BEFORE THE STATE BOARD OF EQUALIZATION

FOR THE STATE OF WYOMING

IN THE MATTER OF THE APPEAL OF                       )

BP AMERICA PRODUCTION COMPANY,        )

ANDARKO E&P COMPANY LP AND                     )

CHEVRON USA, INC. FROM A CHANGE OF         )         Docket No. 2003-100

VALUATION METHOD DECISION BY THE             )

MINERALS DIVISION OF THE                                   )

DEPARTMENT OF REVENUE                                    )

(Whitney Canyon)                                                          )

___________________________________________________________________________________________________________________________

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

___________________________________________________________________________________________________________________________

APPEARANCES

Robert A. Sweich and Nicole Crighton, of Oreck, Bradley, Crighton, Adams & Chase, for Petitioner, BP America Production Company (BP).

Lawrence J. Wolfe, of Holland and Hart, for Petitioner, Andarko E&P Production Company LP (Andarko).

William J. Thomson II and Randall B. Reed, of Dray, Thomson & Dykeman, P.C., for Petitioner, Chevron U.S.A., Inc. (Chevron).

Karl D. Anderson and Martin L. Hardscog, of the Wyoming Attorney General’s Office, for the Department of Revenue (Department).

JURISDICTION

On September 1, 2002, the Department notified BP, Andarko, and Chevron (“Petitioners” or “taxpayers”) that it had selected the comparable value method to determine the value of Petitioners’ natural gas production to be processed through the Whitney Canyon gas processing plant during production years 2003, 2004, and 2005. All three taxpayers filed timely appeals pursuant to Wyo. Stat. Ann. §39-14-203(b)(viii), which authorizes the State Board of Equalization (Board) to review the Department’s selection.

The matter came on for hearing March 7-8, 2005, by the Board consisting of Chairman Alan B. Minier, Vice Chairman Thomas R. Satterfield, and Board Member Thomas D. Roberts.

STATEMENT OF THE CASE

Petitioners are three of four owners of the Whitney Canyon natural gas processing plant. All three produce natural gas which is processed at the plant. On September 1, 2002, the Department notified Petitioners that it had selected the comparable value method to determine the value of Petitioners’ Whitney Canyon production for production years 2003, 2004, and 2005. Petitioners appealed the selection of method under a statute which authorizes the Board to change the method if the Department’s selected method does not accurately reflect the fair market value of Petitioners’ natural gas. In this proceeding, Petitioners relied heavily on claims and arguments they had previously advanced in appeals concerning application of the comparable value method to Petitioners’ natural gas, appeals which were brought under a different statute. The Board has concluded that the scope of its enquiry regarding the Department’s selection of method is narrower than Petitioners have assumed, and finds that Petitioners did not carry their burdens of proof and persuasion.

CONTENTIONS AND ISSUES

The Taxpayers contend that the comparable value method selected by the Department does not accurately reflect the fair market value of their respective gas production streams for the following reasons:

1. There are no comparable values or comparables for the property subject to this appeal.

2. Any alleged comparables of which Taxpayers are aware or have been made aware are not of like quantity or quality as required by the statutorily defined method.

3. Any alleged comparables of which Taxpayers are aware or have been made aware do not reflect the same quality, terms, and conditions of processing, transportation and sale as the gas production stream for which this appeal was filed.

4. It is impossible to determine whether the comparable value method of valuation accurately reflects fair market value because the method as defined in W. S. § 39-14-203(b)(vi)(B) is too vague to be applied consistently with constitutional due process standards.

5. The Wyoming Supreme Court suggested the use of the comparable value method without definitional rulemaking would be arbitrary and capricious. Amoco Production Co. v. State Board of Equalization, 882 P.2d 866, 871 (Wyo. 1994). No such rulemaking has been accomplished or even attempted.

6. Application of the comparable value method does not meet constitutional due process standards, is vague and arbitrary, and does not lead to fair market value.

7. Taxpayers contend that the Department is allowing other producer/processors processing gas at other plants in Wyoming to utilize the proportionate profits methodology even though any alleged comparables suggested and offered by the Department for Taxpayers can just as easily be applied to those plants in the same arbitrary manner. There is no equality or uniformity in the application of the law by the Department and the action discriminates against Taxpayers.

8. The Department has failed to make proper adjustments in its asserted and alleged comparables as required by accepted appraisal practices. The comparable value methodology requires the subject property to be adjusted for various differences from the base property to determine a true comparable. There is no true comparable without such adjustments.

9. This issue was previously decided by the Wyoming Supreme Court in Amoco Production Co. v. State Board of Equalization, 882 P.2d 866, 871 (Wyo. 1994) and the Department is collaterally estopped from rearguing this issue. Further, the doctrines of judicial estoppel, res judicata and waiver prevent the Department from raising the comparable value method here.

10. Taxpayers are uncertain as to the extent the Department will allow them to fully participate in the development and use of the acceptable comparables, potentially violating Taxpayers’ substantive and procedural due process rights.

11. Looking solely to agreements within the subject plant itself does not establish a valid comparable basis as contemplated by recognized appraisal practices. Looking loosely to agreements entered into for incremental loading of plant capacity have no direct relevance to overall total production volumes through the plant on a stand-alone basis.

12. The Department accepted the use of the proportionate profits methodology on the subject property from 1990 through 1999, and the use of proportionate profits has not been disallowed on audit.

13. Suggested alleged comparables identified by the Department fail to establish the fair market value of the gas production stream from the subject properties.

14. The Department’s selective action against the Taxpayers violates the provisions of the Wyoming Constitution and Statutes which require uniform and equal taxation. The Department’s decision discriminates against large integrated producers who process their own production. In addition, the decision may tax differently producers who are similarly situated and who under an equitable and uniform decision should be taxed in the same manner.

15. Taxpayers must be allowed to use the proportionate profits method for this plant and field.

[Petitioners’ Joint Updated Summary of Contentions].

The Department contends that:

1. The Department’s objective in valuing minerals for taxation purposes is to determine the “fair cash market value” of the mineral. Pursuant to Wyoming Constitution, Art. 15, §11, all property subject to taxation is to be “uniformly valued at its full value as defined by the legislature.”

2. Wyo. Stat. § 39-14-203(b)(vi) directs the Department to identify the valuation method it intends to apply to determine the taxpayer’s fair market value of its crude oil, lease condensate or natural gas production.

3. The proportionate profits method, using the direct cost ratio which the taxpayers have used in the past (excluding production taxes and royalties), does not render the full value of the produced minerals. The deletion of production taxes and royalties from the direct cost ratio results in a taxable value which, when compared to the netback method, actual costs, or any other valuation method, is grossly understated.

4. The Department’s rejection of the proportionate profits method, and selection of the comparable value method of valuation, was reasonable, appropriate and consistent with Wyoming law.

5. The Department had full statutory authority in 2002 to select the comparable value method for reporting Petitioners’ taxable value of their Whitney Canyon production for the future 2003, 2004 and 2005 production years.

6. The State Board affirmed the Department’s selection of the comparable value method for the 2000 production year for Whitney Canyon production.

7. The State Board affirmed the Department’s selection and use of the comparable value method for the 2001 production year for Whitney Canyon production.

[Department’s Updated Summary of Contentions].

Petitioners identified six contested issues of fact:

1. Has the Wyoming Department of Revenue (“Department”) applied the comparable value method uniformly and equally to all similarly situated taxpayers?

2. Are there comparable values that the Department and the taxpayer agree can be used to establish fair market value for the production from this field and the plant?

3. Do any comparables exist?

4. What data has the Department developed to determine a typical processing fee or a processing fee that is statistically valid?

5. What extrinsic evidence has the Department considered to arrive at its conclusion that use of the proportionate profits method by Taxpayers does not generate fair market value?

6. Is there any method authorized by statute other than the proportionate profits method, which can legally determine fair market value?

[Petitioners’ Joint Issues of Fact and Law and Exhibit Index].

The Department identified a single issue of fact:

Did the Department correctly and properly select the “Comparable Value” method, as set forth in Wyo. Stat. § 39-14-203(b)(vi)(B), to value Petitioners’ 2003, 2004 and 2005 Whitney Canyon mineral production?

[Department’s Issues of Fact and Law and Exhibit Index].

Petitioners identified seven contested issues of law:

1. Is the comparable value method too vague to be applied consistently with constitutional due process standards?

2. Was the Department’s application of the comparable value method arbitrary and capricious in light of the Wyoming Supreme Court’s suggestion that use of the comparable value method without definitional rulemaking would be arbitrary and capricious? Amoco Production Co. 882 P.2d at 871.

3. Is the proportionate profits method the only statutorily authorized method that can determine fair market value?

4. Did the proportionate profits method used by Taxpayers constitute fair market value?

5. Has the Department violated the requirement of equal and uniform taxation by treating similarly situated taxpayers differently in the audit and valuation process?

6. Does the statutory language not allowing the use of the netback method deny Taxpayers equality and uniformity of taxation, and is it constitutional?

7. Whether the doctrines of collateral estoppel, judicial estoppel, res judicata, or waiver prevent the Department from requiring the Taxpayers to use the comparable value method here.

[Petitioners’ Joint Issues of Fact and Law and Exhibit Index].

The Department identified a single contested issue of law:

Did the Department have the authority under Wyo. Stat. § 39-14-203(b)(vi)(B) to select the “Comparable Value” method, as set forth in Wyo. Stat. § 39-14-203(b)(vi)(B), to value Petitioners’ 2003, 2004 and 2005 Whitney Canyon production?

[Department’s Issues of Fact and Law and Exhibit Index].

We will address a single issue of fact:

Did the comparable value method selected by the Department on September 1, 2002, fail to accurately reflect the fair market value of Petitioners’ production within the meaning of Wyo. Stat. Ann. § 39-14-203(b)(viii)?

No.

We will address three issues of law:

Must the Board distinguish between adjudication of an appeal of the Department’s selection of a valuation method authorized by Wyo. Stat. Ann. § 39-14-203(b)(vi), and an adjudication of an appeal of the Department’s application of that method authorized by Wyo. Stat. Ann. § 39-14-209(b)?

Yes.

Should the Board evaluate the Department’s selection of method by evidence available to the parties at the time the appeal was filed?

Yes.

Did the valuation technique selected by the Department fail to accurately reflect the fair market value of Petitioners’ natural gas?

No.

FINDINGS OF FACT

Did the comparable value method selected by the Department on September 1, 2002, fail to accurately reflect the fair market value of Petitioners’ production within the meaning of Wyo. Stat. Ann. § 39-14-203(b)(viii)?

1.        The Whitney Canyon plant processes sour gas, i.e., natural gas with relatively high concentrations of hydrogen sulfide and carbon dioxide. [Trans. Vol. I, pp. 74, 78]. The plant went into operation in November, 1983. [Stipulated Miller Testimony, p. 5]. At all pertinent times, BP America Production Company, Anadarko Petroleum Company, ChevronTexaco, Inc., and Forest Oil Corporation were the owners of the Whitney Canyon plant. [Stipulated Miller Testimony, p. 6; see Exhibit 120].

2.        The Whitney Canyon plant commingled the gas of all producers during processing. [Trans. Vol. I, p. 89]. The products of commingled gas were sold from the tailgate of the plant. [Stipulated Miller Testimony, p. 6].

3.        The Department must annually determine the value of each taxpayer’s natural gas production, in accordance with statutes and procedures unique to oil and gas. Natural gas not sold prior to processing, as is the case with all gas processed by the Whitney Canyon plant, must be valued using one of four methods defined by statute: comparable sales, comparable value, netback, or proportionate profits. Wyo. Stat. Ann. § 39-14-203(b)(vi). The statute requires the Department to select a method at three-year intervals, in the year before the method is first applied. [Trans. Vol. I, pp. 102-103]. Wyo. Stat. Ann. § 39-14-203(b)(viii). The Department must notify taxpayers of the chosen method by September 1 of the year preceding when the method is to be employed. [Trans. Vol. I, p. 102]. Wyo. Stat. Ann. § 39-14-203(b)(vi). If the Department does not provide taxpayers with timely notice of its preferred method, the taxpayer may select a method and inform the Department of its choice. [Trans. Vol. II, p. 209]. Wyo. Stat. Ann. § 39-14-203(b)(ix).

4.        At each three-year interval since the inception of the statute in 1990, the Department has selected the comparable value method. [Trans. Vol. I, p. 170]. Each time, the Department has notified all oil and gas taxpayers of this selection. [Exhibits 100 (1999), 134 (1990), 136 (1993), 144 (1996), 170 (2002)].

5.        Randy Bolles became Administrator of the Mineral Tax Division of the Department of Revenue in May 1998. [Trans. Vol. I, p. 99].

6.        Bolles testified that the Department did not know how many oil and gas taxpayers actually reported using the comparable value method. [Trans. Vol. I, p. 108]. This was a byproduct of Wyoming’s self-reporting system. [Trans. Vol. I, p. 109]. Each taxpayer was responsible for reporting and paying under the specified method, or securing the permission of the Department to use an alternative method. [Trans. Vol. I, pp. 31-32, 206-207]. In the absence of some notice from the taxpayer about use of an alternative method, the Department could not know that an alternative method had been used until the taxpayer was audited. [Trans. Vol. I, p. 115, Vol. II, p. 208].

7.        In view of the auditing resources available to the state, a small taxpayer might use an alternative method, never be audited, and its use of an unauthorized method might never be discovered. [Trans. Vol. II, p. 209]. In contrast, large taxpayers like Petitioners would certainly be audited, and their use of an unauthorized method discovered. [Trans. Vol. I, p. 210].

8.        The limits on the Department’s ability to monitor the method actually used to report and pay taxes did not necessarily imply inconsistent valuation results. In the vast majority of situations, if both the statutory netback and comparable value methods could be applied to a taxpayer’s natural gas production, the two methods reached the same result. [Trans. Vol. I, p. 68]. The Department viewed its choice of method principally as a measure to address situations in which the processing deduction, and hence the valuation, might be in question. [Trans. Vol. I, p. 70]. The Department did not see any such questions when (1) the gas was sold at the wellhead or (2) there were arms-length processing or transportation contracts to support the processing and/or transportation deduction. [Trans. Vol. I, p. 70].

9.        The statute specifically contemplates use of an alternative method where the taxpayer and Department agree to do so. Wyo. Stat. Ann. § 39-14-203(b)(viii). The Department authorized some taxpayers to report using a method other than the one specified. For production years 1990 through 1999, the Department authorized all three Petitioners to report and pay taxes on their Whitney Canyon production using the proportionate profits method. [Trans. Vol. I, pp. 150-151; Exhibits 140, 142, 143, 146]. The Department authorized use of the proportionate profits method based in part upon Petitioners’ attestations that the comparable value method could not be applied to their Whitney Canyon production. [E.g., Exhibit 146].

10.      In addition to proportionate profits reporting authorized by the Department for production years 1990 through 1999, Chevron consistently reported a portion of its Whitney Canyon production using the netback method. [Trans. Vol. I, p. 69]. The processing deduction Chevron claimed under the netback method was precisely the same as if Chevron had reported using the comparable value method. [Trans. Vol. II, p. 244].

11.      In his capacity as Administrator of the Mineral Tax Division, Bolles believed the Department was responsible for selecting a method that returned fair market value. [Trans. Vol. I, pp. 104, 170]. The Department viewed a netback approach to value as the best benchmark for how well a valuation method returned fair market value. [Trans. Vol. I, pp. 68-69].

12.      For processed natural gas, netback in the Department’s benchmark sense of the word means the deduction of processing and transportation fees from the value of a sale made after processing, in order to reach a taxable value at the statutory point of valuation, prior to any processing. [Trans. Vol. I, p. 41]. The Department acknowledges that there are substantial differences of opinion about an important component of a netback calculation, the return on investment. [Trans. Vol. I, pp. 167-168].

13.      Netback in the Department’s benchmark sense also differs from the statutory netback method. Wyo. Stat. Ann. § 39-14-203(b)(vi)(C). In September 2002 the Department did not believe it could apply the statutory netback method to most Whitney Canyon production because it viewed the Petitioners as producer-processors. [Trans. Vol. I, p. 168]. (For further background on Chevron’s recent use of the statutory netback method for a portion of its Whitney Canyon production, see Chevron U.S.A., Inc. et al, Docket No. 2002-54, January 25, 2005, 2005 WL 221595 (Wyo. St. Bd. Eq.)(hereafter Whitney Canyon 2001), ¶¶ 30-33, 41, 44, 71, 91, 201-203, 306-309. The details of this history were not fully developed in this proceeding.)

14.      Using the netback benchmark, the Department observed that when prices were high, processing deductions for Whitney Canyon production under the proportionate profits method were far greater than actual costs of processing. [Trans. Vol. I, pp. 162, 164]. For production year 2000 and after, the Department did not expect the proportionate profits method – particularly as interpreted by Petitioners – to return fair market value in the coming triennium. [Trans. Vol. I, pp. 165-166]. In previous cases involving the application of the comparable value method, we found a continuing disagreement between the Department and the Petitioners over the correct interpretation of the statute providing for the proportionate profits method. Whitney Canyon 2001, ¶¶ 29, 276, 338; BP America Production Company et al, Docket No. 2003-63 et al, April 20, 2005, 2005 WL 959688, (Wyo. St. Bd. Eq.)(hereafter Whitney Canyon 2002), ¶¶ 31, 245, 309.

15.      After Bolles became Administrator in 1998, the Department began to reconsider Petitioners’ attestations that no comparable values existed. [Trans. Vol. I, pp. 151-153].

16.      On behalf of the Department, Bolles issued his first triennial notice of the Department’s selection of method on August 31, 1999. [Exhibit 100]. In keeping with its new approach to scrutiny of attestations, the Department refused requests from Petitioners’ corporate predecessors to use the proportionate profits method instead of the comparable value method. [Exhibits 101-116]. The core of the Department’s comparable value position was that there were four contracts providing for a processing fee, payable in kind to the owners of the Whitney Canyon plant, which did not exceed 25% for any producer of natural gas, and which were proper sources of comparable value. [Exhibits 121, 127, 130, 132, 166].

17.      Petitioners appealed the Department’s decisions regarding both the method selected and the application of that method to determine the value of Whitney Canyon production for production year 2000. Union Pacific Resources Company et al, Docket No. 2000-147 et al., June 9, 2003, 2003 WL 21774603 (Wyo. St. Bd. Eq.)(hereafter Whitney Canyon 2000), ¶¶ 105-113. Petitioners subsequently appealed the Department’s application of the comparable value method to determine taxable value for production years 2001 and 2002. Whitney Canyon 2001, ¶¶ 299-302; Whitney Canyon 2002, ¶¶ 270-271. (All three Whitney Canyon opinions are available at the Board’s web site, http://taxappeals.state.wy.us, under the link to Recent Board Opinions.)

18.      On September 1, 2002, Bolles issued the triennial notice of selection of method which is the subject of this case. [Exhibit 170]. By then, the Department had fully developed the principal features of its position regarding Whitney Canyon production. From its review of Exhibit F to the Whitney Canyon Construction and Operating Agreement [Exhibit 120], the Wahsatch Gathering System Agreement [Exhibit 127], a 1995 Chevron Agreement [Exhibit 130], a Merit Energy Agreement [Exhibit 132], and a Mutual Back-up Agreement with Chevron’s Carter Creek plant [Exhibit 131], the Department had concluded that the Whitney Canyon plant processing fee was always an in-kind fee of exactly 25% or less. [Trans. Vol. I, pp. 180-182, Vol. II, pp. 191-192]. The Department concluded that the contracts met all of the specific statutory requirements for applying the comparable value method. [Trans. Vol. I, pp. 129-135, 141].

19.      When the September 1, 2002, letter was sent to 600 to 800 oil and gas taxpayers [Trans. Vol. I, 108], the Department was still engaged in the hearing of Whitney Canyon 2000 before this Board. [Trans. Vol. I, p. 125]. Prior to the hearing, the Department had actively developed its base of information regarding Whitney Canyon processing fees through litigation discovery, and had analyzed alternative valuation scenarios. [Trans. Vol. I, pp. 173-176]. In the three years following the selection of method on August 31, 1999, the Department had also continued to solicit information from the taxpayers. [Trans. Vol. I, pp. 173-173; Exhibits 115, 116, 117, 118, 119]. The Department learned nothing between 1999 and 2002 that led it to determine that the comparable value method was inappropriate for Whitney Canyon production, or to select a method other than comparable value going forward. [Trans. Vol. I, p. 176].

20.      By the time of the hearing in Whitney Canyon 2000, the Department was firmly entrenched in its disenchantment with the proportionate profits method as interpreted by Petitioners. First, the Department found the proportionate profits method difficult to administer. Different taxpayers commonly classified the same costs in different ways (classification of costs is an essential feature of the method, Wyo. Stat. Ann. § 39-14-302(b)(vi)(D)). [Trans. Vol. I, p. 163]. All proportionate profits method valuations had been appealed, creating an administrative burden on the Department. [Trans. Vol. I, p. 163].

21.      Second, the Department concluded Petitioners’ proportionate profits method created processing allowances which were far greater than actual costs of processing. Supra, ¶ 14. The Department had concluded that the proportionate profits method would return fair market value only under a limited range of circumstances and values which the Department did not expect to be present in the forthcoming triennium. [Trans. Vol. I, pp. 165-166]. In contrast, when the Department selected the comparable value method in September 2002, it believed the comparable value method was more likely to return fair market value than the proportionate profits method. [Trans. Vol. I, pp. 170-171].

22.      BP responded to the Department’s September 1, 2002, notice with a letter dated October 30, 2002. [Exhibit 171]. BP stated it would continue to “use the proportionate profits method” for several producing properties, including all Mineral Groups associated with Whitney Canyon. [Exhibit 171]. It explained its position with these words:

The State Board of Equalization has recently heard the consolidated cases of [BP, Andarko, and Chevron] concerning the Department’s selection of the comparable value method letter of August 31, 1999 for production years 2000 through 2002. As argued by the taxpayers in those cases, the Department has not established policies and definitions that allow consistent and predictable application of the “Comparable Value” methodology to assure uniform and equal taxation to all similarly-situated taxpayers. Instead, the Department has expressed varying understandings or interpretations of the Comparable Value method. BP still does not know what the Department means when it directs a taxpayer to use the “Comparable Value” method.

Until or unless the Department promulgates definitions and guidelines that allow for the predictable and consistent application of the “Comparable Value” methodology, in a manner that assures equal and uniform taxation of all producers, and in a manner that is binding until changed through official procedures, BP does not believe the “Comparable Value” method can be used to determine fair market value.

[Exhibit 171]. BP went on to state that, “[u]ntil the parties obtain final and non-appealable decisions in the comparable value cases, neither party can be sure that its position is correct.” [Exhibit 171]. BP invoked a policy memorandum of November, 1995, to attest that there were no comparables for any of its Whitney Canyon properties. [Exhibit 171].

23.      Chevron also sent a letter to the Department on October 30, 2002, expressing the same intention to continue use of the proportionate profits method. [Exhibit 172]. Chevron’s letter contained two paragraphs of explanation identical to those in BP’s letter. [Exhibit 172]. Chevron likewise referred to the necessity for “final and non-appealable decisions,” and invoked “the November 30, 1995 policy statement” to attest that there were no comparables for any of its properties. [Exhibit 172].

24.      Andarko did not send a letter to the Department.

25.      The Department did not respond to the BP and Chevron letters in any manner. [Trans. Vol. I, pp. 112-113]. Bolles had concluded from the letters that the taxpayers “were going to continue down the same path” until the dispute was “completely and fully decided by the judicial system.” [Trans. Vol. I, pp. 176-177]. His conclusion is supported by the Petitioners’ letters. [Exhibits 171, 172]. In addition, we find nothing in the Department’s notification of September 2, 2002, that committed the Department to reply to Petitioners’ letters. [Exhibit 170; Trans. Vol. I, p. 58].

26.      The statute contemplates that mutual agreement with the Department is the first recourse for a taxpayer who prefers an alternative to the Department’s selected valuation method. Wyo. Stat. Ann. § 39-14-203(b)(viii), first sentence. By the time BP and Chevron sent their letters of October 30, 2002, mutual agreement on an alternative method was already only a remote possibility. There is an independent indication that the Department and the Petitioners had little common ground to discuss in September and October of 2002. At the time, the Petitioners were not attempting to justify use of the proportionate profits method by any reference to value; in their view, the Department was obliged to use the proportionate profits method by default. Whitney Canyon 2000, ¶¶ 1, 71-72, 150.

27.      The Department allowed some natural gas producers to report and pay taxes on processed natural gas using the proportionate profits method in production year 2000 and after. [Trans. Vol. II, pp. 146-147]. The Department made its initial decision to allow use of the proportionate profits methods for production from other plants based on a review of available contracts, and has sought supplemental information from time to time. [Trans. Vol. I, pp. 157-160; Exhibits 305, 306, 308, 309; Trans. Vol. II, pp. 220-221]. The Department did not view the production of these other producers as meeting the statutory criteria for application of the comparable value method, as did Petitioners’ production. [ Trans. Vol. I, pp. 149, 201-205, 214]. While the Department has not found valid comparables for the production of these other producers authorized to use the proportionate profits method, its position is subject to change if new facts support a different finding. [Trans. Vol. I, p. 203].

28.      Petitioners filed a timely joint appeal of the Department’s selection of method on August 28, 2003. [Case Notice for Review/Notice of Appeal for Change of Methods]. Their Case Notice stated thirteen grounds for appeal. Petitioners’ principal contentions were restated into fifteen points in a Preliminary Statement filed October 9, 2003. [Petitioners’ Preliminary Statement].

29.      Petitioners’ annual gross products reports for production year 2003 were filed about eight months after the notice of appeal of the selection of method, on or about April 25, 2004. [Trans. Vol. I, p. 125]. No party introduced either of these reports, or the Department’s subsequent Notices of Valuation for production year 2003, into evidence. [See Taxpayers’ Proposed Findings of Fact and Conclusions of Law, ¶ 4].

30.      In presenting their case, Petitioners have assumed that evidence related to the application of the comparable value method to determine taxable value annually is equally applicable to the selection of the comparable value method. [See Taxpayers’ Proposed Findings of Fact and Conclusions of Law, ¶ 4]. Petitioners have not directly addressed the standards and/or limitations of appeals authorized by Wyo. Stat. Ann. § 39-14-203(b)(viii).

31.      The Board has concluded that appeals of selection of a method and of annual application of that method to determine taxable value do, and should, present different issues. Infra, ¶¶ 92-94. The Board has also concluded that there is and ought to be a limited focus on the evidence it considers when adjudicating appeals authorized by Wyo. Stat. Ann. § 39-14-203(b)(viii). Infra, ¶¶ 95-111.

32.      The conclusions we have reached regarding the adjudication of appeals authorized by Wyo. Stat. Ann. § 39-14-203(b)(viii) present a problem for our discussion of the facts of the case. In Whitney Canyon 2000, we considered evidence related to both selection and application of the comparable value method, since both appeals were heard in the same proceeding. Some of the evidence offered by Petitioners in this case, such as evidence of the Department’s reasons for selecting the comparable value method on September 1, 2002, is clearly pertinent to an appeal of the selection of method. Other evidence, such as most of the testimony offered to show that the method was improperly applied, is not pertinent to an appeal of the selection of method.

33.      If we completely ignored evidence in this record related to application of the comparable value method, we believe both a reviewing court and the parties would find it difficult to understand our decision. We will therefore illustrate the distinction between selection and application of the comparable value method in the context of (1) the BP and Chevron letters of October 30, 2002; (2) witnesses Neil Bidwell, Rebecca Leo, and Clyde Miller; and (3) the Petitioners’ issues of fact.

34.      To clarify the distinction between selection and application of the comparable value method, we will provide references to previous opinions in which we have addressed the same or a very similar contention of fact. Our references to these previous opinions can not and do not predetermine future rulings concerning application of the comparable value method to Whitney Canyon production for production years 2003, 2004, and 2005.

35.      Rulings on future individual production years could conceivably be affected by factors including, but not limited to, revenues; modified terms of and/or termination of one or more Whitney Canyon processing agreements; and/or whether the Wyoming Supreme Court concludes that production taxes and royalties are a direct cost of producing within the meaning of Wyo. Stat. Ann. § 39-14-203(b)(vi)(D)(I). See infra, ¶106.

The letters of October 30, 2002

36.      Neither BP nor Chevron called the author of its letter of October 30, 2002, to testify, and none of the Petitioners called a tax representative to testify. [Trans. Vol. I, p. 15]. From other testimony and documents in the record, we nonetheless are in a position to understand the issues to which the letters referred.

37.      BP’s reference in Exhibit 171 to “varying understandings or interpretations of the Comparable Value method” does not pertain to the position taken by the Department from 1999 forward, a position which the Department plainly expressed in correspondence with Petitioners. [E.g., Exhibits 115, 116]. BP refers instead to an earlier interpretation by the Department known as the “determinative formula for calculation of comparable value,” dated July 9, 1992. [Exhibit 135]. The Department prepared the determinative formula in response to an order of this Board in a case decided during that period. As Bolles explained on the record in this case, the determinative formula was unworkable because it relied on confidential information which could not be disclosed to the taxpayers. [Trans. Vol. I, pp. 142-146]. The confidentiality constraint did not bar application of the comparable value method in this case because all three Petitioners, as plant owners, had access to the pertinent contracts. [Trans. Vol. I, p. 144].

38.      In the end, the determinative formula approach was disallowed by this Board and never used, nor were any of the other conceptual approaches that were considered during that period of the Department’s administration. [Trans. Vol. II, p. 228]. For example, the Department conceded that it did not, in connection with the notice issued in September 2002, collect statistically valid market information of the type contemplated by the determinative formula approach and related proceedings. [Trans. Vol. I, p. 143]. For the notification at issue, the Department relied principally on contracts and tax returns. [Trans. Vol. I, pp. 143, 180-182].

39.      Petitioners have not carried their burdens of proof or persuasion in this case to demonstrate that in 2002 the Department had varying understandings or interpretations of the Comparable Value method. This issue is also a matter of application rather than selection of the method. We addressed the issue in previous cases involving Whitney Canyon production, and found against Petitioners. Whitney Canyon 2000, ¶¶ 40, 161-168; Whitney Canyon 2001, ¶¶ 241, 340-345; Whitney Canyon 2002, ¶¶ 213, 311-316.

40.      Further, we find no waiver, express or implied, of the Department’s authority to use the comparable value method by virtue of its previous attempt to use the determinative formula approach.

41.      BP did not call any witnesses to support the claim in Exhibit 171 that, “BP still does not know what the Department means when it directs a taxpayer to use the ‘Comparable Value’ method.” Petitioners have not carried their burdens of proof or persuasion in this case to demonstrate this allegation. However, we also view this issue as a matter of application rather than selection of the method. We addressed this issue in previous cases involving Whitney Canyon production, and found against Petitioners. Whitney Canyon 2000, ¶¶ 25-39; Whitney Canyon 2001, ¶¶ 26-28; Whitney Canyon 2002, ¶ 30. In our previous cases, a demand by Petitioners for definitions and guidelines was tied to their alleged inability to apply the method. Id.

42.      Although Petitioners did not call any witnesses to discuss or explain the Department’s policy memorandum of November 30, 1995, the memorandum itself is in the record [Exhibit 140], together with a related letter dated March 1, 1996. [Exhibit 143]. The Memorandum refers to the Department’s selection of the comparable value method for production years 1994 through 1996. [Exhibit 140, second 2]. The letter stated in pertinent part that the Department “issued a policy statement dated November 30, 1995 describing how the valuation procedure for the 1995 and 1996 production years would be carried out.” [Exhibit 143, second paragraph]. When the Department notified all oil and gas producers on August 31, 1996, that it had selected the comparable value method for production years 1997 through 1999, the notification contained a specific procedure for filing an exception letter, but made no reference to the policy statement of November 30, 1995. [Exhibit 144]. The Department’s subsequent notifications in 1999 and 2002 did not incorporate either the 1995 policy statement or the exception letter procedure included in 1996. [Exhibits 100, 170].

43.      Petitioners have not carried their burdens of proof or persuasion to demonstrate that the memorandum of November 30, 1995, remained in force and effect after production year 1996. This issue is a matter of application rather than selection of the method. We addressed this issue in previous cases involving Whitney Canyon production, and found against Petitioners. Whitney Canyon 2001, ¶¶ 242-246, 346-347; Whitney Canyon 2002, ¶¶ 214-217, 317-318.

44.      We find that the remaining points raised by BP and Chevron in their letters pertain only to the application of the comparable value method, not its selection. [Exhibits 171, 172].

Witnesses Bidwell, Leo, and Miller

45.      Petitioners called Neil Bidwell, turnaround manager and project engineer for BP’s Overthrust Asset [Trans. Vol. I, p. 74], to testify to two features of Whitney Canyon plant operations. According to Bidwell, the Wahsatch gas enters the plant at the inlet to the plant’s amine system. [Trans. Vol. I, p. 79]. Petitioners reason that the Wahsatch gas therefore does not receive the same compression or separation services as other producers. Bidwell’s testimony was offered to support the argument that comparable value method cannot be applied by use of the Wahsatch Gathering System Agreement. This issue is therefore a matter of application rather than selection of the method. Based on similar testimony, we rejected the argument in Whitney Canyon 2000, and rejected further elaboration of the same point in subsequent application cases. Whitney Canyon 2000, ¶ 80; Whitney Canyon 2001, ¶¶ 183-185, 187, 325-327; Whitney Canyon 2002, ¶¶ 161-161, 163, 293-295.

46.      Bidwell further testified concerning the significance of contractual priorities for processing in the context of plant operations. [Trans. Vol. I, pp. 79-80, 87-89, 92-95]. The testimony was offered to support the argument that comparable value method cannot be used when contracts do not provide for the same processing priority, because the contracts do not contain the same terms and conditions. This issue is a matter of application rather than selection of the method. Based on similar testimony, we rejected this argument in Whitney Canyon 2000, and have rejected further elaboration of the same point in subsequent application cases. Whitney Canyon 2000, ¶¶ 13,14, 43, 78-79, 91; Whitney Canyon 2001, ¶ 188; Whitney Canyon 2002, ¶¶ 164-165.

47.      The testimony of Rebecca Leo and Clyde Miller follows the pattern of the Bidwell testimony, in that they generally testified in support of arguments advanced by Petitioners in previous cases concerning application of the comparable value method to determine Petitioners’ taxable value. There are, however, additional distinctions related only to Leo and Miller.

48.      Leo did not communicate any information or views about Whitney Canyon to any state official until the Whitney Canyon hearing on production year 2001. That hearing was held on March 8-11 and 15, 2004. [Trans. Vol. II, p. 307]; Whitney Canyon 2001, page 10. Everything that Leo had to say to the Department was therefore first said more than fifteen months after the Department method selection herein, and more than six months after the appeal was filed in the present proceeding.

49.      Leo’s testimony in this case generally repeated her testimony in Whitney Canyon 2001 and Whitney Canyon 2002. In those cases, we made specific Findings of Fact and Conclusions of Law that addressed the points Leo raised in the context of applying the comparable value method. Whitney Canyon 2001, ¶¶ 162, 166-167, 169-174, 176, 180, 190, 205, 304; Whitney Canyon 2002, ¶¶ 71, 133, 135-139, 141-146, 158, 167, 170, 179, 273. Unlike Whitney Canyon 2000, both of those cases were appealed under Wyo. Stat. Ann. § 39-14-209(b) and therefore dealt exclusively with the Department’s application of the comparable value method to determine taxable value for the production years in question, rather than selection of the comparable value method in 2002 for subsequent production years. Whitney Canyon 2001, ¶¶ 300-302; Whitney Canyon 2002, ¶ 271.

50.      Clyde Miller presented his critique of the Department’s application of the comparable value method through stipulated testimony adapted from his testimony in Whitney Canyon 2002. [BP America Company’s Renewed, Unopposed Motion for the Incorporation of Clyde Miller’s Testimony; Trans. Vol. I, pp. 5-7 (page 1 of Stipulated Testimony coincides with Trans. Vol. I, p. 174 of Whitney Canyon 2002)]. Whitney Canyon 2002 was heard August 16-20, 2004. Whitney Canyon 2002, page 2.

51.      Miller’s stipulated testimony was similar to his testimony in Whitney Canyon 2001. The main points of Miller’s testimony were therefore first presented to the Department during the same period in March, 2004, when Leo testified in Whitney Canyon 2001. Supra, ¶48. As with Leo, Miller’s stipulated testimony was originally presented in the context of proceedings pertaining only to the application, not the selection, of the comparable value method. Supra, ¶49. As with Leo, we made specific Findings of Fact which addressed the points Miller raised in the context of applying the comparable value method. Whitney Canyon 2001, ¶¶ 1-4, 9, 13-15, 18, 41-42, 55, 90-91, 162, 164-165, 168, 170, 176, 181, 183-184, 187, 189-195, 201-202, 204, 206, 209; Whitney Canyon 2002, ¶¶ 1-5, 10-11, 14-15, 17-18, 20-22, 73, 133, 165, 142, 146, 148-151, 153-155, 167-168, 170, 180, 204.

52.      Unlike Leo but like Bidwell, Miller also testified in Whitney Canyon 2000. He generally spoke to the same subjects to which he testified at greater length in the subsequent proceedings, including (1) the background of the plant and its processing agreements, and (2) criticisms of the use of those processing agreements as sources of comparable value. Whitney Canyon 2000, ¶¶ 10-12, 15, 17, 22, 65, 68-70, 74, 78-79, 86, 90-92, 95. All of this testimony was known to the Department at the time it selected the comparable value method on September 1, 2002. Supra, ¶19. However, we consider this testimony to concern the application of the comparable value method, rather than the selection of the comparable value method.

Petitioners’ issues of fact

53.      As we stated in our identification of the contentions and issues in this case, the Petitioners identified six issues of fact for us to adjudicate. [Petitioners’ Joint Issues of Fact and Law and Exhibit Index].

Has the Wyoming Department of Revenue applied the comparable value method uniformly and equally to all similarly situated taxpayers?

54.      The question of whether the Department has applied the comparable value method equally to all similarly situated taxpayers with respect to production years 2003, 2004, and 2005 is a question of application of the method. We have addressed similar factual assertions in previous proceedings concerning application of the comparable value method. Whitney Canyon 2001, ¶ 249-260; Whitney Canyon 2002, ¶ 220-230.

Are there comparable values that the Department and the taxpayer agree can be used to establish fair market value for the production from this field and the plant?

55.      In an effort to make sense of this question, we reviewed Petitioners’ fifteen contentions, supra, and found nothing to indicate a claim that the Department and these Petitioners agreed on any comparable values. To the contrary, when we considered the October 30, 2002, letters of BP and Chevron and heard related testimony, we found no such agreement. To the extent that the question focuses on use of comparable values, it is a question of application rather than selection of the comparable value method.

56.      To the extent that Petitioners claim that the Department should not have used the comparable value method unless the Petitioners agreed to the Department’s comparables, we disagree with that position as a matter of law. The Department is authorized by statute to make the selection without the consent of the taxpayer. Conclusions of Law, ¶¶ 71, 137.

Do any comparables exist?

57.      The question of whether valid comparables exist for Whitney Canyon production for 2003, 2004, and 2005 is a question of application of the method. In previous proceedings concerning application of the comparable value method, we have addressed similar factual assertions that there are no comparables, many of which relied heavily on testimony of Bidwell, Leo, and Miller. Whitney Canyon 2001, ¶¶ 162-222; Whitney Canyon 2002, ¶¶ 133-191.

What data has the Department developed to determine a typical processing fee or a processing fee that is statistically valid?

58.      None. At the same time, we have found that the Department’s failed attempt to use a determinative formula in 1992 is unrelated to the Department’s present approach to the comparable value method. Supra, ¶¶ 37-38. This fact accordingly has no legal significance. Infra, ¶¶ 123, 133.

What extrinsic evidence has the Department considered to arrive at its conclusion that use of the proportionate profits method by Taxpayers does not generate fair market value?

59.      This question appears to assume that the Department must demonstrate the Taxpayers’ selected method does not accurately reflect fair market value, a circumstance which would only be true if the Department had failed to notify Petitioners of the Department’s selected method. Wyo. Stat. Ann. § 39-14-203(b)(ix). The Department has testified to its reasons for preferring the comparable value method, supra, ¶¶ 8, 11-14, 16, 19-21, but that testimony is only one consideration. Petitioners have framed this question in a way that tends to ignore the fact that the Department is authorized to select among methods, all of which may determine fair market value. Infra, ¶¶ 129, 135.

Is there any method authorized by statute other than the proportionate profits method, which can legally determine fair market value?

60.      As a statutory proposition, there are four methods from which the Department can unilaterally select to determine fair market value, provided the Department gives timely notice of which method it intends to employ. Wyo. Stat. Ann. § 39-14-203(b)(vi),(vii). Although there are four such methods, not all methods may be available for a taxpayer’s production in a specific production year.

61.      To the extent this question is intended to be a claim that no method other than proportionate profits can be applied to Petitioners’ production, they raise an issue that is properly addressed in an appeal of the application of the comparable value method to a specific production year. The application of a method in the context of a specific year is not grounds for determining whether the Department’s selected method accurately reflects fair market value within the meaning of Wyo. Stat. Ann. § 39-14-203(b).

62.      Petitioners have not carried their burdens of proof or persuasion. We find that the comparable value method selected by the Department on September 1, 2002, did not fail to accurately reflect the fair market value of Petitioners’ production within the meaning of Wyo. Stat. Ann. § 39-14-203(b)(viii).

63.      Any portion of the Conclusions of Law: Principles of Law or the Conclusions of Law: Application of Principles of Law set forth below which includes a finding of fact, may also be considered a Finding of Fact, and therefore is incorporated herein by reference.

CONCLUSIONS OF LAW: PRINCIPLES OF LAW

64.      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. Further, “[a]ll taxation shall be equal and uniform within each class of property. The legislature shall prescribe such regulations as shall secure a just valuation for taxation of all property, real and personal.” Wyo. Const. art. 15, § 11(d).

65.      The Department is generally required to provide for the valuation of natural gas as follows:

(i) The department shall annually value and assess...natural gas at its fair market value for taxation;

(ii) Based upon the information received or procured pursuant to W. S. 39-14-207(a) or 39-14-208(a), the department shall annually value....natural gas for the preceding calendar year in appropriate unit measures at the fair market value of the product, after the mining or production process is completed;

(iii) Annually, on or before June 1, or as soon thereafter as the fair market value is determined, the department shall certify the valuation determined by the department to the county assessor of the county from which the....natural gas was produced to be entered upon the assessment rolls of the county....

Wyo. Stat. Ann. § 39-14-202(a).

66.      The Legislature has provided that the taxable event for natural gas is as follows:

There is levied a severance tax on the value of the gross product extracted for the privilege of severing or extracting....natural gas in this state....

Wyo. Stat. Ann. § 39-14-203(a).

67.      For natural gas, the “[v]alue of the gross product ‘means fair market value as prescribed by W. S. 39-14-203(b) less any deductions and exemption allowed by Wyoming law or rules.’” Wyo. Stat. Ann. § 39-14-201(a)(xxix).

68.      The fair market value for natural gas must be determined “after the production process is completed.” Wyo. Stat. Ann. § 39-14-203(b)(ii). Expenses “incurred by the producer prior to the point of valuation are not deductible in determining the fair market value of the mineral.” Wyo. Stat. Ann. § 39-14-203(b)(ii).

69.      “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.” Wyo. Stat. Ann. § 39-14-203(b)(iv). “When no dehydration is performed, other than within a processing facility, the production process is completed at the inlet of the initial transportation related compressor, custody transfer meter or processing facility, whichever occurs first.” Wyo. Stat. Ann. § 39-14-203(b)(iv).

70.      If the producer does not sell its natural gas prior to the point of valuation “by a bona fide arms-length sale,” the Department must identify the method it intends to apply to determine 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.” Wyo. Stat. Ann. § 39-14-203(b)(vi).

71.      The Department may unilaterally employ only one of four methods to determine fair market value of natural gas not sold prior to the point of valuation. Wyo. Stat. Ann. § 39-14-203(b)(vi). The methods are:

(A) Comparable sales – The fair market value is the representative arms-length market price for minerals of like quality and quantity used or sold at the point of valuation provided in paragraphs (iii) and (iv) of this subsection taking into consideration the location, terms and conditions under which the minerals are being used or sold;

(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;

(C) Netback – 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. The netback method shall not be utilized in determining the value of natural gas which is processed by the producer of the natural gas;

(D) Proportionate profits – The fair market value is:

(I) The total amount received from the sale of the minerals minus exempt royalties, nonexempt royalties and production taxes times the quotient of the direct cost of producing the minerals divided by the direct cost of producing, processing and transporting the minerals; plus

(II) Nonexempt royalties and production taxes.

Wyo. Stat. Ann. § 39-14-203(b)(vi). The Legislature prescribed these methods in 1990. 1990 Wyo. Sess. Laws, Ch. 54.

72.      The Board previously interpreted a key phrase employed in the proportionate profits method. “Direct cost of producing the minerals” includes production taxes, and includes royalties. In the Matter of the Appeal of Marathon Oil Co., Docket No. 2004-08, 2005 WL 794788 (Wyo. St. Bd. of Eq. 2005); In the Matter of the Appeal of BP America Production Co., Docket No. 2003-114, 2005 WL 676580 (Wyo. St. Bd. of Eq. 2005); In the Matter of the Appeal of BP America Production Co., Docket No. 2003-102, 2005 WL 558991 (Wyo. St. Bd. of Eq. 2005); In the Matter of the Appeals of Chevron U.S.A., Inc., Docket Nos. 2002-50, et al., 2004 WL 1294512 (Wyo. St. Bd. of Eq. 2004); In the Matter of the Appeal of Burlington Resources Oil & Gas Co., Docket No. 2002-49, In the Matter of the Appeals of Louisiana Land & Exploration Co., Docket Nos. 2002-123 et al., 2004 WL 1174649 (Wyo. St. Bd. of Eq. 2004); In the Matter of the Appeal of RME Petroleum Company, Docket No. 2002-52, 2003 WL 22814612 (Wyo. St. Bd. of Eq. 2003); In the Matter of the Appeal of Fremont County, Docket No. 2000-203, 2003 WL 21774604 (Wyo. St. Bd. of Eq. 2003).

73.      “If the fair market value of the .... natural gas production .... is determined pursuant to paragraph (vi) of [Wyo. Stat. Ann. § 39-14-203(b)], 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 when the department notified the taxpayer of the method selected.” Wyo. Stat. Ann. §39-14-203(b)(viii).

74.      “If the department fails to notify the taxpayer of the method selected pursuant to paragraph (vi) of this subsection, the taxpayer shall select a method and inform the department. The method selected by the taxpayer 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 taxpayer and the department. If the department believes the valuation technique selected by the taxpayer does not accurately reflect the fair market value of the .... natural gas, the department may appeal to the board of equalization for a change of methods within one (1) year from the date the taxpayer notified the department of the method selected.” Wyo. Stat. Ann. § 39-14-203(b)(ix).

75.      “To determine whether the method selected by the Department, the Comparable Value Method, accurately reflects fair market value, we must define ‘accurately.’ The word ‘accurately’ has several related senses, stemming from the root word ‘accurate,’ which can mean both ‘free from error, especially as the result of care’ and ‘conforming exactly to truth or to a standard.’ Webster’s Ninth Intercollegiate Dictionary (1989), p. 50. The Legislature recognized the difficulty of conforming exactly to the standard of fair market value when natural gas production is used without sale – it provided four alternative methods of valuation, with the option of a mutually agreeable alternative in the event that Department and taxpayer agree that none of those four methods ‘produce a representative fair market value....’ Wyo. Stat. Ann. § 39-14-203(b)(vi),(vii). We therefore choose to rely on the first sense. In other words, we will consider whether the Department’s selected method is free from error, or is in some way marked by carelessness.” Whitney Canyon 2000, ¶ 107.

76.      “Reading the second sentence of Wyo. Stat. Ann. § 39-14-203(b)(viii) as a whole, and in the context of the objectives of the statute, Wyodak Resources Development Corporation v. Wyoming Department of Revenue, 2002 WY 181, ¶¶ 33, 60 P.3d 129, 141-142 (Wyo. 2002), we also conclude that our assessment of accuracy in reflecting fair market value authorizes us to consider evidence of the relative merits of competing methods available under Wyo. Stat. Ann. § 39-14-203(b)(vi). Particularly in view of the evidence presented in this proceeding, not doing so risks the possibility that rejection of one method might, by default, require the Department to employ a method that does not reflect fair market value at all. Even though the second clause of the sentence does not explicitly contemplate that an alternative to a rejected method must also pass the test of accurately reflecting fair market value, that is the fairest reading of the second sentence as a whole, giving meaning to all of its parts in the context of Wyo. Stat. Ann. § 39-14-203. Parker Land and Cattle Company v. Wyoming Game and Fish Commission, 845 P.2d 1040, 1042 (Wyo. 1993).” Whitney Canyon 2000, ¶108.

77.      A natural gas taxpayer is obliged to file tax reports and returns, as follows:

(i) Annually, on or before February 25 of the year following the year of production any person whose .... natural gas production is subject to W. S. 39-14-202(a) shall sign under oath and submit a statement listing the information relative to the production and affairs of the company as the department may require to assess the production;

* * *

(v) Except as provided in subparagraph (vi) of this subsection, each taxpayer liable for severance taxes under W. S. 39-14-203(a) shall report monthly to the department. The monthly tax reports are due on or before the twenty-fifth day of the second month following the month of production. Reports shall be filed on forms prescribed by the department. The department may allow extensions for filing returns by regulation;

(vi) If a taxpayer’s liability for severance taxes is less than thirty thousand dollars ($30,000.00) for the preceding calendar year, monthly reporting requirements are waived and the taxpayer shall report annually....

Wyo. Stat. Ann. § 39-14-207(a).

78.      “Gross products filing dates for oil and natural gas reports:

(I) The statutory due date for annual oil and natural gas reports is February 25^th of the year following the production year.

(II) Extensions of time to file these reports, for up to 60 days, may be granted for cause. Extension requests must be in writing and be received by the Mineral Tax Division prior to the statutory due date....”

Rules, Wyoming Department of Revenue, Chapter 6, § 7(a)(i)(G).

79.      “If the statement provided by W. S. 39-14-207(a)(i) is not filed, the department shall value the....natural gas production from the best information available. The department may use information other than contained in the statement provided by W. S. 39-14-207(a)(i) to determine the fair market value of the production provided by W. S. 39-14-202(a)....” Wyo. Stat. Ann. § 39-14-208(a).

80.      “W. S. 39-2-201 [now Wyo. Stat. Ann. § 39-14-202(a)(iii)] requires the Department of Revenue to certify the annual oil and natural gas valuation of the counties on June 1, or as soon thereafter as the fair market value is determined. Taxpayers may be granted filing extensions to allows sufficient time for accurate tax return preparation. To accommodate the extended reporting deadlines, annual fair market value determinations and certifications will be deferred until July 1.” Rules, Wyoming Department of Revenue, Chapter 6, § 7(a)(i)(H).

81.      A taxpayer “aggrieved by any final administrative decision of the Department may appeal to the state board of equalization.” Wyo. Stat. Ann. § 39-14-209(b)(i),(vi). Oil and gas taxpayers are entitled to this remedy:

Following [the Department’s] determination of the fair market value of... natural gas production the department shall notify the taxpayer by mail of the assessed value. The person assessed may file written objections to the assessment with the state board of equalization within thirty (30) days of the date of postmark and appear before the board at a time specified by the board...

Wyo. Stat. Ann. § 39-14-209(b)(iv).

82.      The Board shall “review final decisions of the department [of revenue] upon application of any interested person adversely affected...under the contested case procedures of the Wyoming Administrative Procedure Act.... In addition, the board shall:

(i) Manage its internal affairs and prescribe rules of practice and procedure;

* * *

(iv) Decide 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:

(A) Upon application of any person adversely affected...

* * *

(viii) Hold hearings after due notice in the manner and form prescribed by the Wyoming Administrative Procedure Act and its own rules and regulation of practice and procedure...

Wyo. Stat. Ann. § 39-11-102.1(c).

83.      The Board may adjudicate a dispute between a taxpayer and the Department only by “approving the determination of the Department, or by disapproving the determination and remanding the matter to the Department.” Amoco Production Company v. Wyoming State Board of Equalization, 12 P.3d 668, 674 (Wyo. 2000).

84.      The Board’s Rules describe a petitioner’s burden of going forward, and its burden of persuasion:

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 Department determination is incorrect, the burden shifts to the Department to defend its action....

Rules, Wyoming State Board of Equalization, Chapter 2, § 20.

85.      The initial step in arriving at a correct interpretation of a statute is an enquiry respecting the ordinary and obvious meaning of the words employed according to their arrangement and connection. A statute must be construed as a whole in order to ascertain its intent and general purpose and also the meaning of each part. We give effect to every word, clause and sentence and construe all components of a statute in pari materia. Parker Land & Cattle Company v. Wyoming Game and Fish Commission, 845 P.2d 1040, 1042 (Wyo. 1993).

86.      “On occasion, however, despite the Court’s having found a statute in question to be plain and unambiguous, the court has departed from the general rule and has resorted to extrinsic aids of interpretation to confirm the plain meaning....” Parker Land & Cattle Company v. Wyoming Game and Fish Commission, 845 P.2d 1040, 1043 (Wyo. 1993).

87.      Collateral estoppel and res judicata are generally stated, and distinguished, as follows:

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 between 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).

88.      Collateral estoppel bars relitigation of previously litigated issues:

Generally, four factors are considered when determining application of collateral estoppel: (1) whether the issue 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 was asserted was 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 a prior proceeding.

Tenorio v. State ex rel. Wyoming Workers’ Compensation Division, 931 P.2d 234, 238-239 (Wyo. 1997).

89.      Res judicata bars relitigation of previously litigated claims. Tenorio, 931 P.2d at 238. Res judicata applies if: (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 identical in reference to the subject matter and the issues between them. Livingston v. Vanderdiet, 861 P.2d 549, 551-552 (Wyo. 1993).

90.      “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, and contentions, under oath, has assumed a particular position in a judicial proceeding is estopped to assume an inconsistent position in a subsequent action.” Ottema v. State ex. rel. Workers’ Compensation Division, 968 P.2d 41, 45 (Wyo.1998). “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 (7^th Cir. 1987). However, a party is not bound to maintain a position it unsuccessfully maintained in the original claim. Matter of Cassidy, 892 F.2d 637, 641 (7^th Cir. 1990); 74 Am. Jur. 2d Estoppel and Waiver § 73, p. 498.

91.      “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).

CONCLUSIONS OF LAW: APPLICATION OF PRINCIPLES

Must the Board distinguish between adjudication of an appeal of the Department’s selection of a valuation method authorized by Wyo. Stat. Ann. § 39-14-203(b)(vi), and an adjudication of an appeal of the Department’s application of that method authorized by Wyo. Stat. Ann. § 39-14-209(b)?

92.      From the standpoint of evidence presented to the Board, this case follows the pattern of previous proceedings concerning application of the comparable value method. Petitioners sought to carry their burdens of proof and persuasion by presenting much the same evidence they previously presented in Whitney Canyon 2000, Whitney Canyon 2001, and Whitney Canyon 2002. They tacitly assumed that key features of their appeals of the Department’s application of the comparable value method have equal probative value in this case involving the selection of the comparable value method. [Taxpayers’ Proposed Findings of Fact and Conclusions of Law, ¶ 4]. For example, in this case the Petitioners presented essentially the same critique of the pertinent processing agreements that they presented in Whitney Canyon 2001 and Whitney Canyon 2002, cases in which only the application of the comparable value method was at issue. Findings, ¶ 49.

93.      Our previous opinions have, in part, addressed the differences between Wyo. Stat. Ann. § 39-14-203(b)(vi) and Wyo. Stat. Ann. § 39-14-209(b). All Petitioners in Whitney Canyon 2001 and Whitney Canyon 2002 brought their appeals under Wyo. Stat. Ann. § 39-14-209(b)(iv). Whitney Canyon 2001, ¶ 299; Whitney Canyon 2002, ¶ 270. As we concluded in our decisions for those production years, Petitioners did not and could not contest the Department’s selection of a method in those cases pursuant to Wyo. Stat. Ann. § 39-14-203(b)(viii). Whitney Canyon 2001, ¶ 300. Likewise, the standard for adjudication which appears in Wyo. Stat. Ann. § 39-14-203(b)(viii), i.e., whether the selected method accurately reflects the fair market value of the taxpayer’s production, did not apply in Whitney Canyon 2001 or Whitney Canyon 2002. Whitney Canyon 2001, ¶ 300.

94.      The distinction between appeals of the Department’s selection of a method and application of that method extends to the standard guiding the Board’s review. Wyo. Stat. Ann. § 39-14-209(b) did not establish any specific standard in cases which exclusively concerned the application of the comparable value method. The Board judged the Department’s valuation by the general standard that the valuation must be in accordance with constitutional and statutory requirements for valuing state-assessed property. Whitney Canyon 2001, ¶¶ 300-302; Whitney Canyon 2002, ¶ 271. In doing so, the Board was obliged to take into account “the rules, regulations, orders and instructions prescribed by the department,” and its own Rule governing the burdens of going forward and of persuasion. Whitney Canyon 2001, ¶ 302; Whitney Canyon 2002, ¶ 271.

Should the Board evaluate the Department’s selection of method by evidence available to the parties at the time the appeal was filed?

95.      For reasons that follow, we conclude that an appeal of the selection of method should focus on the information available to the parties up to the time that the appeal was filed. Such information might include, but need not be limited to (1) the Department’s explanation for its decision in 2002; (2) information about Petitioners otherwise known to the Department at the time it selected a method; and (3) subsequent communications between the taxpayer and the Department reflecting efforts to reach a mutual agreeable alternative to the selected method. In contrast, we conclude that evidence and argument related principally to the application of the selected method for a specific production year should be considered in appeals of the Department’s determination of taxable value for that production year.

96.      Our focus on information available when the appeal was filed rests principally on the one-year deadline for an appeal of the Department’s selection of method. Wyo. Stat. Ann. § 39-14-203(b)(viii). We will review this deadline in the context of Wyo. Stat. Ann. § 39-14-203(b)(viii) and in the context of the oil and gas valuation statutes as a whole. Such review is, of course, the correct approach for determining the appropriate meaning to the statute. Parker Land & Cattle Company, 845 P.2d at1042. We begin with the place of Wyo. Stat. Ann. § 39-14-203(b)(viii) in the statutory arrangement for reporting and paying severance and ad valorem taxes.

97.      Wyoming is a self-reporting state, which is to say, the Department determines value but relies on taxpayers for the information necessary to do so. Wyo. Stat. Ann. § 39-14-207(a); Wyo. Stat. Ann. § 39-14-202(a). The taxpayer must therefore be given direction about which valuation method the Department intends to use. It cannot prepare its first monthly severance tax return for a given production year until it knows what data is necessary for the return, and different methods rely on different underlying data. A taxpayer reporting under the proportionate profits method relies on different data than a taxpayer reporting under the comparable value method. Compare Wyo. Stat. Ann. § 39-14-203(b)(iv)(B) and (D).

98.      The first monthly severance tax return for a specific production year is due March 25 of that year, i.e., “the twenty-fifth day of the second month following the month of production.” Conclusions, supra, ¶ 77. The statute allows the taxpayer ample time to adapt to the Department’s selected method, because the Department must notify the taxpayer of its intended method “on or before September 1 of the year preceding the year for which the method shall be employed.” Wyo. Stat. Ann. § 39-14-203(b)(vi). For production year 2003, the Department therefore notified Petitioners of its intended method on September 1, 2002, a date more than six months in advance of the deadline for the January, 2003, severance tax return on March 25, 2003.

99.      The deadline for an appeal of the Department’s selection of method, “within one (1) year from the date when the department notified the taxpayer of the method selected,” Wyo. Stat. Ann. § 39-14-203(b)(viii), coincides with the effective midpoint of monthly reporting for the first of the three production years. By the time Petitioners filed this appeal on August 31, 2003, they would have submitted monthly severance tax reports for production through June 2003.

100.    Complete information about the results for production year 2003 were not due until about six to eight months after the appeal was filed. Specifically, each Petitioner had to submit an annual gross products report that addressed all of production year 2003 by February 25, 2004, subject to one extension of up to sixty days. Conclusions, supra, ¶¶ 77-78. Based on the information in the annual gross products report, the Department determined the value of each Petitioner’s production for production year 2003, and certified that value on or before June 1, 2004, a date subject to extension for up to thirty days. Conclusions, supra, ¶¶ 65, 80; Wyo. Stat. Ann. § 39-14-202(a)(iii); Rules, Wyoming Department of Revenue, Chapter 6, § 7(a)(i)(H). Once the Department determines fair market value and notifies the taxpayer, the taxpayer has thirty days to appeal to this Board. Wyo. Stat. Ann. § 39-14-209(b)(iv).

101.    Because the Department is not required to certify the value of production year 2003 until June 1, 2004 (exclusive of a possible extension), about twenty-one months elapsed between the Department’s selection of method and its determination of taxable value for the first production year.

102.    The Department’s selection of method persists for three production years, unless the Department and the taxpayer agree to a different method or this Board intervenes on appeal. Wyo. Stat. Ann. § 39-14-203(b)(viii). It therefore follows that about thirty-three months would elapse between the Department’s selection of method and the date when Department had to certify taxable value for production year 2004. By the same calculation, forty-five months would elapse between the Department’s selection of method and the date when Department must certify taxable value for production year 2005.

103.    The Legislature’s choice of an appeal deadline means that Petitioners had to make a decision to appeal the Department’s selected method based on incomplete information for any production year affected by the selected method. For example, when Petitioners appealed the Department’s selection of method, they had reported no more than half of the actual financial results for production year 2003, were months away from having their first revenue and cost information for production year 2004, and were more than a year away from having revenue and cost information for production year 2005.

104.    In contrast, a taxpayer has a full year’s financial information, and more, before the valuation appeal deadline for the first production year affected by the Department’s selected method. That deadline is as many as ten months after the deadline to appeal the selection of method, i.e., to the following June 1 (exclusive of a possible extension), then thirty days later. Wyo. Stat. Ann. § 39-14-209(b). Similarly, the appeal deadline for the value actually determined by the Department for the second production year may be as many as twenty-two months after an appeal of selection of method. Id. The appeal deadline for the value actually determined by the Department for the third production year may be as many as thirty-four months after appeal of selection of method. Id.

105.    The information available to resolve appeals of the application of a method for each production year is clearly superior to the information available to resolve an appeal of the selection of method. This is particularly true of actual values for the processing deductions claimed and allowed, and for revenues and costs. The actual processing deduction claimed by a taxpayer using the proportionate profits method requires data regarding revenues, royalties, costs of producing, and costs of processing, together with a calculation of production taxes. Wyo. Stat. Ann. § 39-14-203(b)(vi)(D). The processing deduction claimed by a taxpayer using the comparable value method requires data regarding revenues and transportation or processing fees paid by other parties. Wyo. Stat. Ann. § 39-14-203(b)(vi)(B). Claims such as those concerning the relationship between the deductions allowed and actual costs must also be evaluated by reference to data specific to a production year. Compare Whitney Canyon 2001, ¶¶ 51-161; Whitney Canyon 2002, ¶¶ 50-132.

106.    The superiority of information for the appeal of a taxable value is not limited to financial information. In Whitney Canyon 2001 and Whitney Canyon 2002, information regarding the actual state of the processing agreements which were the source of the Department’s comparable values was superior to conjecture about those processing agreements before those production years were appealed. As Petitioners pointed out in Whitney Canyon 2000, they remained at liberty to take action to terminate or amend the processing agreements on which the Department relied. During the hearing of Whitney Canyon 2000, one BP witness proposed to plug and abandon the well producing for Merit. Whitney Canyon 2000, ¶ 86. Another threatened to amend the in-kind processing fee in the Exhibit F processing agreement. Whitney Canyon 2000, ¶ 34. Neither event subsequently occurred.

107.    Similarly, there is superior information available to judge claims based on constitutional uniformity requirements. See Whitney Canyon 2001, ¶¶ 249-261; Whitney Canyon 2002, ¶¶ 220-230.

108.    While the appeal of a selection of method may take many months to reach a hearing, and therefore remain pending long enough to develop actual data and other information for the first of the three triennial production years, the Legislature could not intend such information to be necessary to resolution of an appeal of the selection of method. Instead, the Legislature established an appeal deadline which falls far in advance of the appeal deadline for even the first production year.

109.    Further, the Legislature’s choice of a one-year appeal deadline is significant in the context of Wyoming’s mineral valuation statutes. The deadline for filing appeals of the Department’s determination of mineral taxable value is consistently thirty days. Wyo. Stat. Ann. § 39-14-109(b)(i),(ii) (coal); Wyo. Stat. Ann. § 39-14-209(b)(iv),(v) (oil and natural gas); Wyo. Stat. Ann. § 39-14-309(b)(i),(ii) (trona); Wyo. Stat. Ann. § 39-14-409(b)(i),(ii) (bentonite); Wyo. Stat. Ann. § 39-14-509(b)(i),(ii) (uranium); Wyo. Stat. Ann. § 39-14-609(b)(i),(ii) (sand and gravel); Wyo. Stat. Ann. § 39-14-709(b)(i),(ii) (other valuable deposits). A taxpayer’s obligation to act “within one (1) year” is instead associated with applications for refunds. Wyo. Stat. Ann. §3 9-14-109(c)(i) (coal); Wyo. Stat. Ann. § 39-14-209(c)(i) (oil and natural gas); Wyo. Stat. Ann. § 39-14-309(c)(i) (trona); Wyo. Stat. Ann. § 39-14-409(c)(i) (bentonite); Wyo. Stat. Ann. § 39-14-509(c)(i) (uranium); Wyo. Stat. Ann. §39-14-609(c)(i) (sand and gravel); Wyo. Stat. Ann. § 39-14-709(c)(i) (other valuable deposits). The ostensible purpose of the one year deadline is to allow time for new information to come to light.

110.    The one year selection appeal deadline implies that, on appeal, this Board must consider more information than what was available to the Department at the time it notifies taxpayers of its selection of method. This implication is supported by the plain language of Wyo. Stat. Ann. § 39-14-203(b)(viii), which provides that the selected method may be “changed by mutual agreement between the department and the taxpayer.” Mutual agreement implies communication between the taxpayer and the Department, and such communication cannot occur until after the taxpayer is notified by the Department and the taxpayer responds that it wishes to use an alternative method.

111.    The one year deadline also allows the taxpayer ample time to evaluate the general practical effect of the selected method before filing an appeal. While such an effect may be readily apparent to sophisticated taxpayers like Petitioners, the notice of selection was directed to all oil and gas taxpayers. Findings, supra, ¶¶ 4, 19. For a less sophisticated taxpayer, the deadline allows time to file a number of severance tax returns during the first production year, and to work out potential problems with the Department. Since the Department has little if any knowledge about many reporting taxpayers, Findings, supra, ¶¶ 6-8, this opportunity for the taxpayer to develop a position and communicate with the Department supports the statutory objective of achieving mutual agreement on an alternative method when appropriate.

Did the valuation technique selected by the Department fail to accurately reflect the fair market value of Petitioners’ natural gas?

112.    When the Department and a taxpayer do not reach a mutual agreement to use an alternative to the Department’s selected method, and the taxpayer continues to believe “the valuation method selected by the department does not accurately reflect the fair market value of the .... natural gas,” the taxpayer may appeal to this Board to change the method. We previously considered this standard in Whitney Canyon 2000, and concluded that the statutory test of accurately reflecting fair market value could be applied by reference to two principles. Whitney Canyon 2000, ¶¶ 107-108; Conclusions, supra, ¶¶ 75-76. Nothing in this case has caused us to reconsider the conclusions of law we reached in Whitney Canyon 2000. As with the issues of fact identified by Petitioners, we will also address Petitioners’ issues of law for the sake of clarifying our decision.

Error or carelessness

113.    Our first principle was whether the Department’s selected method is free from error, or is in some way marked by carelessness. Whitney Canyon 2000, ¶ 107. While Petitioners have not acknowledged the tests the Board articulated in Whitney Canyon 2000, we will nonetheless evaluate the evidence from three perspectives referenced above, Conclusions, ¶ 95: the Department’s explanation for its decision in 2002; information about Petitioners otherwise known to the Department at the time it selected a method; and subsequent communications between the taxpayer and the Department reflecting efforts to reach a mutual agreeable alternative to the selected method.

The Department’s explanation of its decision

114.    When the parties made the record in Whitney Canyon 2000, they focused on the history of their dispute with the Department, rather than the larger context of the Department’s decision to select the comparable value method for all oil and gas taxpayers. See Whitney Canyon 2000, ¶¶ 23-47. This is the first case regarding selection of method in which our record includes evidence that the Department has consistently selected the comparable value method since the pertinent statute was enacted in 1990. Findings, supra, ¶ 4. We did, however, encounter similar evidence in cases involving application of the comparable value method. When the Department has selected the comparable value method for all oil and gas taxpayers, we have concluded that the “Department is constitutionally required to apply the comparable value method to the Petitioners’ production if information is available to do so.” Whitney Canyon 2001, ¶ 363; Whitney Canyon 2002, ¶ 331.

115.    When the Department has selected the comparable value method for all taxpayers, its universal and consistent selection of method affects our evaluation of the Department’s rationale. We conclude that the principal focus of our evaluation of the Department’s selection must be on the Department’s rationale as it relates to all oil and gas taxpayers. While we will not ignore concerns of one or more individual taxpayers regarding selection of the method, individual concerns may be addressed more effectively and appropriately in the context of how the method is applied to those individual taxpayers.

116.    In the context of all Wyoming oil and gas taxpayers, the breadth and depth of the Department’s knowledge of Petitioners’ Whitney Canyon operations is an anomaly spawned by persistent litigation. Under Wyoming’s self-reporting system, the Department knows relatively little about most oil and natural gas taxpayers. The Department may not learn if a taxpayer has complied with the Department’s selection of method until the taxpayer is audited; if the taxpayer is never audited, the Department may never be certain of a specific taxpayer’s compliance. Findings, supra, ¶ 6. In some respects, this Board faces a similar problem. We know a great deal about the Petitioners’ Whitney Canyon operations, but relatively little about how selection of the comparable value method affects most oil and natural gas taxpayers. We are accordingly inclined to caution when we are asked to disturb a Departmental choice affecting many taxpayers on the basis of the limited perspective of three taxpayers.

117.    The Department articulated acceptable reasons to prefer the comparable value method. See Findings, ¶¶ 8, 11-14, 16, 19-21. In this regard, we generally view the Department as having a reasoned basis for selecting the comparable value method, somewhat in the manner that we concluded in Whitney Canyon 2001 and Whitney Canyon 2002 that the Department had a reasoned basis for applying the comparable value method to determine the value of Petitioners’ production. Whitney Canyon 2001, ¶¶ 37-50; Whitney Canyon 2002, ¶¶ 36-49. In the Department’s articulation of its reasons for selecting the comparable value method, we find no error or carelessness.

Information about Petitioners otherwise known to the Department

118.    As a result of the timing of the hearing in Whitney Canyon 2000, the Department had access to extensive information about the Whitney Canyon operations of Petitioners prior to the time it selected the comparable value method on September 1, 2002. No effort was made during this proceeding to precisely delineate the information known to the Department as the result of the hearing then taking place, or to delineate what information developed during the course of that hearing related to selection, rather than application, of the comparable value method. Petitioners have not persuaded us that the information available to the Department by virtue of the hearing then in progress should cause us to set aside the Department’s selection of method.

119.    As a separate point, we reached conclusions of law with respect to selection of method following the hearing in Whitney Canyon 2000, which provide insight into what was known to the Department as a result of the hearing in Whitney Canyon 2000. Whitney Canyon 2000, ¶¶ 147-150. Petitioners have not persuaded us that we should reconsider any conclusions previously reached.

Subsequent communications between the taxpayer and the Department

120.    Petitioners BP and Chevron responded to the Department’s selection of method with letters requesting the use of the proportionate profits method. Findings, ¶ 22-23. In statutory terms, the letters were a communication intended to result in a change of the selected method “by mutual agreement between the department and the taxpayer,” as referenced in the first sentence of Wyo. Stat. Ann. § 39-14-203(b)(viii). We also understood these letters as a contemporaneous expression of those Petitioners’ belief that the selected method did not accurately reflect fair market value, as referenced in the second sentence of Wyo. Stat. Ann. § 39-14-203(b)(viii).

121.    Although the Department did not respond to either the BP letter or the Chevron letter, the Department was not obligated to do so by any provision of statute or regulation. We also found that by the time the letters were received, the Department and Petitioners were firmly committed to conflicting positions. Findings, supra, ¶ 22-26.

122.    In our Findings, we have described the issues stated in the BP and Chevron letters: (1) an allegation about the Department’s “varying understandings or interpretations of the comparable value method;” (2) a claim that the taxpayer did not know what the Department meant by the comparable value method; and (3) a claim that the Department was bound to accept the taxpayer’s attestations of the absence of sources of comparable value. Findings, ¶ 37-38, 41-42. We found that Petitioners failed to carry their burdens of proof and persuasion with regard to these issues. Findings, ¶ 39, 41, 43.

123.    We also conclude not only that these claims fail as a matter of law, but they also address matters of application, rather than selection, of the method. We have previously addressed the same three issues under the rubric of a single question of law: Did the Department violate prescribed requirements by the procedures it used to determine the value of each Petitioner’s production? Whitney Canyon 2001, ¶¶ 340-348; Whitney Canyon 2002, ¶¶ 311-319. Petitioners’ claims with respect to the determinative value method were considered at greater length, and rejected, after the hearing of the first Whitney Canyon comparable value appeal. Whitney Canyon 2000, ¶¶ 161-168.

124.    After review of the letters and the issues to which the letters spoke, we conclude there was no error or carelessness in the Department’s selection of method.

125.    The record does not include any evidence of further communication between Petitioners and the Department prior to the time this appeal was filed. This is not surprising in view of Bolles’ testimony that the taxpayers “were going to continue down the same path” until the dispute was “completely and fully decided by the judicial system.” Findings, supra, ¶ 25.

Relative merits of competing methods

126.    Our second principle was to assess accuracy in reflecting fair market value by reference to evidence of the relative merits of competing methods available under Wyo. Stat. Ann. § 39-14-203(b)(vi). Whitney Canyon 2000, ¶ 108. Again, Petitioners have not acknowledged this principle.

127.    When we used this principle in Whitney Canyon 2000, we did so with an eye to whether the rejection of one method might, by default, require the Department to employ a method that did not reflect fair market value at all. Whitney Canyon 2000, ¶ 108. Our task was relatively easy, because Petitioners made no effort to demonstrate that the proportionate profits method reached fair market value. Whitney Canyon 2000, ¶¶ 71-72, 150. As we noted at the time, “it is clear the taxpayers were aware that the proportionate profits method would yield a distorted value for this tax year.” Whitney Canyon 2000, ¶ 150.

128.    Our record includes one exhibit originally prepared for the hearing in Whitney Canyon 2002 which purports to compare the results of alternative calculations of value for that production year. [Exhibit 169]. However, Exhibit 169 was not discussed by any witness in this case. While some of the information necessary to prepare Exhibit 169 was available by the time the appeal in this case was filed, we do not know when it was actually prepared because Whitney Canyon 2002 was not heard until August 16-20, 2004. Supra, ¶ 50. Our decision in that hearing also found considerable amendments to the cost figures used for Exhibit 169 and similar comparisons, Whitney Canyon 2002, ¶¶ 99-118, which led us to place little reliance on such comparisons in Whitney Canyon 2002. Whitney Canyon 2002, ¶ 119. Under these circumstances, we place no reliance at all on Exhibit 169. To the contrary, we conclude Exhibit 169 illustrates the importance of addressing revenue and cost information in the context of applying the method, where potential issues concerning the integrity of the information can be fully explored.

129.    There is one more dimension to the application of our second principle. The Board views all four methods specified in Wyo. Stat. Ann. § 39-14-203(b)(vi), when properly applied, as determining fair market value, although not necessarily the same value. Whitney Canyon 2002, ¶308. With the passage of time, the Department and Petitioners have moved to the same view. Whitney Canyon 2002, ¶¶198, 202. If all four methods determine fair market value, then a taxpayer plainly faces considerable difficulty when challenging a selected method based on the belief that the selected method does not accurately reflect fair market value. We believe the Department’s approach, which is to consider actual costs as a yardstick and to consider alternative approaches to value, Findings, supra, ¶¶ 11-14, is a sensible response to this apparent conundrum. On the record made in this case, the Department has confirmed its view that the proportionate profits method would not return a sound value for the range of inputs which the Department anticipated at the time it selected the method. Findings, ¶ 21. The Department’s testimony supports our conclusions of law regarding the selection of the comparable value method in light the relative merits of competing methods.

Petitioners’ issues of law

Is the comparable value method too vague to be applied consistently with constitutional due process standards?

130.    We understand this question to have two dimensions, both of which are issues regarding the application, rather than selection, of a method.

131.    The first dimension concerns the language of the statute itself. In Taxpayers’ Proposed Findings of Fact and Conclusions of Law, ¶¶ 131-170, Petitioners’ arguments are developed further. These arguments are familiar to us from previous cases involving application of the comparable value method to Whitney Canyon production, where we rejected the arguments on a record similar to the one made in this case. Whitney Canyon 2001, ¶¶ 303-338; Whitney Canyon 2002, ¶¶ 272-309.

132.    The second dimension addresses how the Department actually applies the comparable value method in a specified production year, and is best addressed by the evaluation of evidence received regarding the Department’s actions pertaining to that production year. Based on our review of Taxpayers’ Proposed Findings of Fact and Conclusions of Law, we note that we have addressed this argument in previous opinions regarding application of the comparable value method to Whitney Canyon production. Whitney Canyon 2001, ¶¶ 214-248, 340-348, 378-380; Whitney Canyon 2002, ¶¶ 212-219, 311-319, 345-347

Was the Department’s application of the comparable value method arbitrary and capricious in light of the Wyoming Supreme Court’s suggestion that use of the comparable value method without definitional rulemaking would be arbitrary and capricious? Amoco Production Co. 882 P.2d at 871.

133.    Amoco Production Company, 882 P.2d 866, arose from the determinative formula litigation. Supra, ¶¶ 37-38. Since the Department did not rely on the determinative formula approach when it selected the method in 2002, Amoco Production Company, 882 P.2d 866, does not apply in this case. We discussed the application of the case at some length in Whitney Canyon 2000. Whitney Canyon 2000, ¶¶ 161-168.

134.    We have also previously concluded that Petitioners had no difficulty understanding the Department’s view of the comparable value method; Petitioners simply refused to accept the Department’s position. Supra, ¶ 41.

Is the proportionate profits method the only statutorily authorized method that can determine fair market value?

135.    Petitioners have framed an ambiguous question. From a statutory standpoint, the answer is no. There are four statutorily authorized methods, only one of which is the proportionate profits method. Wyo. Stat. Ann. § 39-14-203(b)(vi). By definition all four can determine fair market value. Under some circumstances, the Department and a taxpayer may agree on an alternative method to determine fair market value. Wyo. Stat. Ann. § 39-14-203(b)(viii).

136.    As a further caveat, the statutorily authorized methods must be correctly applied. During the period at issue, Petitioners insisted on use of a version of the proportionate profits method which was not authorized by statute. Specifically, they improperly insisted that the statutory phrase, “direct cost of producing,” did not include production taxes and royalties, contrary to the rulings of this Board. Conclusions, supra, ¶ 72.

137.    The choice of which method a taxpayer must use lies with the Department, Wyo. Stat. Ann. § 39-14-203(b)(vi), (viii), unless the Department fails to notify the taxpayer of its preferred method. Wyo. Stat. Ann. § 39-14-203(b)(ix). The Department notified the taxpayers in this case. Findings, supra, ¶ 18. Even though one or more methods may be applied to reach a taxable value, a taxpayer is not at liberty to select its preferred method. See Whitney Canyon 2001, ¶¶ 361-362; Whitney Canyon 2002, ¶¶ 329-330.

138.    To the extent that Petitioners mean to argue that no other method is available, and that the proportionate profits method must be used by default (See Whitney Canyon 2000, ¶1), this question must be addressed in the context of the application of the comparable value method for a specific production year. It is not a basis for challenging the Department’s selection of a method.

Did the proportionate profits method used by Taxpayers constitute fair market value?

139.    In the context of this selection of method case, this question incorrectly assumes that the method has already been used – i.e., applied – and not merely selected. See supra, ¶¶ 92-94. It is therefore a question pertaining to the application of the Department’s selected method. The answers to the preceding question apply to this question as well.

Has the Department violated the requirement of equal and uniform taxation by treating similarly situated taxpayers differently in the audit and valuation process?

140.    This is an issue of the application, rather than selection, of the method. The issue addresses how the Department actually applies the comparable value method in a specified production year, and is best addressed by the evaluation of evidence received regarding the Department’s actions for a specific production year.

141.    Based on our review of Taxpayers’ Proposed Findings of Fact and Conclusions of Law, we note that we have considered, and rejected, this argument in previous opinions regarding application of the comparable value method to Whitney Canyon production. Whitney Canyon 2001, ¶¶ 249-261, 350-377; Whitney Canyon 2002, ¶¶ 220-230, 321-344.

Does the statutory language not allowing the use of the netback method deny Taxpayers equality and uniformity of taxation and is it constitutional?

142.    We have no reason to reach a constitutional question. First, Petitioners ask us to direct the use of the proportionate profits method, not the netback method. Since the netback and comparable value methods have previously reached the same taxable value when applied to Whitney Canyon production, Whitney Canyon 2001, ¶ 311, Whitney Canyon 2002, ¶ 280, and Petitioners object to the results of the comparable value method, we have no reason to believe that they now wish to use the netback method going forward.

143.    Second, the Board has previously determined that the netback method was available for the Whitney Canyon production of these Petitioners in at least two production years. Whitney Canyon 2001, ¶¶ 310-312; Whitney Canyon 2002, ¶¶ 279-281. Our previous resolution of that question is consistent with our view that all questions regarding the application of the netback and other methods, including constitutional questions, are best considered in the context of a specific production year.

Whether the doctrines of collateral estoppel, judicial estoppel, res judicata or waiver prevent the Department from requiring the Taxpayers to use the comparable value method here.

144.    Petitioners presented no argument regarding the application of these theories to this case, and we therefore deem the theories waived. At the same time, we wish to make our disposition of these issues clear, had they been properly pursued.

145.    Based upon our ruling in Whitney Canyon 2000 (we refer to Whitney Canyon 2000 because Petitioners did not advance specific argument on this issue in the current case), we understand the core of Petitioners’ collateral estoppel claim to be that the same parties, the same property, and the same issues were previously decided by the Wyoming Supreme Court. Amoco Production Company v. Wyoming State Board of Equalization, 882 P.2d 866 (Wyo. 1994), or by this Board in Appeal of Amoco Production Company, SBOE Docket 91-174, 1992 WL 126533 (Wyo. St. Bd. Eq. 1992). Whitney Canyon 2000, ¶ 193. We disagree.

146.    The principal issue in this case is whether the valuation method selected by the Department for production years 2003 through 2005 accurately reflects fair market value, within the meaning of Wyo. Stat. Ann. § 39-14-203(b)(viii). Conclusions, ¶112 et seq. This issue was not and could not have been decided in a previous proceeding. Tenorio, 931 P.2d at 238-239. Neither this Board nor the Court previously had jurisdiction to rule on anything related to the selection of method for production years 2003 through 2005. The selection of method for that period was not identified as an issue by the parties in the previous proceedings, nor was it decided by the Board as a fact finder. The Board did not purport in earlier proceedings to determine any questions related to the selection of method for production years 2003 through 2005. The earlier judgments of the Court and the Board were not dependent upon determination of any issues with regard to the selection of method for production years 2003 through 2005. On this basis alone, we conclude that the doctrine of collateral estoppel does not apply. We do not deem it necessary to list the many issues that were decided in this case, but were not previously advanced and decided. Any concern for relitigation is groundless.

147.   The subject matter of this case is the Department’s the selection of method for production years 2003 through 2005. This factor alone is enough for us to conclude that the doctrine of res judicata does not apply, although further analysis would show a general failure to meet the criteria for res judicata. Livingston, 861 P.2d at 551-552.

148.    Based upon our ruling in Whitney Canyon 2000 (we refer to Whitney Canyon 2000 because Petitioners did not advance specific argument on this issue in the current case), we understand Taxpayers to argue 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. Since the Department did not succeed in employing the method advanced in 1992, supra, ¶¶ 37-38, we conclude that judicial estoppel does not apply. Eagle Foundation, Inc., v. Dole, 813 F.2d at 810; Matter of Cassidy, 892 F.2d at 641; 74 Am. Jr. 2d Estoppel and Waiver §73, p. 498. Having reached this conclusion, we find it is not necessary 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). See generally, Whitney Canyon 2000, ¶¶ 201-203.

149.    Based on Whitney Canyon 2000, we understand Petitioners’ waiver claim to stem from the fact that the Department did not seek, in this case, to support the formulaic approach of 1992 stated in determinative formula [Exhibit 135] and referenced in Amoco Production Company, supra, all as discussed in our opinion in Whitney Canyon 2000. Whitney Canyon 2000, ¶¶161-168. Petitioners apparently argue that the failure of the 1992 approach should be deemed a waiver of any comparable value approach. They rest this theory on conduct, i.e., on the fact that the Department did not attempt in this proceeding to support the 1992 approach. We have already ruled that the Department is not forever wedded to the 1992 determinative formula approach. Findings, supra, ¶¶ 37-39; Conclusions, supra, ¶ 133.

150.    We found no waiver, express or implied, of the Department’s authority to select the comparable value method as it has done in this case. Findings, supra, ¶ 40. Further, and in response to a theory of the taxpayers advanced in Whitney Canyon 2000, we disagree that the facts and circumstances in this case warrant 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, taxpayers’ characterization of the facts in this case is in dispute.

151.    For all of the foregoing reasons, we conclude that the Department’s selected method did not fail to accurately reflect the fair market value of Petitioners’ Whitney Canyon production within the meaning of Wyo. Stat. Ann. §39-14-203(b)(viii).

ORDER

           IT IS THEREFORE HEREBY ORDERED the Department’s selection of method for production years 2003 through 2005, for Petitioners’ Whitney Canyon production, is affirmed.

Pursuant to Wyo. Stat. Ann. § 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 for review within 30 days of the date of this decision.

Dated this ____ day of May, 2005.

STATE BOARD OF EQUALIZATION

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Alan B. Minier, Chairman

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Thomas R. Satterfield, Vice-Chairman

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Thomas D. Roberts, Board Member

ATTEST:

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Wendy J. Soto, Executive Secretary