FROM A DECISION BY THE                                )                    Docket No. 2000-97

DEPARTMENT OF REVENUE                         )








Wyoming Resources Corporation, (Petitioner), Jay Brewster, Vice-President.

Department of Revenue, (DOR), Cathleen D. Parker, Assistant Attorney General.



This matter was considered by Edmund J. Schmidt, Roberta A. Coates and Ron Arnold, the State Board of Equalization (SBOE), on written information and argument pursuant to a July 14, 2000, stipulation of the parties as to the facts. The appeal arises from the letter of DOR dated May 22, 2000, refusing Wyoming Resources Corporation stripper classification for 1999 crude oil production.

The issues before the SBOE are:

          Did the DOR, in determining Petitioner's stripper status, properly interpret Wyo. Stat. 39-14-201(a)(xxiv)(A) when it refused to combine the total annual             production from a well field successively operated by Petitioner and another operator in one calendar year and

         Was the DOR's interpretation correct, for purposes of determining stripper status, that during the preceding "calendar year" refers to the year of production             immediately preceding the tax year.



Upon application of any person adversely affected, the SBOE is mandated to review final DOR actions, including actions to certify taxable mineral production and demand taxes, interest and penalties on such mineral production. Wyo. Stat. 39-11-102.1(c). The SBOE shall "[h]old hearings after due notice in the manner and form provided in the Wyoming Administrative Procedure Act [Wyo. Stat. 16-3-101 through 16-3-115] and its own rules and regulations of practice and procedure." Wyo. Stat. 39-11-102.1(c)(viii).

The SBOE is required to "[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. 39-11-102.1(a)(iv). The rules of practice and procedure for appeals before the SBOE involving tax matters contemplate appeals from final administrative decisions of the DOR. Rules, Chapter 2, 3, Wyoming State Board of Equalization. The rules require appeals be filed with the SBOE within thirty days of any final administrative decision. Rules, Chapter 2, 5, Wyoming State Board of Equalization.




On April 1, 1999, the Petitioner purchased a minority working interest in sixteen wells in Pumpkin Butte Field in Campbell County, Wyoming. The previous owner, Wellstar Corporation, reported to the DOR a total sales value of $10,507 for 995 barrels for the period of January through March, 1999. The Petitioner sold 3258 barrels for a total sales value of $65,739 for the period of April through December, 1999. If all the sold barrels for both owners are combined, the average price per barrel is $17.93. The average price per barrel for just Petitioner's production is $20.18. In order to qualify for stripper status, a producer must receive less than twenty dollars per barrel as set forth in Wyo. Stat. 39-14-201(a)(xxiv). If a producer qualifies for stripper production, the production is exempt from those severance taxes in Wyo. Stat. 39-14- 204(a)(iii) pursuant to Wyo. Stat. 39-14-205(a). The DOR decided that each operator's production must stand alone and denied stripper status to the Petitioner. On appeal, the Petitioner sets forth two arguments. First, Petitioner argues that the production in 1998 qualified the field for stripper status and it was error for the DOR to use 1999 production for such determination. Second, Petitioner argues that the legislative intent is to use the entire year's production from a well to determine the total production for stripper status regardless of successive ownership of that well.




1. Wyoming Resources Corporation (WRC) is a South Dakota Corporation authorized and in good standing to do business in Wyoming. [Stipulation of facts.]


2. On April 1, 1999, WRC purchased a minority working interest and assumed operatorship of sixteen (16) wells in the Pumpkin Butte Field of Campbell County. [Stipulation of facts.]


3. The original operator, Wellstar Corporation, reported for 1999 production for January through March a total sales value of $10,507 for 995 barrels. [Stipulation of facts.]


4. WRC reported for 1999 production for April through December a total sales value of $65,739 for 3258 barrels. [Stipulation of facts.]


5. The average price calculation per barrel for all barrels produced by both WRC and Wellstar Corporation is $17.93. [Stipulation of facts.]


6. The average price calculation per barrel for the barrels produced only by WRC is $20.18. [Stipulation of facts.]


7. The DOR, by letter dated May 22, 2000, decided that WRC could not use the production of Wellstar Corporation to reduce the average price per barrel in order to qualify for stripper status. [Stipulation of facts.]


8. The DOR, by letter dated May 22, 2000, also decided that the 1998 production could not be used by WRC for stripper status. [Stipulation of facts.]


9. WRC appealed the DOR determinations to the SBOE on June 2, 2000.


10. Both parties have stipulated to all facts and have agreed the SBOE should decide this case on their briefs without a contested case hearing. [Stipulation of facts; Joint Motion for Reconsideration of Hearing Order.]




11. Petitioner's notice of appeal was timely and the SBOE has jurisdiction to decide this matter.


12. The Petitioner has the burden of going forward and the ultimate burden of persuasion. See: Rules, Chapter 2, 19, Wyoming State Board of Equalization, which provide:


Except as specifically provided by law or in this section, 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 DOR determination is incorrect, the burden shifts to the DOR to defend its actions.


13. The obvious intent of the legislature in creating the stripper well exemption is to encourage continued production from marginally economic oil wells which might otherwise be plugged and abandoned by oil operators. On the other hand, the $20 per barrel provision is designed to remove the tax break when oil prices increase sufficiently to ensure continued, economic operation of the wells.


14. Petitioner's first argument is that the language in Wyo. Stat. 39-14-201 (a)(xxiv)(B), authorizing stripper status if production for the preceding calendar year was 15 barrels per day and less than $20.00 per barrel, refers to the production in the year preceding the year of production being taxed. On the other hand, the DOR interprets the phrase in the statute "during the preceding calendar year" to mean the year of production subject to the immediate tax.


15. The SBOE holds that DOR correctly determined that the phrase "during the preceding calendar year" refers to the year of production subject to the immediate tax.


16. The DOR correctly interpreted the phrase in question because Chapter 6, Section 5(a)(ii) Department of Revenue Rules(October 4, 1995) reads as follows:


The severance tax is an excise tax imposed on the present and continuing privilege of removing, extracting, severing or producing any mineral in this state, and the incidence of the severance tax is upon all interest owners in proportion to their ownership shares, unless otherwise exempt by law. Severance taxes are determined from the gross proceeds in the current calendar year. (Emphasis provided.)


SBOE notes that the way in which an operator files for the stripper exemption is by filling out Part C "Claim for Stripper Rate" on the gross products return (Form 4101) which is required to be filed with the DOR "annually, on or before February 25 of the year following the year of production." Wyo. Stat. 39-14-207(a)(i). Therefore the "preceding calendar year" clearly refers to the year preceding the year in which the operator files his tax return requesting the stripper status.


17. The number of barrels of oil produced and the value received for those barrels in production year 1999 by Petitioner were set forth on its annual gross products return filed on February 22, 2000. [Exhibit I to Petitioner's brief dated September 12, 2000.] Since the DOR rules require that severance taxes be calculated on the volumes produced and values received in the year they are severed (current calendar year), then it is only logical that any tax exemption applied for on that oil production would also be calculated on the same calendar year in which the oil was produced.

18. Petitioner next argues that the stripper status must be determined by what the well produces and not by what each operator produces within a calendar year from that well.


19. The DOR counters Petitioner's argument with the language of Wyo. Stat. 39-14-201 (a)(xxiv)(B) which uses the word producer in the singular. The DOR argues that because producer is singular and not plural, the legislative intent was to limit the stripper status to each producer operating the well.


20. The DOR's argument is not persuasive because the "Rules of Construction for Statutes," Wyo. Stat. 8-1-103 (a)(v), clearly dictates that words used in their plural form include the singular and words used in the singular form include the plural.


21. However, SBOE believes the Petitioner's argument likewise lacks merit. We again point to the annual gross products form where each Operator must file for the stripper exemption. [Petitioner's Exhibit I to its September 12, 2000 brief]. The operator must indicate the number of producing wells on the property and the number of down days that were due to mechanical failure or disruption. Those down days are then subtracted from the total number of days in the period reported. The number of days the well is produced at a maximum feasible rate for the period is then multiplied by 15 barrels. This produces the total number of barrels that can be produced on the property for that reported period. If the actual number of barrels produced are less than the maximum total barrels allowable, then the operator's well will qualify for the stripper exemption. This is subject to one further qualification, that being, did the average value received for those barrels exceed $20 per barrel? Wellstar, the prior operator of the property from January through March of 1999, and the Petitioner, who produced the well for the remainder of the year, are individually entitled to apply for the stripper exemption for the period they operated the well. The DOR's interpretation would allow both operators, only one operator, or neither operator to qualify for stripper status depending upon whether each operator's production met the stripper qualifications. If one party elects to rework the well, thus increasing the production significantly, they most likely will not qualify for the stripper exemption. A significant increase in oil prices during the year might also result in an operator no longer qualifying for the exemption. In either case, the intent of the legislature is honored and no subsequent operator can benefit from or lose the stripper status by the actions of another operator.

22. Wyo. Stat. 39-14-203 imposes the severance tax liability upon the operator because the tax is levied upon the "privilege of severing or extracting crude oil, lease condensate or natural gas in the state." [Emphasis added.] It is not the well or real property which is being taxed. Consequently, it is illogical to extend the severance tax exemption to the total production from one well or field being operated by successive operators in any one calendar year when each operator is individually liable notwithstanding what amount of production other operators generate. The severance tax is on the privilege of severing as exercised by each operator and consequently it would be improper to combine multiple privileges of successive owners in order to reduce the tax obligation of each individual operator.


23. Because the stripper status benefits the individual operator by exempting him from certain severance taxes, and the tax is imposed upon the party severing the minerals, we find the interpretation by the DOR more closely approximates the legislative intent thanthe interpretation proposed by the Petitioner.


24. The Petitioner has failed in meeting its ultimate burden of persuasion.





A. The interpretation by the DOR of Wyo. Stat. 39-14-201 (a)(xxiv)(B) is AFFIRMED.


          Pursuant to Wyo. Stat. 16-3-114 and Rule 12, Wyoming Rules of Appellate Procedure, any person aggrieved or adversely affected in fact by this decision may seek judicial review in the appropriate district court by filing a petition of review within thirty (30) days of the date of this decision.


DATED this 22nd day of November, 2000.




Edmund J. Schmidt, Chairman


Roberta A. Coates, Vice-Chairman


Ron Arnold, Member



Wendy J. Soto, Executive Secretary