 2d 855, 858 (Wyo. 1995); Teton Valley Ranch v. State Board of Equalization, 735 P. 2d 107, 113 (Wyo. 1987). The Board’s Rules provide that, “the Petitioner shall have the burden of going forward and the ultimate burden of persuasion, which burden shall be met by a preponderance of the evidence. If Petitioner provides sufficient evidence to suggest the Department determination is incorrect, the burden shifts to the Department to defend its action....” Rules, Wyoming State Board of Equalization, Chap. 2, § 20.
89. Under the analysis which follows, taken in light of our Findings of Fact, we conclude Amoco has not met its burden.
II. OBJECTIVE OF THE STATUTES
90. To properly interpret the various statutes applicable to natural gas valuation, we must first review their fundamental objective. Wyodak Resources Development Corporation v. Wyoming Department of Revenue, 2002 WY 181, ¶33, 60 P.3d 129, 141-142 (Wyo. 2002). The Wyoming Constitution requires the gross product of mines to be taxed in proportion to the value thereof and uniformly valued for tax purposes at full value as defined by the legislature. Wyo. Const. Art. 15, §§ 3, 11. For oil and gas, the “value of the gross product means fair market value as prescribed by Wyo. Stat. Ann. 39-14-203(b), less any deductions and exemption allowed by Wyoming law or rules.” Wyo. Stat. Ann. §39-14-201(a)(xxix). The fair market value for natural gas must “be determined after the production process is completed.” Wyo. Stat. Ann. §39-14-203(b)(ii).
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.
Wyo. Stat. Ann. §39-14-203(b)(iv). All of these provisions read together provide the context within which the specific valuation methods contained in Wyo. Stat. Ann. §39-14-203(b)(vi) must be interpreted. Wyodak Resources Development Corporation v. Wyoming Department of Revenue, id., ¶33, 60 P.3d at 141-142.
91. The Petitioner in this case does not sell its natural gas at the point of production. Therefore, Wyo. Stat. Ann. §39-14-203(b)(vi) obliges the Department to value the production using one of four methods defined by statute: comparable sales, comparable value, netback, or proportionate profits. If none of these methods produces a representative fair market value, a mutually acceptable alternative method may be applied. Wyo. Stat. Ann. §39-14-203(b)(vii). There was no effort to reach a mutually acceptable alternative in this case, so a mutually acceptable alternative is not available to value the processing deduction.
III. SELECTION OF THE METHOD
A. Procedures
92. The Department identified the valuation method it intended to apply pursuant to Wyo. Stat. Ann. §39-14-203(b)(vi), and duly notified Amoco before September 1 of the year preceding the year for which the method was to be employed, as required by Wyo. Stat. Ann. §39-14-203(b)(vi). [Exhibit 113]. At the hearing of this matter, Bolles, on behalf of the Department, explained the valuation options available to him, and the reasons for selecting the comparable value method. We conclude, as we did in Whitney Canyon, supra, that the identification and notice requirements of the statute were met. We further conclude that the Department was under no obligation to accept any request to substitute the proportionate profits method simply because such requests had been granted in previous years. Whitney Canyon, Conclusion of Law, ¶119. Any other conclusion would contradict the plain meaning of the statute, which contemplates a periodic exercise of the Department’s discretion to select a method.
93. The Petitioner has complained that the Department failed to provide the Petitioner with sufficient notice of how to apply the comparable value method. In light of our findings of fact with regard to the positions taken by the Petitioner, we conclude, as we did in Whitney Canyon, supra, that it has failed to carry its burden of proof to establish its complaint as a matter of fact. Findings of Fact, ¶¶14-21. We further conclude that the Petitioner has been fully afforded its “statutory and constitutional rights to protest and contest.” Pathfinder Mines v. Wyoming State Board of Equalization, 766 P. 2d 531, 535 (Wyo. 1988). We emphasize our conclusion from Whitney Canyon, supra, that the Department, rather than the individual, Amoco, is responsible for determining value. Wyo. Stat. Ann. §39-14-203(b)(vi); infra., ¶109; Whitney Canyon, Conclusions of Law, ¶120.
B. The Definition of Comparable Value Method
i. General
94. The dispute between the parties begins with how the comparable value method is defined. We accordingly begin by addressing the requirements of the statute.
95. There is no dispute that the Department has correctly identified the statutory definition of the comparable value method, which is:
Comparable Value – The fair cash market value is the arms-length sales price less processing and transportation fees charged to other parties for minerals of like quantity, taking into consideration the quality, terms and conditions under which the minerals are being processed or transported.
Wyo. Stat. Ann. §39-14-203(b)(vi)(B).
96. Our reading of the statute is governed in the first instance by well established principles. The Board must look to the intent of the legislature when enforcing or construing statutes, and legislative intent must be ascertained initially and primarily from the words used in the statute. Allied-Signal, Inc. v. Wyoming State Board of Equalization, 813 P.2d 214, 219 (Wyo. 1991). For a more complete statement of related principles, see generally State of Wyoming by and through the Department of Revenue v. Union Pacific Railroad Company, 2003 WY 54, ¶12, 67 P.3d 1176, 1182-1183 (Wyo. 2003).
97. A concern advanced by Amoco is that the Department could not have reached valid conclusions regarding application of the comparable value method on the basis of information available to the Department before commencement of litigation. It is true that
the Department was not as fully informed about pricing and volume relationships at the time it issued the Notices of Valuation as it is now, after the presentation of all evidence. This concern is fully addressed by the statutory appeal procedures the taxpayer has invoked. These procedures require us to adjudicate disputes between the Department and the taxpayer. The procedures contemplate that the parties will argue their positions in a contested case proceeding, after discovery by the parties. The discovery then becomes a part of the body of evidence we consider in adjudicating the dispute. In addition, we reject any principle that would encourage the taxpayer to withhold information from the Department in hopes of affecting the outcome of the dispute. The potential for failing to disclose information is of direct interest in this case, where Amoco refused or neglected to produce the amended Exhibit H Gas Processing Agreement at Painter Processing Plant and the E26-08 well agreement thereby hindering the Department’s application of the comparable value method. Findings of Fact, ¶ 18. A taxpayer cannot fault the Department because the taxpayer fails to report important information in a timely fashion to affect the valuation process. Airtouch Communications, Inc., et. al. v. Department of Revenue, 2003 WY 114 (2003) ¶39.
98. Another concern advanced by Amoco is that it is hampered by the lack of standards “for the purpose of establishing an appropriate processing deduction.” [Taxpayers’ Proposed Findings of Fact and Conclusions of Law, ¶178, p. 69]. We have already found, as we did in Whitney Canyon, supra, that this concern is without basis in fact. Findings of Fact, ¶21. As important, this concern presupposes that a taxpayer, rather than the Department, is charged with applying a selected method to reach fair market value. We have concluded the contrary. Supra, ¶93.
99. Amoco is also concerned that if the statute provides latitude to the Department to exercise its judgment (something we have concluded, although not necessarily in the specific manner feared by Amoco), then “by definition the application of this statute is ad hoc decision-making which is arbitrary and capricious....” [Whitney Transcript, Vol. IX, p. 1652]. We disagree. The statute provides a discernible test for the exercise of the Department’s discretion. Supra, ¶93. The statute also provides for an appeal process based on a separate test, i.e., whether the selected method accurately reflects fair market value. Supra, ¶¶80-84. It bears repeating that this taxpayer has clearly demonstrated its opposition to any method but proportionate profits. Findings of Fact, ¶¶21-22. We have found no factual basis to support this fourth concern, so the taxpayer has failed to carry their burden of proof. Based on the appeal method provided by the statute, we also reject Amoco’s concern as a matter of law.
ii. Comparable Value
100. The first word of interest is “comparable”. As used in the phrase, comparable value, “comparable” is an adjective which is defined as “capable of or suitable for comparison.” Webster’s Ninth New Collegiate Dictionary (1989), p. 267. The root of “comparable” is “compare”, which in this context means “to examine the character or qualities of especially in order to discover resemblances or differences.” Id., p. 267. A usage note states that compare “implies an aim of showing relative values or excellences by bringing out characteristic qualities whether similar or divergent.” Id., p. 268.
101. The statute provides additional context for the phrase. The Department is the entity by which the valuation method is “employed,” and which must “determine the fair market value by application of” the selected method. Wyo. Stat. Ann. 39-14-203(b)(vi). That is, the statute contemplates an exercise of discretion by the Department. The language chosen by the legislature to define the comparable value method must be considered in that light, just as the same language must be considered in the context of the objectives of the statute.
102. The larger context of Wyo. Stat. Ann. §39-14-203(b)(vi), and what it implies for the comparable value method, was considered by the Board in the context of an earlier production year. The resulting principle was cited with apparent approval by the Wyoming Supreme Court.
[T]he reasonableness of the comparable value methodology is tested by whether there exist reliable, available information within the ‘market’ of natural gas processing fees paid by others (i.e., the ‘known’), which can be used to reasonably infer or estimate a just and fair processing fee (the ‘unknown’) that would have been paid by Petitioner had it been in a ‘third party’ producer position vis-à-vis the processing plant.
Appeal of Amoco Production Company, SBOE Docket 91-174, 1992 WL 126533 (Wyo. St. Bd. Eq. 1992); Amoco Production Company v. State Board of Equalization, 882 P.2d 866, 870 (Wyo. 1994). It is important to note that the Board’s decision rested on an analysis of the “minimum standard which must be met to uphold the method selected by the Department.” Appeal of Amoco Production Company, 1992 WL 126533, ¶4. In addition, the application of the quoted principle under different facts required a different result than we reach today. The precedent nonetheless assists us in reaching a final conclusion regarding the words, “minerals of like quantity”.
iii. Fair Market Value
103. In determining whether the method selected by the Department accurately reflects fair market value, Wyo. Stat. Ann. §39-14-203(b)(viii), we consider the results of the method rather than the results of specific comparables, and consider whether the Department’s selected method is free from error. We also consider whether an alternative method would reach fair market value. We have weighed the evidence that has been presented to us. In all respects, we conclude that the Department’s selected method accurately reflects fair market value. We summarize the main points, while incorporating by reference details set forth in our Findings of Fact.
iv. Arms-length
104. The statute’s directive for determining fair market value parses into three phrases. The first phrase is, “the arms-length sales price”. We understand that there is no dispute about the meaning of this phrase. It refers to the price received for sales of gas from the tailgate of the plant. That is what we conclude as a matter of law.
105. As in Whitney Canyon, supra, we conclude that “the arms-length sales price” refers to the price Petitioner received for sales of gas from the tailgate of the plant. Whitney Canyon, Conclusions of Law, ¶125.
v. Processing fees
106. The second phrase is, “less processing and transportation fees charged to other parties for minerals of like quantity.” The transportation fees are not an issue in this case. We can therefore simplify our task, and address the phrase, “less processing....fees charged to other parties for minerals of like quantity.” There does not appear to be any dispute in this proceeding with regard to what a processing fee is, perhaps because “processing” is defined by statute. Wyo. Stat. Ann. §39-14-201(a)(xviii). There is, however, a dispute regarding the qualifying words, “charged to other parties for minerals of like quantity.”
107. Amoco has focused considerable attention on what it considers to be an ambiguity in the words, “minerals of like quantity.” We conclude that there is no ambiguity. Amoco argues to the effect that the volumes of gas on which a suitable comparison can be based must be defined in advance of applying the comparable value method. Amoco asks us to conclude that there is or should be an additional constraint on the discretion of the Department. We see no valid reason for adding and thereby imposing such a constraint as a matter of law, and by doing so, prejudging the range of pricing and volume relationships that the Department may select for analysis. Where the Department and Amoco disagree about the significance of pricing and volume relationships for the sound exercise of the Department’s discretion, the dispute must be resolved on the basis of evidence presented to the Board. See Amoco Production Company v. Wyoming State Board of Equalization, 12 P.3d 668, 672 (Wyo. 2000).
108. At one level, the words “minerals of like quantity” are of plain meaning. “Minerals” is a shorthand for the crude oil, lease condensate and natural gas that are taxed under Wyo. Stat. Ann. §39-14-203(b). Although “like” has many meanings, the correct meaning in this context is “the same or nearly the same (as in appearance, character, or quantity).” Webster’s Ninth New Collegiate Dictionary (1989), at 692 (Emphasis supplied); see also The American Heritage Dictionary of the English Language, 4th Edition (2000); Black’s Law Dictionary, 5th Edition (1979). “Quantity” means “an indefinite amount or number.” Webster’s Ninth New Collegiate Dictionary (1989), at 963. We can therefore paraphrase “minerals of like quantity” to mean natural gas of the same or nearly the same amount.
109. However, a “same amount” unavoidably implies a comparison based on a measurement. There is no dispute that natural gas is measured volumetrically, but the words in the statute arguably raise a question about what sorts of measurements must be
made to make a comparison. Possibilities include total quantities, e.g. 100 MMCF, and unit quantities, e.g. 1 MCF. This question cannot be answered exclusively by reference to the words “minerals of like quantity.” However, it can be answered by reference to the context of the whole phrase, “processing....fees charged....for minerals of like quantity,” and by reference to the context of Wyo. Stat. Ann. §39-14-203(b)(vi) as a whole. Therefore, we look to processing fees charged for minerals in the same volume measurement.
110. Although there is no dispute regarding the meaning of the words “processing fees,” those words are also unspecific with respect to measurement. Possible ways to gauge processing fees might include total fees measured in-kind or in dollars, or fees per unit of volume, measured in-kind or in dollars. For example, the fee for processing 100 MMCF might be $25 or 25 MCF, which in turn might be calculated under a fixed rate or a sliding scale. When “processing....fees” and “minerals of like quantity” are read together in the phrase as a whole, their meaning comes into focus. The intention of the statute is to reach a comparison using the same measurement approach to both processing fees and amounts of mineral. If the comparable value method is to be used, the Department must be certain that it has investigated the circumstances with sufficient diligence to assure that there are no ambiguities or errors in its determination of what the fees are. The words chosen by the legislature avoid difficulty with a specific directive regarding the means of measurement, which could exclude comparisons that might be valid. A measurement specifying comparisons in terms of dollars per MCF, for example, might have excluded a comparison based on the in-kind fee presented by a comparable.
vi. Other Parties
111. The Petitioner has offered a variety of arguments urging us to find ambiguities in the phrase “other parties.” Divergent opinions as to the meaning of a statute may be evidence of an ambiguity, but the fact that opinions may differ as to a statute’s meaning is not conclusive. Campbell County School District v. Catchpole, 6 P.3d 1275, 1285 (Wyo. 2000). We have already found that the Petitioner was actively opposed to the use of the comparable value method. The Petitioner has simply taken a position contrary to the ordinary and obvious meaning of the words employed in the statute. We conclude that there is no ambiguity regarding the words, “other parties.”
112. As in Whitney Canyon, supra, we conclude that “other parties” are simply persons or groups distinct from the individual Petitioner, and that this is “the ordinary and obvious meaning of the words employed according to their arrangement and connection.” Whitney Canyon, Conclusions of Law, ¶127. We also conclude that the words “other parties” are not ambiguous. Whitney Canyon, Conclusions of Law, ¶128.
113. Defining the term “other party” is important in this case because we don’t want to create a confusion that we are finding a comparable in the Painter Plant Exhibit H agreement with the Petitioner and itself. Amoco is the Petitioner and a co-owner of the Painter Plant. We are not comparing the processing fees Amoco pays to the Painter Plant, rather we are comparing the processing fees that the other owners of the Painter Plant and the third party producers from the Anschutz Unit to find a comparable for Amoco. As we already found the Painter Plant and the Anschutz Plant are so interrelated that the fees paid at both plants can be comparables for the producers in the Anschutz Unit. Findings of Fact ¶34-44.
114. As in Whitney Canyon, supra, we conclude that the phrase, “processing fees....charged to other parties for minerals of like quantity” is a broad test which must be used by the Department when the Department selects the comparable value methodology to determine fair market value. That test requires the Department to exercise its sound discretion to analyze available information of known processing fees in the context of known volumes of gas for which such fees are charged, with the objective of securing reliable information from which reasonable estimates can be made regarding processing fees which would be paid by a specific Petitioner had it been in the position of a third party producer requiring the services of a gas processing plant. This is primarily a determination of fact. We conclude that we have reached “the ordinary and obvious meaning of the words employed according to their arrangement and connection.” Whitney Canyon, Conclusions of Law, ¶¶130-135. In this regard, we also reconfirm our discussion of concerns raised by the Petitioner, including concerns regarding the latitude of the Department’s discretion. Whitney Canyon, Conclusions of Law, ¶¶136-139.
vii. Terms and Conditions
115. The third phrase of the comparable value method definition is, “taking into consideration the quality, terms and conditions under which the minerals are being processed or transported.” Transportation of the minerals is not at issue, so the phrase may be simplified to, “taking into consideration the quality, terms and conditions under which the minerals are being processed....” We have previously concluded that the Department is the entity responsible for taking the referenced subjects into consideration, since the Department is the entity by whom the method is “employed,” and which must “determine the fair market value by application of” its selected method. Supra, ¶93; Wyo. Stat. Ann. §39-14-203(b). Amoco urges us to conclude that the obligations imposed on the Department by this phrase are vague. We disagree. Particularly when taken in conjunction with the second phrase, the meaning of the statute is plain. The Department must assure itself of the reliability of any comparison upon which it bases inferences regarding processing fees, and in doing so it must consider at least the quality of the minerals, and the terms and conditions under which the minerals are being processed. We conclude that we have reached “the ordinary and obvious meaning of the words employed according to their arrangement and connection.” Parker Land and Cattle Company, 845 P.2d 1040,1042.
116. The Petitioner argues that the Department has failed to consider pertinent distinctions between and among various gas processing contracts, and therefore has failed to consider “terms and conditions” as required by the statute. We conclude that this is a dispute between the parties regarding the significance of those distinctions for applying the comparable value method. As such, we view the resolution of that dispute as a question of fact. We have made various findings in this regard. E.g., Findings of Fact, ¶¶33, 44, 47, 49. We conclude that the Department has met the requirements of the statute with respect to considering the terms and conditions under which the minerals are being processed, and conclude that the terms and conditions to which the Petitioner has directed our attention are not commercially significant. Therefore, the Petitioner has failed to carry its burden of proof. On the same grounds, we likewise conclude that the Department has taken the quality of the gas into account, as required by the statute, and that the Petitioner has failed to carry its burden of proof.
117. Amoco argues that the Department has failed to consider a large number of pertinent distinctions between and among various gas processing contracts, and hence has failed to consider “terms and conditions” as required by the statute. We conclude that this is a dispute between the parties regarding the significance of those distinctions for applying the comparable value method. As such, we view the resolution of that dispute as a question of fact. We conclude that the Department has met the requirements of the statute with respect to considering the terms and conditions under which the minerals are being processed, and somewhat like the Department, further conclude that the terms and conditions to which Amoco has directed our attention are not commercially significant. Therefore, the taxpayer has failed to carry its burden of proof.
viii. Conclusion as to Interpretation of the Statute
118. Under our reading of the plain language of the statute, the Department correctly applied the comparable value method by subtracting an inferred processing fee from a known sales price to reach a value. We decide this issue based upon all of the information known at the close of the hearing, and not just on the basis of the information known to the Department when it prepared the Notices of Valuation for the Petitioner. For Amoco, the fees charged to other parties include:
● Processing fees charged by the Painter Plant Owners to Chevron, Mobil, Forest, FBA Trust, RME, Headington and BWAB under the Exhibit H Gas Processing Agreement
● Processing fees charged by the Painter Plant Owners to all Producers except Amoco under the Anschutz Ranch East Unit Gas Processing Agreement for processing
● Processing fees charged by the Painter and Anschutz Plant Owners to Amoco under the Anschutz Ranch East Unit Gas Processing Agreement for Glasscock Hollow processing
● Processing fees charged by the Anschutz Plant Owners to the Anschutz Corporation under the E26-08 Agreement
119. The Department did not, however, choose to apply the processing fee most strongly supported by weight of available Agreements. The Chevron Exhibit H Agreement of the Painter Plant and the Anschutz Producer Gas Processing Agreement require payment of a proportionate share of costs plus a fee of $0.08 per MCF of Gas, measured at the inlet to the Painter Plant. Instead of $0.08, the Department chose $0.26 per MCF. This higher fee was supported principally by testimony from Amoco that $0.08 understated the Anschutz Plant Owners’ return on investment. However, as we have previously observed, the role of the Board in this case is to decide the dispute, not to establish a value. Supra, ¶87. We conclude that the selection of $0.26 rather than $0.08 was within the Department’s discretion. As a further and separate ground for our decision in this regard, we find that the Petitioner has not carried its burden of proof with respect to demonstrating that $0.26 was insufficiently related to return on investment in the Anschutz Plant.
120. We conclude that, with respect to the processing fees charged under all of the Gas Processing Agreements referenced in Conclusions of Law ¶118, the Department correctly determined, by comparison of processing fees in the context of suitably measured volumes of gas, that there was a consistent range of fees applied against any and all volumes processed under the referenced Gas Processing Agreements during 2000. Findings of Fact, ¶¶33, 44, 47, 49. As a further and separate ground for our decision in this regard, we find that the Petitioner failed to carry its burden of proof.
121. We conclude that, in the course of satisfying itself that the inferences being drawn from the Gas Processing Agreements were based on valid comparisons, the Department adequately considered both the quality of the gas being processed, and the terms and conditions under which the gas was being processed. In all instances, similarity of quality was assured by virtue of the fact that all gas was commingled before becoming available at the tailgate of the plant, among other considerations. In all instances, the terms and conditions were sufficiently similar to conclude that the comparison was valid. Findings of Fact, ¶¶33, 44, 47, 49. We conclude that the Department met the requirements of the statute. As a further and separate ground for our decision in this regard, we find that the Petitioner failed to carry its burden of proof.
122. Although we approve the use of the selected comparables, the Department’s calculations of value and Notices of Valuation must be adjusted to reflect actual numbers for 2000 operations. Conclusions of Law, ¶130. We will accordingly remand this case to the Department for that purpose.
C. Evidence of Fair Market Value
123. The selected fee covers operating costs, plus return on investment. E.g., Findings of Fact, ¶42. The Petitioner has not drawn our attention to any other components of an appropriate processing cost.
124. The Department’s selection and application of the comparable value method was free from error, both with respect the Department’s analysis of the facts, and with respect to the law. Our conclusion in this regard would decide the dispute between the parties, even without attention to the question of whether the proportionate profits method, as employed by Amoco, reflects fair market value for year 2000 production processed at the Anschutz Plant.
125. There is no evidence that the alternative method requested by Amoco, the proportionate profits method, would accurately reflect fair market value for 2000. To the contrary, there is considerable evidence that the proportionate profits method would not accurately reflect fair market value, but would instead result in an excessive deduction, thereby raising constitutional issues if it were used to value year 2000 production processed at the Anschutz Plant. Infra, ¶¶53-59. Moreover, it is clear that Petitioner was aware that the proportionate profits method would yield a distorted value for this tax year.
D. The Netback Objection
126. As a further and separate objection, Amoco argues that the Department’s application of comparable value for production year 2000 is indistinguishable from the Department’s application of the netback method “[d]uring 1980-1989.” [Amoco’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 213-217, pp.86-87]. It further argues that this cannot be allowed, since the Legislature has specifically excluded the application of the netback method to Anschutz production. Id.
127. As we found in Whitney Canyon, supra, we are not troubled by the fact that the Department’s use of the comparable value method yields a result which appears to be the same as the netback method of earlier years for two reasons. First, Amoco concedes that some form of netback calculation yields fair market value. The report of Amoco’s expert Adair states that, “The market value of the raw gas can then be determined by netting the direct costs to gather, condition, and process the gas along with an allowance for recovery and on the capital invested in the assets required to transform the raw gas to marketable products, from the market value attributable to the products extracted.” [Whitney Exhibit 170, p. W1150]. The Department agrees, at least in principle. [Whitney Transcript, Vol. VI, pp. 1066-1067]. If a result that reflects fair market value has been achieved, then honoring the objection by Amoco will thwart the statutory objective of fair market value.
128. Second, and perhaps more important, in light of the uniform processing fee which is the subject of this case, the statutory definition of netback requires the same processing deduction that is reached by the comparable value method. The statutory netback calculation is defined this way: “The fair market value is the sales price minus expenses incurred by the producer for transporting produced minerals to the point of sale and third party processing fees.” Wyo. Stat. Ann. §39-14-203(b)(vi)(C)(emphasis supplied). If we look to the fees being paid by the Producers in this field, the simple answer is the formula of expenses plus a per MCF charge. Let us assume for a moment that the netback exclusion does not apply. The difference between the netback and comparable value methods lies only in the point of inference – for netback, it is each Producer’s own fee, and for comparable value, it is the fee charged to other producers.
129. Finally, we decline to entertain a blanket rejection of the proportionate profits method, as urged by the Intervenor. Further, we believe, as we did in Whitney Canyon, supra, that a focus on the facts and circumstances of each year, as directed by the appeal statutes, Wyo. Stat. Ann. §39-14-203(b)(viii) and Wyo. Stat. Ann. §39-14-209(b), obliges us to avoid conclusions which extend beyond the year at hand. The record before us suggests that circumstances may change substantially from year to year, based on such factors as changing gas prices and changing economic conditions in the field. It would be unwise for us to prejudge which of the methods authorized by the legislature will prove the most suitable for determination of fair market value in another year.
IV. THE APPLICATION OF THE METHOD WAS NOT APPROPRIATE
A. Mathematical Calculations
130. Amoco has disputed the mathematical calculation performed by the Department and reflected in the Notices of Valuation. The Department valued the production by accepting Amoco’s statements of all values and allowing a processing deduction based upon Amoco’s proportionate share of the Anschutz Plant operating costs in 1999 plus $0.25 per MCF and $0.01 per MCF for mercury removal. [Stipulations of the Parties, ¶E1]. The Department did not have access to the operating cost information for Production Year 2000 and therefore used the best information available, cost information for Production Year 1999. The Department also could not check to insure the operating expense information included only the processing expenses chargeable under the Painter Exhibit H agreement or the Glasscock Hollow Agreement, and allowable by statute. Therefore the calculations do not contain accurate information for Production Year 2000. Now that the necessary information has been provided, the Department should calculate a new value.
B. Not a Hypothetical Processing Allowance
131. Amoco contends that the processing fee represents a hypothetical processing allowance, in apparent allusion to Amoco Production Company v. Wyoming State Board of Equalization, 12 P.3d 668, 672 (Wyo. 2000). The Court in that case characterized the situation in this way:
Amoco and the Department had agreed that the actual costs should be relied upon instead of the twenty-five percent allowance, but they could not agree as to which costs were to be utilized in connection with formula. The issue that was properly before the Board was whether Amoco or the Department was correct with respect to those costs, and we previously have acknowledged the authority of the Board to decide that question.... Instead of adjudicating the dispute between Amoco and the Department, however, the Board in this instance determined to arrive at its own valuation...
Id., p. 673.
132. The case before us now is different. There is no agreement between Amoco and the Department on a set of costs that are agreed to be “actual.” Instead, the Department has determined that the formula is the correct processing fee, and Amoco contends that it is not. The Board will adjudicate that dispute as it has been presented.
133. In addition, the characterization of value as hypothetical is not necessarily pejorative under Wyoming law. The facts of the specific case are of critical importance:
The decision .... [in Appeal of Monolith Portland Midwest Co., Inc., 574 P.2d 757 (Wyo. 1978)] does not say that hypothetical costs are per se illegal. But, more importantly, we do not agree with Amax that the method used creates hypothetical costs. Amax itself admitted at the hearing that the costs were not hypothetical. The Division’s evaluation of Amax’s operations may have produced a different result (number) than did that evaluation which Ajax has done–the numbers may be different, but that does not make one hypothetical.
Amax Coal Co. v. Wyoming State Board of Equalization, 819 P.2d 825 (Wyo. 1991).
134. The Board also addressed the potential problem of hypothetical fees in Appeal of Amoco Production Company, SBOE Docket 91-174, 1992 WL 126533 (Wyo. St. Bd. Eq. 1992). At that time, the Board observed:
For utilization of the comparable value methodology, the only requirement is reliable information from which a reasonable processing fee may be inferred and imputed for Petitioner’s production. Such a process does not result in a hypothetical fee inasmuch as the estimated processing fee would be based on analysis of actual fees.
1992 WL 126533, ¶5; quoted in Amoco Production Company, 882 P.2d 866, at 870. We conclude that the requisite analysis of actual fees has occurred in this case.
C. Appraisal Principles Are Not Applicable
135. As we found in Whitney Canyon, supra, many of the issues identified by Petitioner are addressed to the application of appraisal principles. The word “appraisal” has been freely used by the parties in at least two of the root senses of “appraise.” See Webster’s New World College Dictionary (4th Edition)(2001), p. 69. One is the sense of setting value. The other is the sense of exercising judgment to set value. This latter sense is commonly associated with the flexibility afforded an appraiser to make a determination of value after employing different methods to calculate value, then weighing the results of those calculations to reach an opinion of value. 34 Rocky Mt. Min. Law Inst., Ch. 2, §2.03[2](1988) (Keeping the Assessor at Bay: A Guidebook to Property and Production Taxes; Traditional Approaches to Valuation); Rules, Department of Revenue, Chap. 7, §6 (Ad Valorem Valuation and Methodology and Assessment). Appraisal in the sense of exercising judgment in this way is a professional discipline, and often associated with such descriptions as general appraisal principles, recognized appraisal techniques, or appraisal judgment. For the reasons that follow, as we did in Whitney Canyon, supra, we conclude that general appraisal principles should be applied sparingly, if at all, in the context of Wyo. Stat. Ann. §39-14-203(b)(vi) and the four methods that it defines.
136. Prior to 1990, mine products were valued annually at fair cash market value after “the mining or production process [was] completed.” Wyo. Stat. Ann. §39-2-202(a), 1977. “The production process [was] deemed completed....when the mine product [was] removed from the....well and prior to any....further processing [was] placed....in the case of natural gas, in the pipeline for transportation to market.” Wyo. Stat. Ann. §39-2-202(b),1977. “In the event the [mine product was] not sold at the mine or mine claim by bona fide arm’s length sale....the department shall determine the fair cash market value by recognized appraisal techniques.” Wyo. Stat. Ann. §39-2-202(d), 1977 (emphasis supplied).
137. In 1990, the legislature adopted different valuation statutes for solid minerals, 1990 Wyo. Sess. Laws, Ch. 53, and for oil and gas, 1990 Wyo. Sess. Laws, Ch. 54. The statute for oil and gas appeared in a format essentially the same as the current statute (using the word “product” at the time, rather than the later words, “crude oil, lease condensate or natural gas production”). Wyo. Stat. Ann. §39-2-208(d), 1990. The overall objective of each of the four methods available since 1990 is to reach fair market value for oil and gas not sold at the point of valuation. However, the oil and gas valuation statute makes no reference to recognized appraisal techniques. The history of the legislation implies that the legislature rejected the use of “recognized appraisal techniques” in favor of the legislatively defined alternatives for determining fair market value. We conclude that the legislature’s amendments to the statutes indicate that some change in existing law was intended. Barcon, Inc. v. Wyoming State Board of Equalization, 845 P.2d 373, 377 (Wyo. 1992).
138. For oil and gas taxpayers, with the enactment of Wyo. Stat. Ann. §39-14-203(b)(vi), the legislature stripped the Department of authority to exercise judgment in the sense of comparing the outcomes of various methods, then weighing the outcomes of those methods to reach an opinion of value. Instead, the Department must make a commitment to a specific method of valuation in advance of having all of the information that might bear on the consequences of employing that method. That is, the Department must select a single valuation method no later than September 1 of the year before the method is to be applied, or nearly a year and a half before having complete taxpayer data in the form of annual reports. Wyo. Stat. Ann. §§39-14-203(b)(vi); 39-14-207(a)(i).
139. As important, each of the four statutorily defined methods for oil and gas valuation is specific about how fair market value is to be calculated using that method. With regard to comparable value, we have previously observed that the unknown which is being sought is the value for the processing fee; once inferred, the statute tells us how to then calculate fair market value. Findings of Fact, ¶60. In contrast, reaching a direct inference about the value of natural gas at the point of valuation requires use of a different method, the comparable sales method. Wyo. Stat. Ann. §39-14-203(b)(vi)(A). Further, the statutory netback method is confined to “third party processing fees” rather than the type of calculation described by Adair. Wyo. Stat. Ann. §39-14-203(b)(vi)(c). The proportionate profits method, Wyo. Stat. Ann. §39-14-203(b)(vi)(D), is even further removed from traditional appraisal judgment. The proportionate profits method is grounded in calculation of the depletion deduction for federal income tax purposes, not traditional appraisal theory, even though the federal income tax version of the proportionate profits method is not available for oil and gas. Maxfield, Taxation of Mining Operations, §2.03[2][c](1991); 26 C. F. R. §1.613-4(d)(4)(Gross income from the property in the case of minerals other than oil and gas; Cases where a representative market or field price cannot be ascertained; “proportionate profits method”); see: 26 C. F. R. §1.613-3. Compare 36 Rocky Mt. Min. L. Inst., ch. 11 (1990); 34 Rocky Mt. Min. L. Inst., Ch. 2, §2.03
140. The legislature having supplanted “recognized appraisal techniques” for oil and gas valuation, we disagree with the Department’s argument that we should look to authorities that rest on those very words. E.g., Thunder Basin Coal Co. v. Wyoming State Board of Equalization, 896 P. 2d 1336, 1338-1339 (Wyo. 1995); Amax Coal West, Inc., v. Wyoming State Board of Equalization, 896 P. 2d 1329, 1332 (Wyo. 1995); Amax Coal Co. v. Wyoming State Board of Equalization, 819 P.2d 834 (Wyo. 1991). Our conclusion might be different if this were a case involving coal, trona, or other valuable deposits. The application of recognized appraisal techniques is still included in subsections of the articles of Chapter 14 related to those mine products. Wyo. Stat. Ann. §39-14-102(c); Wyo. Stat. Ann. §39-14-302(c); Wyo. Stat. Ann. §39-14-702(c); Rules, Wyoming Department of Revenue, Ch. 6, §10, (Recognized Appraisal Techniques Applicable to Miscellaneous Minerals).
141. There is a noteworthy echo of the comparable value definition of Wyo. Stat. Ann. §39-14-203(b)(vi)(B) in one subsection of the coal valuation statutes. That subsection provides:
For coal used without sale, or coal not sold pursuant to a bona fide arms-length agreement, the sales value for the purposes of paragraph (vii) of this subsection shall be the fair market value of coal which is comparable in quality, quantity, terms and conditions under which the coal is being used or sold, both in the spot market and through long-term agreements negotiated within the previous (12) months, multiplied by the respective number of tons used or sold for each reporting period;
Wyo. Stat. Ann. §39-14-103(b)(viii)(emphasis supplied).
142. However, there are significant differences between Wyo. Stat. Ann. §39-14-103(b)(viii)[coal] and Wyo. Stat. Ann. §39-14-203(b)(vi)(B)[oil and gas] that reinforce our reluctance to supplement or modify the language of the comparable value definition by reliance on appraisal theory. The legislature has used similar words to different effect with respect to coal on the one hand, and oil and gas on the other. First, Wyo. Stat. Ann. §39-14-103(b)(viii) is not the statute which addresses coal sold away from the point of valuation; that is instead Wyo. Stat. Ann. §39-14-103(b)(vii). Wyo. Stat. Ann. §39-14-103(b)(viii) addresses the very limited case of “coal used without sale, or coal not sold pursuant to a bona fide arms length agreement.” For coal which is not “used without sale,” there must a be a factual inquiry regarding the absence of a bona fide arms length agreement. Under Wyo. Stat. Ann. §39-14-203(b)(vi)(B), relating to oil and gas, there is no such inquiry. Instead, the method is premised on the existence of an arms-length sale after the point of valuation. Second, for coal, the unknown which is to be “comparable in quality, quantity, terms and conditions” is the coal itself, not a processing fee. Third, for coal, there is very specific language about the context of sales, i.e. “in the spot market and through long term agreements negotiated within the previous (12) months,” providing express guidance about factors that might influence price. There is no similar language in Wyo. Stat. Ann. §39-14-203(b)(vi)(B).
143. From the standpoint of direct guidance from the Wyoming Supreme Court, it would be advantageous if Wyo. Stat. Ann. §39-14-103(b)(viii) were more closely related to Wyo. Stat. Ann. §39-14-203(b)(vi)(B), because the coal subsection has recently been interpreted by the Wyoming Supreme Court in Wyodak Resources Development Corporation v. Wyoming Department of Revenue, 2002 WY 181, 60 P.3d 129 (Wyo. 2002). However, the lessons of Wyodak Resources Development Corporation regarding comparable value are not broadly applicable. We conclude instead that Wyodak Resources Development Corporation requires us to read Wyo. Stat. Ann. §39-14-203(b)(vi)(B) carefully, and to consider the record carefully, for the ultimate purpose of reaching fair market value.
144. The Board has already found, as a matter of fact, that the evidence regarding appraisal theory did little to aid either our understanding generally, or to aid the interpretation and application of the comparable value statute. Findings of Fact, ¶¶20, 21. There are aspects of our conclusions that are consistent with, but not dictated by, the significance of individual judgment in appraisal theory, such as our conclusions regarding the discretion afforded the Department in its application of the comparable value method. Supra, ¶93. However, we conclude the correct reading of the statute, the plain and obvious reading, does not require us to view the statute through an overlay of appraisal theory. We accordingly conclude, as we did in Whitney Canyon, supra, that Amoco’s many objections based on appraisal theory are without merit.
D. Rules and Regulations Were Not Imperative
145. Amoco has been specifically critical of the Department’s refusal to pursue rule making to more fully define the comparable value method. It relies on a suggestion made by the Court in Amoco Production Company v. State Board of Equalization, 882 P.2d 866, 871 (Wyo. 1994), which the Court itself characterized as being “in the nature of an aside.” We have already concluded that this suggestion was made under different circumstances. Also, rulemaking is not required “so long as statutory and constitutional rights to protest and contest are afforded the taxpayer.” Pathfinder Mines v. State Board of Equalization, 766 P.2d 531, 535 (Wyo. 1988); Amoco Production Company v. Wyoming State Board of Equalization, 899 P.2d 855, 860 (Wyo. 1995); see AT & T Communications v. State Board of Equalization, 768 P.2d 580, 585 (Wyo. 1989). Moreover, we doubt that rule making would have been a productive endeavor. Findings of Fact, ¶20. We also note that it has always been within the power of Amoco to petition for rule making and in doing so, to offer to their own vision of a workable approach to making sense of the comparable value method. Wyo. Stat. Ann. §16-3-103.
E. Uniform Valuation
146. We have already described the potential state constitutional problem that arises from excessive deductions. Supra, ¶90.
147. It is important to note that the only producer from the Anschutz Field requesting to use proportionate profits at this stage is Amoco. All the other producers are using comparable value and they understand how to apply it. Findings of Fact, ¶65. It would result in a lack of uniformity if all other producers from the Anschutz fields deduct processing costs using the comparable value method and Amoco is allowed to use the proportionate profits method.
148. In order for a constitutional issue to arise, Amoco must first show that it is situated similarly to other taxpayers which are being treated in a way that gives rise to the concern for lack of uniformity. “Equal protection in Wyoming requires a law to operate alike upon all persons or property under the same circumstances and conditions.” W. W. Enterprises, Inc., v. City of Cheyenne, 956 P. 2d 353, 356 (Wyo. 1998)(Emphasis in original). The taxpayer has failed to carry this burden. This is enough to dispose of the constitutional claim.
149. We also conclude that the Petitioner has failed to carry its burden to demonstrate that it has been the object of selective or arbitrary enforcement of the tax laws of Wyoming. Our conclusion, as it was in Whitney Canyon, supra, with respect to the Petitioner’s failure to carry its burden of proof warrants further comment on the hurdles that any taxpayer must face in making a constitutional uniformity claim while contesting the Department’s application of a valuation method. There are inherent difficulties in complaining about the treatment of other taxpayers when the Department is dependent on the self-reporting of all taxpayers. Since the reliability of information submitted by other taxpayers (not a party to this and the companion cases) granted the use of the proportionate profits method cannot be directly tested in this proceeding, there are threshold concerns about meeting the evidentiary standard of a contested case proceeding: “the type of evidence commonly relied upon by reasonably prudent men in the conduct of their serious affairs.” Wyo. Stat. Ann. §16-3-108(a).
150. In our Findings of Fact, we stated that we are not now prejudging the possibility that facts may later come to light which might serve to clarify the circumstances of other gas processing facilities. Those additional facts might in turn give rise to well grounded and specific concerns regarding the constitutional requirement for uniformity. Those facts can best be developed in the context of an audit of taxpayers that have been authorized to use the proportionate profits method for 2000. If the use of the proportionate profits method were disallowed on audit due to existence of valid comparables, the uniformity concerns would be addressed. If the Department remained satisfied that the use of the proportionate profits method was appropriate, there would be an audit record to help us consider constitutional objections. Further, the Board would likely be relieved of the possibility that there would be “more to be accomplished” by way of development of the pertinent facts. See Board of County Commissioners for Sublette County, Wyoming v. Exxon Mobil Corporation, 2002 WY 151, ¶36, 55 P.3d 714, 723-724 (Wyo. 2002). As an alternative to audits, the Board has the power to initiate an investigation at a later date, should circumstances warrant. Wyo. Stat. Ann. §39-12-102.1(c)(x).
151. We also conclude, under the specific circumstances in this case, that Petitioner has failed to show that it is situated similarly to other taxpayers which are being treated in a way that gives rise to the concern for lack of uniformity. This is a case involving sweet gas, not sour gas. This is a case in which fees were actually charged under the contracts which we have found to be comparables, in contrast to the facts known about the producers of concern to Petitioner. We have rejected the characterization of the Exhibit H fees in the Painter C&O agreement as penalties. The charges to the Lost Cabin producers are penalties. Findings of Fact, ¶74. Petitioner has again failed to come forward with meaningful evidence to compare the cost structure at Anschutz with those of the producers of concern.
V. UINTA COUNTY INTERVENTION IS APPROPRIATE
152. Amoco has urged us to reverse our order authorizing the intervention of Uinta County under certain terms and conditions. It relies entirely on Board of County Commissioners for Sublette County, Wyoming v. Exxon Mobil Corp., 2002 WY 151, 55 P.3d 714 (Wyo. 2002). In that case, the Wyoming Supreme Court recognized, inter alia, limits on a county’s authority to file a contested case appealing ad valorem tax decisions, and on a county’s authority to raise certain types of issues in such an appeal. In this proceeding, the county neither filed the contested case proceeding nor defined the issues that comprise the subject matter of the proceeding; the initiative was seized by the taxpayer.
153. Under Wyo. Stat. Ann. §18-3-504(a)(v), a board of county commissioners may “[r]epresent the county, care for the county property and manage the business and concerns of the county in all cases where no provision is made by law....” This language is directly contrary to the inference that Amoco would have us draw from Exxon Mobil Corp., i.e., that it is incumbent upon the Board of County Commissioners of Uinta County to direct our attention to a statute which specifically authorizes the commissioners to intervene. The statute grants authority under circumstances “where no provision is made by law”, but Amoco insists that we should infer the absence of authority instead. We do not accept Amoco’s inference, and decline the taxpayer’s invitation to declare the Board’s rule on intervention invalid with respect to counties.
154. Perhaps we will receive further express guidance from the Wyoming Supreme Court when it decides Amoco Production Company v. Department of Revenue, et al., No. 02-171. In the absence of that guidance, we believe our Order on Intervention, and the positions articulated in that Order, should stand. There is no question that intervention was granted with express recognition of the commissioners’ status as representatives with legitimate concerns for Uinta County. In fact, we are concerned that Amoco’s arguments logically demand that we deny intervention to any person or entity seeking to intervene in a proceeding like the one we decide today. There is no indication that Amoco would be receptive to the intervention of another governmental entity of any stripe, or a private group claiming to represent the public interest. Historically and practically, the county is the entity best positioned to represent many interests that, for whatever reason, are not prepared to acquiesce in the judgments of the Department of Revenue and/or the Department of Audit. Further, in appeals filed under Wyo. Stat. Ann. §39-14-209(b)(iv), such as the one before us, the appeal statute itself assures that county commissioners will reliably have notice that the Department’s determination is being contested, unlike the public at large.
155. We also think Amoco’s position is unwise. Where, as in this case, a county is prepared to pursue concerns that are not frivolous, we believe that the public good may be well served by airing those concerns at the earliest possible stage, rather than insisting that those concerns be addressed, if at all, only after the much later conclusion of audits, or in a separate proceeding under the Board’s power to investigate. Under Chapter 2, Section 14(a), of the Board’s Rules, the Board is in an advantageous position to condition the participation of county intervenors, as we have done in this case, to minimize disruption of the proceeding and to prevent unnecessary and unfair expenditures of money, time, and effort by other parties. The county is also bound by its participation as an intervenor, and hence practically foreclosed from initiating later proceedings in a way that cannot apply to a less formal means of appearance.
156. In short, intervention can be an effective means to reach an early, efficient, and satisfactory disposition of the public business before the Board. As such, our Rule falls squarely within the purview of our authority to exercise discretion in the conduct the Board’s affairs. Wyo. Stat. Ann. §39-11-102.1(c)(viii), (xvi).
VI. THE EFFECT OF AMOCO PRODUCTION COMPANY, Case No. 93-104
157. The source of many of Amoco’s objections to the comparable value method lies in events which occurred over a decade ago. At that time, the Department pursued an approach to calculating comparable value that was rebuffed first by the Board, and then by the Wyoming Supreme Court. Amoco Production Company v. Wyoming State Board of Equalization, 882 P.2d 866 (Wyo. 1994). The end result was that the Department’s attempt to use the comparable value method failed, and Amoco was authorized to use the proportionate profits method. Id., at 868. Amoco wishes to reach that same result now. To do so, we understand Amoco to claim that the litigation in Amoco Production Company, 882 P.2d 866, has forever limited the Department to pursue comparable value method which was the subject of that case. [Whitney Exhibit 148]. Since that “Definitive Formula for Computation of Comparable Value” was flawed, the result of accepting Amoco’s position would inevitably lead to the use of the proportionate profits method, by default. We know of no principle of law that binds the Department to an exercise in futility. As we did in Whitney Canyon, supra, we will address the various theories which Amoco have invoked to that end.
158. One of the striking features of Appeal of Amoco Production Company, SBOE Docket 91-174, 1992 WL 126533 (Wyo. St. Bd. Eq. 1992), is the paucity of facts reflected in the record made before the Board. There was only one explicit finding of fact unrelated to jurisdiction: “While there is testimony in the record as to example calculations which might be made for natural gas processing fees charged to unrelated parties, there is no evidence as to the actual processing fees or fee arrangements charged to such parties in circumstances similar to those for the natural gas processing at issue.” Id., at ¶3; quoted in Amoco Production Company, 882 P.2d 866 at 869 (Wyo. 1994). Moreover, a large universe of Amoco processing plants were considered at once, rather than just Anschutz. The opinion lists these as “the Brady Plant, Salt Creek Facility, Beaver Creek Gasoline and Phosphoria Facility, Whitney Canyon, Anschutz Ranch CPF and NGL/NRU Plants, and the Bairoil CO2 Facility.” Id., at ¶1. There is no indication of any scrutiny of the agreements for these producers with the Painter Plant or the Glasscock Hollow agreement, or similar agreements pertaining to the other facilities. To the contrary, the concurring opinion summarizes the factual focus of the proceeding as follows: “The record herein contains substantial testimony and evidence relating to Petitioner’s preferred valuation methodology, proportionate profits.” Id., at ¶6. One of the Board’s conclusions of law further sums up the record in this way: “Upon reflection, we conclude that the record herein contains insufficient evidence to allow any finding or conclusion as to whether reliable, available information exists from which a reasonable processing fee may be inferred.” Id., at ¶5. It was this absence of information which prompted the Board to remand the case “to the Department for adoption of a more determinative formula for computation of comparable value based upon reasonable inferences from third-party natural gas processing fees.” Id., at ¶8.
159. In response, the Department produced the valuation formula which became the focus of Amoco Production Company, 882 P.2d 866 (Wyo 1994). The Department’s formula was derived from an unspecified number of processing agreements between unrelated parties. [Whitney Exhibit 150]. This information had been obtained from two sources, an unidentified taxpayer and the confidential records of investigations by the Department of Audit, so that all of the underlying data in the formula was subject to confidentiality restrictions. [Whitney Exhibit 150].
160. The Department’s exclusive reliance on confidential information naturally gave rise to the concerns which lie at the heart of Amoco Production Company, 882 P.2d 866 (Wyo 1994). If all of the information which determines the fate of the taxpayer is confidential, the taxpayer is severely handicapped in defending itself from questionable data, from questionable applications of the data, and even from wholesale misapplication of the stated method. So, in Board Docket No. 91-174, there was no evidence of processing fees, and when the case reached the Wyoming Supreme Court, the Department relied entirely on information that could not be disclosed to the taxpayer. This situation naturally oriented the issues before the Wyoming Supreme Court toward any conceptual tools that might be available to salvage the Department’s use of its formula. Consideration was given to the direct participation of the taxpayer; to rule making delimiting the Department’s actions consistent with the statute; to analogies from appraisal practice; and to other “parameters or definition” which would allow the method to be utilized “by taxpayer reporting production, price, cost, and value information,” Amoco Production Company, 882 P.2d 866 at 870-872 (Wyo 1994). In the end, there was nothing that could be done to sustain the application of the Department’s approach at the time. There is no reason to believe that the result would be different today under the facts presented there.
161. When we consider the difficulties of statutory application that were posed in Amoco Production Company, 882 P.2d 866, (Wyo 1994) it becomes apparent that the source of those difficulties lay in the Department’s formulaic approach, rather than with the letter of the statute. When the Court observed that “some of the statutory factors are amorphous to a degree,” Id., at 871, it was laboring under the absence of any concrete information about what the Department of Revenue had actually done. The director of the mineral tax division denied having documented comparables or identifying specific comparables. Id., at 869. No detailed discussion of the plain meaning of the statute was apparently considered by the parties, or of interest to the Court, due to the posture in which the case reached the Court, i.e., after the Board remanded the matter to the Department, thereby granting the Department an opportunity to support its position.
162. The factual circumstances in this case, as they were in Whitney Canyon, supra, are starkly different. The information which is the basis for the Department’s action is not hidden from Amoco by any veil of confidentiality. Comparable processing fees, together with the documentation for those fees, have been specifically identified and are now public information. The Department’s inferences with respect to processing fees have been plainly stated during the course of the proceeding, and the Department’s conceptual approach was disclosed to Amoco more than a year in advance of the date that annual reports were filed. Amoco has been given ample opportunity to “respond and present evidence and argument”, see Amoco Production Company, 882 P.2d 866 at 872, (Wyo 1994), and have fully availed themselves of that opportunity.
163. The Petitioner’s focus on Amoco Production Company, 882 P.2d 866, (Wyo 1994) tends to distract attention from an event which prompted the Department to reconsider its approach to comparable value, and which was unknown during the period when the Department’s formula was at issue. We refer to the discovery, during an audit, of processing agreements for the Painter field and the Anschutz field. This discovery led to the Department’s pursuit of information that would enable it to apply the statute as it has done, and ties to a last distinction regarding Amoco Production Company, 882 P.2d 866. There is an additional ground for distinguishing the circumstances of production year 2000 for Anschutz from the circumstances of the earlier proceeding. Painter and Anschutz clearly processed gas for other producers in 2000.
VII. COLLATERAL ESTOPPEL
164. As the taxpayers did in Whitney Canyon, supra, Amoco requests that we apply the doctrine of collateral estoppel. We begin with a statement of the principles involved:
The doctrines of res judicata and collateral estoppel incorporate “‘a universal precept of common-law jurisprudence * * *’” that a right, question or fact put in issue, and directly determined by a court of competent jurisdiction, cannot be disputed in a subsequent suit by the same parties or their privies.... While the interests of finality served by this doctrine are the same, this court has carefully distinguished the two:
[A]lthough many cases speak of res judicata in the administrative context, they actually apply collateral estoppel. * * * Collateral estoppel....bars relitigation of previously litigated issues. * * * Res judicata on the other hand bars relitigation of previously litigated claims or causes of action.
Tenorio v. State ex rel. Wyoming Workers’ Compensation Division, 931 P. 2d 234, 238 (Wyo. 1997)(emphasis in original).
165. The Wyoming Supreme Court has stated the elements of collateral estoppel:
Generally, four factors are considered when determining application of collateral estoppel: (1) whether the issues decided in the prior adjudication was identical to the issue presented in the present action; (2) whether the prior adjudication resulted in a judgment on the merits; (3) whether the party against whom collateral estoppel is asserted was in a party or in privity with a party to the prior adjudication; and (4) whether the party against whom collateral estoppel is asserted had a full and fair opportunity to litigate the issue in the prior proceeding.
Tenorio, 931 P. 2d at 238-239.
166. The core of Amoco’s claim is that, “The same parties, same property and the same issues were previously decided by the Wyoming Supreme Court in Case No. 93-104.” [Petitioner’s Proposed Findings of Fact and Conclusions of Law ¶119]. We conclude the contrary.
167. The principal issue in this case is whether the Department’s selection of a valuation method for production in tax year 2000 “accurately reflects fair market value.” This issue was not and could not have been decided in a previous proceeding. At a minimum, the Board which decided Board Docket No. 93-104 had no jurisdiction to rule on anything related to the matter of production in 2000. Production year 2000 methods and valuations were not identified as issues by the parties to Amoco Production Company, 882 P.2d 866, (Wyo 1994). Nor was any such issue then litigated and decided by the Board as a fact finder. The Board did not purport at the time to determine any questions related to production year 2000. The judgment at that time was not dependent upon determination of the any issues with regard to production year 2000. On this basis alone, we conclude that the doctrine of collateral estoppel does not apply. However, there are many other bases to support this result, based on what has already been discussed so far in our Findings and Conclusions. These include facts, such as the unusual gas prices in 2000. They also include such questions of law as the Department’s authority to select its method of choice for the coming year, Wyo. Stat. Ann. §39-14-203(b)(vi), which directly contradicts an inference that one administrator of a Department can commit a successor to a preferred valuation method.
168. As we did in Whitney Canyon, supra, we believe our conclusion is even clearer when broadly considered in light of the common law policy concern for relitigation. Even if we set aside the central fact that tax year 2000 is the subject of this case, and set aside the obvious limitations on the fact finding that preceded Board Docket No. 93-104, we cannot avoid noticing that Amoco has introduced issues that became involved in the fabric of our decision. We refer, among other things, to the contrasts between C&O Agreement for the Painter Plant and agreements for other facilities, to the significance of Board Docket No. 93-104 for this proceeding, to the application of appraisal theory in the context of Wyo. Stat. Ann. §39-14-203(b)(vi). We have decided the dispute that was brought to us. It is a very different dispute than that presented in Board Docket No. 93-104. As we concluded in Whitney Canyon, supra, we conclude that the concern for relitigation is groundless.
VIII. STARE DECISIS
169. As was advanced in Whitney Canyon, supra, Amoco requests that we apply the doctrine of stare decisis, which it describes as “the doctrine of precedent, under which it is necessary for a court to follow earlier judicial decisions when the same points arise again in litigation,” State v. Campbell County School District, 32 P.3d 325, 344 (Wyo. 2001)(Voight, J., dissenting). This Board accepts this definition, and submits that it has honored the doctrine fully.
170. Finally, we note that the Wyoming Supreme Court has observed that, “we should be willing to depart from precedent when it is necessary ‘to vindicate plain obvious principles of law and remedy continued injustice.” Goodrich v. Stobbe, 908 P.2d 416 (Wyo. 1995), quoting Gueke v. Board of County Commissioners, 728 P.2d 167, 171 (Wyo. 1986). To the extent that we have departed from precedent, we conclude that our departure is amply justified.
IX. RES JUDICATA
171. As was requested in Whitney Canyon, supra, Amoco requests that we apply the doctrine of res judicata to this case. The four criteria used to determine the applicability of res judicata are: (1) the parties were identical; (2) the subject matter was identical; (3) the issues were the same and related to the subject matter; and (4) the capacities of the persons were the identical in reference to the subject matter and the issues between them. Livingston v. Vanderdiet, 861 P.2d 549, 551-552 (Wyo. 1993). The subject matter is the Department’s selection of valuation for production for tax year 2000, and a variety of specific claims regarding application of that method. This factor alone is enough for us to conclude, as we did in Whitney Canyon, supra, the doctrine of res judicata does not apply, although further analysis would show a general failure to meet the criteria for res judicata.
X. JUDICIAL ESTOPPEL
172. The Court in Ottema v. State ex. rel. Worker’s Compensation Division, 968 P. 2d 41, 45 (Wyo. 1998), stated:
Judicial estoppel is a doctrine which precludes a party from asserting inconsistent positions in different judicial proceedings. Under this doctrine, a party who by his pleadings, statements or contentions, under oath, has assumed a particular position in a judicial proceeding is estopped to assume an inconsistent position in a subsequent action.
Stated in somewhat punchier fashion, “The principle is that if you prevail in Suit #1 by representing that A is true, you are stuck with A in all later litigation growing out of the same events.” Eagle Foundation, Inc., v. Dole, 813 F.2d 798, 810 (7th Cir. 1987). Similarly, an older Wyoming case held that where “a man is successful in the position taken in the first proceeding” then that position “rise[s] to the dignity of conclusiveness.” Hatten Realty Co. v. Baylies, 42 Wyo. 69, 290 P 561, 568 (Wyo. 1930), quoted in Matter of Paternity of SDM, 882 P2.d 1217, 1224 (Wyo. 1994). Amoco argues, as was argued in Whitney Canyon, supra, that, some ten years ago, the Department took a different position with respect to the application of the phrase “other parties” than it does now, directing our attention to Amoco Production Company, 882 P.2d 866.
173. In making its argument, Amoco has neglected to account for the principle that, “In general estoppel against inconsistent positions will operate where the position first asserted has been successfully maintained.” 31 C. J. S. Estoppel and Waiver §138c, p. 590. Conversely, “A party is not bound to maintain a position it unsuccessfully maintained.” Matter of Cassidy, 892 F 2d. 637, 641 (7th Cir. 1990). “Estoppel against such a change of position is dependent upon maintaining the success of the original claim.” 74 Am. Jur. 2d Estoppel and Waiver §73, p. 498; see also 74 Am. Jur. 2d Estoppel and Waiver §74. Since the Department did not succeed in employing the method advanced in 1992, we conclude that judicial estoppel does not apply. Having reached this conclusion, we find it unnecessary to discuss other defects in the application of judicial estoppel in this case, or the application of the principle that “the initial position taken must be one regarding fact.” Willowbrook Ranch v. Nugget Exploration, 796 P.2d 769, 771 (Wyo. 1995).
XI. WAIVER
174. Amoco has requested, as it did in Whitney Canyon, supra, that we find the Department has waived the right to introduce documentation of comparables, because the Department did not “introduce any agreements that could support an inferred processing fee,” as contemplated in the Board decisions that were the subject of Amoco Production Company, 882 P.2d 866. The Wyoming Supreme Court has recently stated the principles governing a decision on this waiver theory:
We have defined waiver as an intentional relinquishment of a known right that must be manifested in some unequivocal manner. [citation omitted] “While the necessary intent for waiver may be implied from conduct, the conduct should speak to the intent clearly.” [citations omitted] In addition, we have recognized that the three elements of waiver are: 1) an existing right; 2) knowledge of that right; and 3) an intent to relinquish it....
Jensen v. Fremont Motors Cody, Inc., 2002 WY 173, ¶16, 58 P.3d 322, 327 (Wyo. 2002).
175. As in Whitney Canyon, supra, our analysis begins and ends with the proposition that the Department does not seek, in this case, to support the formulaic approach of 1992, stated in Determinative Formula [Exhibit 146] and referenced in Amoco Production Company. Amoco apparently suggests that the failure of the 1992 approach should be deemed a waiver of any comparable value approach. It rests this theory on conduct, i.e., on the fact that the Department did not attempt to introduce evidence in support of the 1992 approach. In contrast, we have already ruled that the Department is not forever wedded to the 1992 formulaic approach.
176. As we did in Whitney Canyon, supra, we find no waiver, express or implied, of the Department’s right to use the comparable value method as it has done in this case. Further, and in response to a theory of Amoco, we disagree that the facts and circumstances in this case warrant application of waiver as a matter of law. In re Worker’s Compensation Claim of Wright, 983 P.2d 1227, 1231 (Wyo. 1999). At the very least, Amoco’s characterization of the facts in this case is very much in dispute.
XII. PRESUMPTION FAVORING DEPARTMENT
177. As a further and separate ground for our decision, there is presumption favoring the Department’s action:
The Department’s valuations for state-assessed property are presumed valid, accurate, and correct. [citation omitted]. This presumption can only be overcome by credible evidence to the contrary. [citation omitted]. In the absence of evidence to the contrary, we presume that the officials charged with establishing value exercised honest judgment in accordance with the applicable rules, regulations, and other directives that have passed public scrutiny, either through legislative enactment or agency rule-making, or both.
Colorado Interstate Gas Company v. Wyoming Department of Revenue, 20 P.3d 528, 531 (Wyo. 2001). We find and conclude that Amoco has not produced credible evidence to overcome the presumption.
XIII. ADDITIONAL CONCLUSION
178. We conclude that the Painter Plant Gas Processing Agreements attached as Exhibit H, and the Painter Plant Letter Agreement, considered without regard to other comparables, support the decision of the Department. In other words, the Department properly applied the comparable value method based on the information available to it when it issued Notices of Valuation to Amoco.
179. We conclude that the Thief Creek Well Processing Agreement, the agreement between the Painter Plant and the non-unitized Anschutz producers, and the agreement to process gas for E26-08 well, considered without regard to other comparables, support the decision of the Department. In other words, the Department properly applied the comparable value method.
THIS SPACE INTENTIONALLY LEFT BLANK
ORDER
IT IS THEREFORE HEREBY ORDERED: The Department’s selection of the comparable value is affirmed;
The Department’s application of the comparable value method for production year 2000 to Amoco is affirmed, provided that;
This matter is remanded to the Department, which shall amend and adjust its calculation of value and Notices of Valuation for 2000 to reflect actual expenses for 2000 operations.
DATED this 5th day of December, 2003.
STATE BOARD OF EQUALIZATION
_____________________________________
Roberta A. Coates, Chairman
_____________________________________
Alan B. Minier, Vice-Chairman
_____________________________________
Thomas J. Satterfield, Member
ATTEST:
_______________________________
Wendy J. Soto, Executive Secretary