BEFORE THE STATE BOARD OF EQUALIZATION

FOR THE STATE OF WYOMING

IN THE MATTER OF THE APPEAL OF             )

CHEVRON USA, INC.                                        )         Docket No. 2003-101

FROM A CHANGE OF VALUATION                )

METHOD DECISION BY THE MINERALS     )

DIVISION OF THE DEPARTMENT                   )

OF REVENUE (Carter Creek)                             )

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

APPEARANCES

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

Cathleen D. Parker, Senior Assistant Attorney General, of the Wyoming Attorney General’s Office, for the Wyoming Department of Revenue (Department).

JURISDICTION

On September 1, 2002, the Department notified Chevron that the Department had selected the comparable value method to determine the value of Chevron’s natural gas production to be processed through the Carter Creek gas processing plant during production years 2003, 2004, and 2005. Chevron filed a timely appeal of the Department’s selection on August 29, 2003, pursuant to Wyo. Stat. Ann. § 39-14-203(b)(viii), which authorizes the State Board of Equalization (Board) to review the Department’s selection of a valuation method.

The matter came on for hearing March 21-22, 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

Chevron produces natural gas from the Carter Creek Field. The gas must be processed in order to be marketable. The Carter Creek gas is processed at the Carter Creek Gas Plant constructed and owned by Chevron. On September 1, 2002, the Department notified Chevron it had selected the comparable value method for valuing Chevron’s gas production processed at the Carter Creek Gas Plant for production years 2003, 2004, and 2005. On August 29, 2003, Chevron 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 Chevron’s natural gas. In this proceeding, Chevron relied heavily on claims and arguments it had previously advanced in appeals concerning application of the comparable value method to Chevron’s 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 Chevron has assumed, and finds that Chevron did not carry its burdens of proof and persuasion.

CONTENTIONS AND ISSUES

The Board’s procedures afford parties several opportunities to document and refine the issues they would have us adjudicate. In this proceeding, these opportunities occurred at least in the original notice of appeal; in preliminary statements; in formal statements of contentions; in prehearing listings of issues of fact and law; and in post-hearing briefs.

In prehearing filings, Chevron identified six contested issues of fact and nine contested issues of law. [Petitioner’s Issues of Fact and Law and Exhibit Indices]. Chevron separately identified twenty-one contentions. [Petitioner’s Updated Summary of Contentions]. The Department identified one contested issue of fact and one contested issue of law. [Department’s Issues of Fact and Law and Exhibit List]. The Department separately identified six contentions. [Department’s Updated Summary of Contentions].

Because of the number of issues inconsistently stated over time, the Board specifically requested the parties address the issues they desired the Board consider in their respective briefs filed with the Board after the hearing. [Transcript Vol. II, pp. 269-274]. We note the issues identified in the parties post-hearing briefs do not dovetail with the issues they identified prior to the hearing. We have, therefore, relied primarily on the parties’ post-hearing briefs for the principal contentions they desire us to decide in this matter.

From Chevron’s post-hearing brief, we have identified six issues it would have us decide:

           1.         What standard should the Board utilize in determining whether the Department’s selection of a valuation method pursuant to Wyo.                            Stat. Ann § 39-14-203(b)(viii) is correct?[Petitioner’s Posthearing Brief, pp. 10-11].

           2.        Do appropriate comparables exist and, if so, do those comparables achieve fair market value? [Petitioner’s Posthearing Brief, pp. 11-12].

           3.        Did the Department demonstrate that appropriate comparables exist for valuing Chevron’s Carter Creek gas production? [Petitioner’s Posthearing Brief, pp. 12-25].

           4.        Did the Department establish that the comparable value method more accurately reflects fair market value? [Petitioner’s Posthearing Brief, pp. 25-29].

           5.        Did the Department’s actions deprive Chevron of its rights to due process? [Petitioner’s Posthearing Brief, pp. 29-34].

           6.        Were there procedural deficiencies in this matter? [Petitioner’s Posthearing Brief, pp. 34-35].

           7.        Was Chevron treated in a uniform, nondiscriminatory manner? [Petitioner’s Posthearing Brief, pp. 35-37].

From the Department’s post-hearing brief, we have identified the following issues it would have us decide:

           1.        Whether Chevron had the burden of going forward and the ultimate burden of proof and failed to meet that burden?

           2.        Whether the Department was required to promulgate rules in order to select the comparable value method in Wyo. Stat. Ann. § 39-14-203(b)(vi)(B)?

           3.        Whether the Department properly rejected Chevron’s attestation that no comparable existed for the purpose of ascertaining a comparable processing fee pursuant to Wyo. Stat. Ann. § 39-14-203(b)(vi)(B)?

[Wyoming Department of Revenue’s Brief].

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 Chevron’s 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 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 method selected by the Department fail to accurately reflect the fair market value of Chevron’s natural gas production within the meaning of Wyo. Stat. Ann. § 39-14-203(b)(viii)?

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 Chevron’s production within the meaning of Wyo. Stat. Ann. § 39-14-203(b)(viii)?

The Carter Creek Field and Plant

1.        The Carter Creek Gas Plant was constructed by Chevron in the early 1980's and went into operation in 1982. [Transcript Vol. I, pp. 22-23]. It was constructed to process natural gas, removing relatively high concentrations of hydrogen sulfide. [Transcript Vol. II, p. 243].

2.        The Carter Creek Gas Plant processes Chevron gas production from the Carter Creek Field. It also processes third-party gas for Exxon (Road Hollow), for Anschutz (Yellow Creek/Wahsatch Gathering System), and for the owners of the Whitney Canyon Gas Plant. [Transcript Vol. II, pp. 238-239, 249, 255].

The Department’s selection of a method

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 Carter Creek Gas 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, and notify taxpayers of the chosen method by September 1 of the year preceding the year the method is first applied. [Transcript Vol. I, pp. 55-56]. Wyo. Stat. Ann. § 39-14-203(b)(vi), (viii). If the Department does not provide a taxpayer with timely notice of its preferred method, the taxpayer may select a method and inform the Department of its choice. Wyo. Stat. Ann. § 39-14-203(b)(ix). The statute also specifically contemplates use of an alternative method where the taxpayer and Department agree to do so. Wyo. Stat. Ann. § 39-14-203(b)(viii).

4.        At each three-year interval since the inception of the statute in 1990, the Department has selected the comparable value method. Each time, the Department has notified all oil and gas taxpayers of this selection. [Exhibits 917 (1990), 919 (1993), 928 (1996), 904 (1999), 900 (2002)]. From 1990 to 2000, however, there were five taxpayers who were allowed to use the proportionate profits method to value their production. [Transcript Vol. II, pp. 165-166].

5.        Randy Bolles was Administrator of the Mineral Tax Division of the Department of Revenue from May, 1998, through November, 2004. [Transcript Vol. I, p. 49]. In his capacity as Administrator, Bolles believed the Department was responsible for selecting the method that best reached fair market value. [Transcript Vol. I, pp. 131-132]. The Department viewed the comparable value method as the best available method because it reflects a willing buyer/willing seller concept. [Transcript Vol. I, p. 132].

6.        On behalf of the Department, Bolles signed the Department’s 1999 and 2002 method selection letters sent to all Wyoming oil and gas producers selecting the comparable value method for oil and gas production not sold at or prior to the point of valuation pursuant to a bona fide arms-length sale, or where the product is used without sale. [Transcript Vol. I, pp. 61-62, Vol II, pp. 163-164; Exhibits 900, 904].

7.        The Department’s triennial selection letter is sent to approximately 800 Wyoming oil and gas producers. [Transcript Vol. I, p. 141; Vol. II, p. 332] In most instances, the Department does not know what methodology a particular taxpayer uses to report the value of its production to the Department. [Transcript Vol. II, p. 333]. Because it is often difficult to determine how a particular taxpayer has reported its value, the Department relies on audits which review contracts and tie them to invoices. [Transcript Vol. II, p. 334]. This is primarily a function of Wyoming’s self reporting system and the limited Department resources available to determine how a particular taxpayer has reported. [Transcript Vol. II, pp. 335, 343-344].

8.        Bolles testified that prior to the issuance of the Department’s triennial selection letter in August 1999, it had gathered an enormous amount of information and reviewed contracts which indicated there were comparables which could be used in the comparable value method. [Transcript Vol. II, p. 168]. There had also been a lot of work done to analyze the proportionate profits method to determine whether it returned fair market value or was an appropriate method to use. [Transcript Vol. II, pp. 170-171]. By the time the Department issued the 1999 selection letter, it did not believe the proportionate profits method returned fair market value in all economic situations because it allowed a taxpayer to claim a processing deduction far greater than its actual processing expenses. [Transcript Vol. I, pp. 130, 133].

9.        Craig Grenvik, the current administrator of the Department’s Mineral Tax Division, elaborated on why the Department believes the comparable value method best reflects fair market value. The Department views the proportionate profits method to be merely a formula, a calculation intended as a surrogate for what values may be achieved in the open market. The proportionate profits method does not rely on actual contracts. By relying on actual contracts, the Department believes the comparable value method best reflects fair market value. [Transcript Vol. II, p. 312].

10.      As additional justification for the Department’s decision to select for the comparable value method, both Bolles and Grenvik indicated the Department was aware of instances in which the proportionate profits method had allowed a processing deduction far greater than the actual processing expenses. [Transcript, Vol. I, p. 138, Vol. II, pp. 199-200, 313].

11.      After receiving the 1999 selection letter, Chevron requested to use the proportionate profits method. [Exhibit 905]. The Department responded by seeking additional information from Chevron to evaluate its request. [Exhibits 905, 906, 207, 908]. The Department requested and received additional contracts from taxpayers, including Chevron, and was aware of the processing contracts in place for the Carter Creek Gas Plant and for other taxpayers. [Transcript Vol. I, p. 72, Vol. II, p. 173; Exhibits 906-913, 934-944, 946, 948]. The Department ultimately rejected Chevron’s request to use the proportionate profits method for 2000, 2001 and 2002. [Exhibit 909].

12.      By April 2001, the Department’s decision to require Chevron to use the comparable value method to value its production processed through the Carter Creek Gas Plant for 2000, 2001, and 2002, had been appealed. Chevron had filed its tax returns for 2000, the first production year covered by the Department’s August, 1999, selection letter, utilizing the proportionate profits method; the Department had revalued Chevron’s production utilizing the comparable value method; and Chevron had appealed the Department’s 2000 valuation. [Transcript Vol. II, pp. 171-172, 292]. See Chevron USA, Inc., Docket No. 2000-152 et al., October 15, 2003, 2003 WL 22422677 (Wyo. St. Bd. Eq.)(hereafter Carter Creek 2000).

13.      Chevron subsequently appealed the Department’s application of the comparable value method to determine taxable value for production years 2001 and 2002. Chevron USA, Inc., Docket No. 2002-162, June 16, 2005, 2005 WL 1464851, (Wyo. St. Bd. Eq.) (hereinafter Carter Creek 2001); Chevron USA, Inc., Docket No. 2003-64, October 28, 2005, 2005 WL 2905656 (Wyo. St. Bd. Eq.) (hereinafter Carter Creek 2002). (All three Carter Creek opinions are available at the Board’s web site, http://taxappeals.state.wy.us, under the link to Recent Board Opinions.)

14.      By September 1, 2002, when Bolles issued the triennial notice of selection of method which is the subject of this case, [Exhibit 901], the Department had fully developed the principal features of its position regarding the Carter Creek production. From its review of the contracts, the Department had concluded that the processing fee was never greater than an in-kind fee of 25%, with no adjustments based on volume, quantity, quality, or terms and conditions. [Transcript Vol. I, pp. 99-101]. The Department had concluded that the contracts met the statutory requirements for applying the comparable value method. [Transcript Vol. I, pp. 97-101]. The Department had seen the 25 % processing fee allowed Chevron under the comparable value method covered Chevron’s actual expenses for 2000, and may have seen the same result for 2001. [Transcript Vol. II, pp. 316-317]. Information for 2002 production was not available at the time the 2002 selection letter was sent. [Transcript Vol. II, p. 318].

Chevron’s response

15.      Chevron responded to the Department’s September 1, 2002, selection letter with a letter dated October 30, 2002. [Exhibit 901]. In its response, Chevron stated it would continue to “use the proportionate profits method” for several producing properties, including all Mineral Groups associated with Carter Creek. [Exhibit 901]. It explained its position with these words:

The State Board of Equalization has recently heard the consolidated cases of these particular taxpayers [BP, Andarko, and Chevron] concerning the Department’s selection and directive of the comparable value method for production years 2000-2002 as set forth in the Department’s August 31, 1999 letter. 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. ChevronTexaco 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, ChevronTexaco does not believe the ‘comparable value’ method can be used to determine fair market value.

[Exhibit 901]. Chevron went on to state that, “[u]ntil the parties … obtain final and non-appealable decisions [in the comparable value cases], no party can be certain its position is correct.” [Exhibit 901]. Chevron invoked a policy memorandum of November, 1995, to attest that there were no comparables for any of its Carter Creek properties. [Exhibit 901].

16.      The Department did not respond to Chevron’s October 30, 2002, letter in any manner. [Transcript Vol. II, p. 290]. Bolles took Chevron’s letter to mean that “Chevron had a pretty good understanding of what the Department was going to do and that it was going to continue with comparable value method and the comparables that it had selected and that Chevron would continue to report and pay under proportionate profits.” [Transcript Vol. I, p. 63]. His conclusion is supported by Chevron’s letter. [Exhibit 901]. In addition, we find nothing in the Department’s notification of September 1, 2002, that committed the Department to reply to Chevron’s letter. [Exhibit 900].

17.      Wyoming’s oil and gas valuation statutes contemplate 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 Chevron sent its letter of October 30, 2002, mutual agreement on an alternative method was at best a remote possibility. [Exhibit 901]. There is an independent indication that the Department and Chevron had little common ground to discuss in September and October of 2002. At the time, Chevron was not attempting to justify use of the proportionate profits method by any reference to value; in its view, the Department was obliged to use the proportionate profits method by default. Carter Creek 2000, ¶¶ 2, 14, 27.

18.      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. [Transcript Vol. II, p. 180]. The Department made its initial decision to allow use of the proportionate profits method for production processed at other processing plants based on a review of available contracts, and had sought supplemental information from time to time. [Transcript Vol. I, pp. 110-115, 180; Exhibits 103, 104, 105, 106]. 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 Chevron’s production. [Transcript Vol. I, pp. 110-115, Vol. II, pp. 173-174, 201-205, 214]. While the Department had 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. [Transcript Vol. II, p.180; Exhibits 930, 931]. A few other producers who processed their own gas had mutual agreements with the Department. [Transcript Vol. II, pp.174-175].

19.      Chevron filed a timely appeal of the Department’s selection of method on August 28, 2003. [Case Notice for Review/Notice of Appeal for Change of Methods].

20.      At the hearing of this matter, Chevron presented a chart and supporting spreadsheet showing the effects of the application of the proportionate profits and comparable value methods for a number of years, both prior to and after the Department’s 1999 and 2002 method selection letters. [Exhibits 117, 118] . The chart reflects that for 2000 and 2001, the first two years where Chevron’s production was valued using the comparable value method, both the comparable value method and the proportionate profits methods allowed a deduction for processing expenses greater than Chevron’s reported processing costs. It also reflects that the deduction calculated using the proportionate profits method exceeded the deduction calculated using the comparable value method in each of those two years. [Exhibits 117, 118; See Exhibits 926, 927, 929 which reflect the Department allowed Chevron to use the proportionate profits method in years prior to 2000].

Selection versus Application

21.      In presenting its case, Chevron has 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 Petitioner’s Posthearing Brief, pp. 18-25]. Chevron, however, has not directly addressed the standards and/or limitations of appeals authorized by Wyo. Stat. Ann. § 39-14-203(b)(viii). Rather, Chevron argues the Department must establish that appropriate comparables exist that satisfy the requirements of Wyo. Stat. Ann. § 39-14-203(b)(vi)(B). [Petitioner’s Posthearing Brief, pp. 11-12].

22.      The Board has concluded appeals of selection of a method and of annual application of that method to determine taxable value do, and should, present different issues. Conclusions, ¶¶ 89-91. The Board has also concluded 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). Conclusions, ¶¶ 82-108. See BP America Production Co., et al., Docket No. 2003-100, May 25, 2005, 2005 WL 1276339 (Wyo. St. Bd. Eq.).

23.      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 this case. In Carter Creek 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 Chevron 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.

24.      If, however, we were to completely ignore 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 Chevron letter of October 30, 2002; (2) the testimony of Chevron’s witnesses David Mathews and Craig Tysse; and (3) Chevron’s issues of fact presented in its post-hearing brief.

25.      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 production from Carter Creek Field for production years 2003, 2004, and 2005.

26.      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 Carter Creek or 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 Conclusions, ¶¶ 102, 103.

27.      The Department has authorized some taxpayers to report using a method other than the comparable value method. For production years 1994 through 1999, the Department authorized Chevron to report and pay taxes on its Carter Creek production using the proportionate profits method. [Exhibits 926, 927, 929]. The Department authorized the use of the proportionate profits method based in part upon Chevron’s attestations that the comparable value method could not be applied to its Carter Creek production. [E.g., Exhibit 926, 929]. For 1991 through 1993 the Department valued Chevron’s production using an agreed upon method. [Transcript Vol. I, pp. 92-93; Exhibit 117].

The October 30, 2002 letter

28.      Chevron’s reference in Exhibit 901 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 Chevron. [E.g., Exhibits 909, 911]. Chevron refers instead to an earlier interpretation by the Department known as the “determinative formula for calculation of comparable value,” dated July 9, 1992. [Exhibit 141]. 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 not workable because it relied on confidential information which could not be disclosed to the taxpayers. [Transcript Vol. I, pp. 64-67].

29.      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. [Transcript Vol. I, pp. 80-81, 92-93]. The confidentiality constraint did not bar application of the comparable value method in this case because Chevron had access to the pertinent contracts.

30.      Chevron has not carried its 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 Carter Creek production, and found against Chevron. Carter Creek 2000, ¶¶ 22, 145-158; Carter Creek 2001, ¶¶ 159, 256-257; Carter Creek 2002, ¶¶ 140, 231-232.

31.      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.

32.      None of Chevron’s witnesses testified that “Chevron/Texaco still does not know what the Department means when it directs a taxpayer to use the ‘comparable value’ method.” [Exhibit 901]. Rather their testimony concerned the application of the method. See Findings, ¶¶ 36-38. Chevron has not carried its burden 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 Carter Creek production, and found against Chevron. Carter Creek 2000, ¶¶ 14-23; Carter Creek 2001, ¶¶ 17-26; Carter Creek 2002, ¶ 22-26. In our previous cases, the demand by Chevron for definitions and guidelines was tied to its alleged inability to apply the method. Id.

33.      Although no witnesses discussed or explained in any detail the Department’s memorandum of November 30, 1995, the memorandum itself is in the record [Exhibit 923], together with a related letter dated March 1, 1996. [Exhibit 926]. The 1995 memorandum referred to the Department’s selection of the comparable value method for production years 1994 through 1996. [Exhibit 923, second paragraph]. The March 1, 1996, 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 927, 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 1995 memorandum. [Exhibit 928]. The Department’s subsequent notifications in 1999 and 2002 did not incorporate either the 1995 memorandum or the exception letter procedure included in 1996. [Exhibits 900, 904]. The Department’s position that the 1995 memorandum no longer applied when the 1999 selection letter was sent [Transcript Vol. I, p. 62] was reflected in the 1999 and 2002 notifications which did not incorporate either the 1995 memorandum or the exception letter procedure included in 1996.

34.      Chevron has not carried its 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 Carter Creek production, and found against Chevron. Carter Creek 2001, ¶¶ 160-164, 260-261; Carter Creek 2002, ¶¶ 141-146, 235-236.

35.      We find the remaining points raised by Chevron in its October 30, 2002, letter pertain only to the application of the comparable value method, not its selection. [Exhibit 901].

Witnesses Matthews and Tysse

36.      Chevron called David Matthews, operations manager for its Carter Creek Gas Plant [Transcript Vol. I, p. 23], to testify primarily to three features of the plant to distinguish it from the Whitney Canyon Gas Plant. According to Matthews, the Carter Creek Gas Plant has a more stringent air quality permit, requiring removal of a greater percentage of hydrogen sulfide. [Transcript Vol. I, pp. 24-26]. Matthews testified to the different natural gas liquid (NGL) recovery processes used at the Carter Creek Gas Plant and Whitney Canyon Gas Plant. [Transcript Vol. I, p. 30]. Matthews also testified to the installation of a Flexsorb sulfur recovery unit in October, 2002, after the Department’s selection letter was sent. [Transcript Vol. I, pp. 30-33]. Chevron reasons that the differing air quality requirements and NGL recovery processes distinguish the Carter Creek Gas Plant from the Whitney Canyon Gas Plant. Matthews’ testimony was offered to support an argument that processing contracts from the Whitney Canyon Gas Plant can not be used as comparables for gas processed at the Carter Creek Gas Plant. This issue is therefore a matter of application rather than selection of the method. Based on similar testimony, we rejected the argument in Carter Creek 2000, and rejected further elaboration of the same point in subsequent application cases. Carter Creek 2000, ¶¶ 35-59, 80-82; Carter Creek 2001, ¶¶ 86-100, 242-252; Carter Creek 2002, ¶¶ 70-78, 206-227. Chevron’s evidence related to the installation of the Flexsorb unit in 2002, after the issuance of the Department’s September 1, 2002, method selection letter, likewise can only be a matter of application rather than selection of the method.

37.      Craig Tysse, a Chevron gas control administrator, testified primarily concerning the volumes of gas processed for third parties pursuant to various contracts, the significance of contractual priorities for processing in the context of plant operations, and the composition of the Exxon Road Hollow gas processed at the Carter Creek Gas Plant. [Transcript Vol. II, pp. 238-245]. The testimony was offered to support the argument that the comparable value method cannot be applied to the Carter Creek Field gas because of the different volumes, composition or priority. This testimony concerned matters of application rather than selection of the method. Based on similar testimony, we rejected this argument in Carter Creek 2000, and have rejected further elaboration of the same point in subsequent application cases. Carter Creek 2000, ¶¶ 39, 45, 59, 69, 72, 130; Carter Creek 2001, ¶¶ 94, 104, 107, 109, 120-126, 246-249; Carter Creek 2002, ¶¶ 71-73, 76, 79-91, 100, 108-109, 221-224.

38.      Mr. Tysse also offered his opinions as to the motivations of the parties in entering into the various contracts identified as comparables. [Transcript Vol. II, pp. 251, 256, 257-259, 261]. While it was not clear from the testimony whether the opinions were based on first hand knowledge, no testimony was offered from the other parties to the agreements concerning their motivations. This is a matter of application rather than selection of the method. Based on similar testimony, we rejected this argument in Carter Creek 2001 and Carter Creek 2002. Carter Creek 2001, ¶¶ 98, 103, 111-112, 118-119, 122-123, 239; Carter Creek 2002, ¶¶ 81, 100, 105-106, 216.

39.      Based on Chevron’s post-hearing brief and pre-hearing issues of fact, we have identified several issues of fact Chevron would have us decide. While these issues are subsumed by the issue of fact identified and discussed above, we will briefly discuss the issues as framed by Chevron.

40.      Chevron contends the Department bears the burdens of proof and persuasion. [Petitioner’s Posthearing Brief, p. 12]. Those burdens rest with Chevron. Conclusions, ¶ 81.

41.      The question of whether valid comparables exist for Carter Creek production for 2003, 2004, and 2005 is a primarily 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. Carter Creek 2000, ¶¶ 35-59, 66-83; Carter Creek 2001, ¶¶ 85-148; Carter Creek 2002, ¶¶ 64-127. We have found the Department had a reasoned basis for selecting the comparable value method to be used by all Wyoming oil and gas producers in instances where oil and gas production is not sold at or prior to the point of valuation pursuant to a bona fide arms-length sale or where the product is used without sale. Findings, ¶¶ 5, 8-10, 48.

42.      Chevron also contends the Department did not demonstrate that appropriate comparables exist. Again, this is a question of the 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 and found otherwise. Carter Creek 2000, ¶¶ 35-59, 66-83; Carter Creek 2001, ¶¶ 85-148; Carter Creek 2002, ¶¶ 64-127.

43.      Chevron argues the Department was required to establish that the comparable value method accurately reflects fair market value. This argument is related to the burdens of proof and persuasion. To the extent it attempts to shift the burdens to the Department, we find the argument misconstrues the applicable standard. Conclusions, ¶ 81. We have found the Department had a reasoned factual basis for its selection of the comparable value method. Facts, ¶¶ 5, 8-10, 48. When Chevron argues the method selected by the Department must allow a producer to recover its costs of processing, it argues a question of the application of the method. In a previous proceeding concerning application of the comparable value method, we have addressed similar factual assertions. Carter Creek 2002, ¶¶ 48-63, 131-138, 201-230.

44.      Chevron raised an issue concerning the Department’s failure to respond to its October 30, 2002, letter. [Petitioner’s Issues of Fact and Law and Exhibit Indices, p. 1]. We take this issue to be related to Chevron’s reference to the November 30, 1995, memorandum in its October 30, 2002, letter, and to the fact that the Department did not respond to Chevron’s letter. [Exhibit 901]. We find nothing in either the 1995 memorandum or in the Department’s 2002 selection letter to support the continued validity of the 1995 memorandum. Facts, ¶¶ 28, 33-34. We find the Department’s September 1, 2002, selection letter applied to Chevron’s Carter Creek production.

45.      Chevron complains the Department did not develop the quality and quantity of data needed to determine a typical market processing fee or a processing fee that is statistically valid. This contention is directly related to the Department’s failed attempt to adopt a determinative formula in the early 1990's. See Amoco Production Company v. State Board of Equalization, 882 P.2d 866 (Wyo. 1994). We find 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. Findings, ¶ 28. This fact accordingly has no legal significance. Conclusions, ¶ 151.

46.      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. Carter Creek 2001, ¶¶ 165-179, 265-277; Carter Creek 2002, ¶¶ 147-159, 238-247.

47.      Chevron complains the Department has not adopted rules or other guidelines. The Department believes the definition of comparable value is clear. [Transcript Vol. I, p. 144]. However, we find absence of rules to be of no legal significance. Conclusions, ¶¶ 80, 118-119.

General Findings

48.      Chevron has not carried its burdens of proof or persuasion. We find the comparable value method selected by the Department on September 1, 2002, did not fail to accurately reflect the fair market value of Chevron’s production within the meaning of Wyo. Stat. Ann.

§ 39-14-203(b)(viii). We further find the Department had a reasoned, factual basis for selection of the comparable value method for all Wyoming oil and gas producers in instances where oil and gas production is not sold at or prior to the point of valuation pursuant to a bona fide arms-length sale, or where the product is used without sale.

49.      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

50.      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).

51.      “The Wyoming Legislature has charged the Wyoming Department of Revenue with the task of determining the fair market value of natural gas production for severance tax purposes. Wyo. Stat. Ann. § 39-14-202(a)(i).” BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶ 5, 112 P.3d 596, 600 (Wyo. 2005). The Department is also charged with annually determining the fair market value of natural gas production for ad valorem tax purposes. Wyo. Stat. Ann. § 39-13-102(m)(i), (n).

52.      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 production 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).

53.      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).

54.      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).

55.      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).

56.      “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).

57.      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). The identified method must be used “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.” Wyo. Stat. Ann. § 39-14-203(b)(viii).

58.      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.

59.      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. Marathon Oil Co., Docket No. 2004-08, March 29, 2005, 2005 WL 794788 (Wyo. St. Bd. Eq.); BP America Production Co., Docket No. 2003-114, March 18, 2005, 2005 WL 676580 (Wyo. St. Bd. Eq.); BP America Production Co., Docket No. 2003-102, March 3, 2005, 2005 WL 558991 (Wyo. St. Bd. Eq.); Chevron U.S.A., Inc., Docket Nos. 2002-50, et al., June 2, 2004, 2004 WL 1294512 (Wyo. St. Bd. Eq.); Burlington Resources Oil & Gas Co. et al., Docket No. 2002-49 et al., May 10, 2005, 2004 WL 1174649 (Wyo. St. Bd. Eq.); RME Petroleum Company, Docket No. 2002-52, November 20, 2003, 2003 WL 22814612 (Wyo. St. Bd. Eq.); Fremont County, Docket No. 2000-203, April 30, 2003, 2003 WL 21774604 (Wyo. St. Bd. Eq.).

60.      “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).

61.      “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).

62.      “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 the 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.” Union Pacific Resources, et al., Docket No. 2003-100, June 9, 2003, 2003 WL 21774603 (Wyo. St. Bd. Eq.) (hereinafter Whitney Canyon 2000), ¶ 107; aff’d BP America Production Co. v. Department of Revenue, 2005 WY 60, 112 P.3d 596.

63.      “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, aff’d BP America Production Co. v. Department of Revenue, 2005 WY 60, 112 P.3d 596.

64.      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).

65.      “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).

66.      “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)(i).

67.      “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 allow 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).

68.      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).

69.      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).

70.      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).

71.      “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.” U. S. Const. amend. XIV, § 1, second sentence.

72.      “No person shall be deprived of life, liberty or property without due process of law.” Wyo. Const. art. 1, § 6.

73.      Procedural due process is satisfied “if a person is afforded adequate notice and an opportunity to be heard at a meaningful time and in a meaningful manner.” BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶ 27, 112 P.3d at 609, quoting Robbins v. South Cheyenne Water and Sewage Dist., 792 P.2d 1380, 1385 (Wyo. 1990); see Higgins v. State ex rel. Workers’ Compensation Div., 739 P.2d 129 (Wyo. 1987), cert. den. 484 U. S. 988 (1987).

74.      “All laws of a general nature shall have a uniform operation.” Wyo. Const. art. 1, § 34.

75.      “Equal protection in Wyoming requires a law to operate alike upon all persons or property under the same circumstances and conditions.” W. W. Enterprises, Inc., v. City of Cheyenne, 956 P.2d 353, 356 (Wyo. 1998) (emphasis in original).

76.      A valuation method may yield a deduction so low that the valuation method is constitutionally impermissible. If:

an artificially low price were utilized for purposes of taxation, the result would be a lower tax for operators [with the excessive deduction] than that paid by other operators. That lack of uniformity would be unacceptable because ‘the Wyoming Constitution mandates that all [minerals] shall be uniformly taxed on the value of their gross product.’ Amax Coal West, Inc., 896 P.2d at 1332.

Wyodak Resources Development Corporation v. Wyoming Department of Revenue, 2002 WY 181, ¶34, 60 P.3d 129, 142 (Wyo. 2002).

77.      “Many types of property are included within each of the three constitutional classes of property…. For example, it has long been recognized that, even though mineral products are one class of property, different valuation methods should be applied to different types of minerals. Oil is not valued by using the same method as is used in valuing coal or uranium. See, e.g., Pathfinder Mines v. State Board of Equalization, 766 P.2d 531 (Wyo. 1988) (recognizing that uranium is valued by using a different method than is used in valuing other mineral products).” Amoco Production Company v. Wyoming State Board of Equalization, 899 P.2d 855, 860 (Wyo. 1995).

78.      “Uniformity of assessment requires only that the method of appraisal be consistently applied…. It is an intrinsic fact in mineral valuation that differences in values result from the application of an appraisal method.” In re Monolith Portland Midwest Company, Inc., 574 P.2d 757, 761 (Wyo. 1978).

79.      “[U]niformly achieving taxation based upon accurate fair market value may well require application of different methodologies to similarly situated mineral taxpayers if comparable values differ in processing agreements or different cost structures exist.” BP America Production co. v. Department of Revenue, 2005 WY 60 ¶ 30, 112 P.3d at 610.

80.      The Wyoming Supreme Court has concluded that adoption of rules by the Department to define the terms used in the comparable value method is not required:

We find no requirement for rulemaking to resolve any statutory ambiguity at issue in this case. Taxpayers believe that, in the absence of rulemaking, the Department is empowered with unfettered discretion to determine comparable value on an ad hoc basis. This argument goes too far. It is probably impossible to draft statutes with sufficient precision and foresight to resolve each of the hundreds of issues that are likely to arise during the life of a statute. This does not, however, make a statute void for vagueness or unenforceable barring rulemaking.

BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶ 23, 112 P.3d at 607-608. This is also true with respect to the Department’s selection of a valuation method. Pathfinder Mines Corp. v. State Board of Equalization, 766 P.2d 531, 535-536 (Wyo. 1988).

81.      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.

82.      “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).

83.      “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).

84.      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).

85.      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).

86.      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).

87.      “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.

88.      “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)?

89.      From the standpoint of evidence presented to the Board, this case follows the pattern of previous proceedings concerning application of the comparable value method. Chevron sought to carry its burdens of proof and persuasion by presenting much the same evidence it previously presented in Carter Creek 2000, Carter Creek 2001, and Carter Creek 2002. Chevron has tacitly assumed that key features of its 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. [Petitioner’s Posthearing Brief, pp. 11, 18-25]. For example, in this case Chevron presented essentially the same critique of the pertinent processing agreements that it presented in Carter Creek 2001 and Carter Creek 2002, cases in which only the application of the comparable value method was at issue. Findings, ¶¶ 36-38, 41-42.

90.      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). In Carter Creek 2001 and Carter Creek 2002, Chevron brought its appeal under Wyo. Stat. Ann. § 39-14-209(b)(iv). Carter Creek 2001, ¶ 218; Carter Creek 2002, ¶ 201. As we concluded in our decisions for those production years, Chevron 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). Carter Creek 2001, ¶¶ 219-220; Carter Creek 2002, ¶¶ 202-203. 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 Carter Creek 2001 or Carter Creek 2002. Carter Creek 2001, ¶ 219; Carter Creek 2002, ¶ 202.

91.      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) does 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. Carter Creek 2001, ¶ 221; Carter Creek 2002, ¶ 205. 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. Carter Creek 2001, ¶ 221.

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

92.      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 Chevron 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 only be considered in appeals of the Department’s determination of taxable value for that production year.

93.      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 by placing Wyo. Stat. Ann. § 39-14-203(b)(viii) in the statutory arrangement for reporting and paying severance and ad valorem taxes.

94.      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). A taxpayer must therefore be given direction about which valuation method the Department intends to use. A taxpayer 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 valuation 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); Conclusions, ¶ 58.

95.      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, ¶ 64. 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 Chevron of its intended method on September 1, 2002, a date more than six months in advance of the March 25, 2003, deadline for the January, 2003, severance tax return.

96.      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 severance tax reporting for the first of the three production years. By the time Chevron filed this appeal on August 29, 2003, it would have submitted monthly severance tax reports for production through June 2003.

97.      Complete information about the results for production year 2003 were not due until about six to eight months after the appeal was filed. Specifically, Chevron had to submit an annual gross products report which addressed all of production year 2003 by February 25, 2004, subject to one extension of up to sixty days. Conclusions, ¶¶ 64-65. Based on the information in the annual gross products report, the Department would determine the value of Chevron’s production for production year 2003, and certify that value on or before June 1, 2004, a date subject to extension for up to thirty days. Conclusions, ¶ 67; 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).

98.      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 complete production year.

99.      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, September 1, 2002, and the date when Department had to certify taxable value for production year 2004, i.e., June 1, 2005. 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, i.e., June 1, 2006.

100.    The Legislature’s choice of an appeal deadline means that Chevron 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 Chevron appealed the Department’s selection of method, it had reported no more than half of the actual financial results for production year 2003, was months away from having its first revenue and cost information for production year 2004, and was more than a year away from having revenue and cost information for production year 2005.

101.    In contrast, a taxpayer has a full year’s financial information, and more, before the deadline for appeal of the valuation of the first production year affected by the Department’s selected method. The annual valuation appeal 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.

102.    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 Carter Creek 2001, ¶¶ 52-79, with Carter Creek 2002, ¶¶ 48-63.

103.    The superiority of information for the appeal of a taxable value is not limited to financial information. In Carter Creek 2001 and Carter Creek 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.

104.    Similarly, there is superior information available to judge claims based on constitutional uniformity requirements. See Carter Creek 2001, ¶¶ 165-179; Carter Creek 2002, ¶¶ 147-159.

105.    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 the annual valuation of even the first production year.

106.    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 associated with applications for refunds. Wyo. Stat. Ann. § 39-14-109(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.

107.    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.

108.    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 a sophisticated taxpayer like Chevron, the notice of selection was directed to all oil and gas taxpayers. Findings, ¶¶ 4, 6-7. 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, ¶ 7, 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 Chevron’s natural gas?

109.    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,” Wyo. Stat. Ann. § 39-14-203(b)(viii), the taxpayer may appeal to this Board to change the method. We previously considered this standard in Whitney Canyon 2000 and Carter Creek 2000, and concluded that the statutory test of accurately reflecting fair market value could be applied by reference to two principles. Carter Creek 2000, ¶¶ 98-99; Whitney Canyon 2000, ¶¶ 107-108; Conclusions, ¶¶ 62-63. Nothing in this case has caused us to reconsider the conclusions of law we reached in those cases.

Error or carelessness

110.    In examining the Department’s selection of a method, 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, aff’d BP America Production Co. v. Department of Revenue, 2005 WY 60, 112 P.3d 596; Carter Creek 2000, ¶ 98. While Chevron has not acknowledged the tests the Board articulated in Whitney Canyon 2000 or Carter Creek 2000, we will nonetheless evaluate the evidence from three perspectives referenced in these decisions, Conclusions, ¶ 92: the Department’s explanation for its decision in 2002; information about Chevron 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.

111.    When Chevron made the record in Carter Creek 2000, it focused on the history of its 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 Carter Creek 2000, ¶¶ 12-23. 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, ¶ 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 Petitioner’s production if information is available to do so.” Carter Creek 2001, ¶ 274.

112.    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.

113.    In the context of all Wyoming oil and gas taxpayers, the breadth and depth of the Department’s knowledge of Chevron’s Carter Creek 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 even 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, ¶ 7. In some respects, this Board faces a similar problem. We know a great deal about Chevron’s Carter Creek 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 this taxpayer.

114.    The Department articulated acceptable reasons to prefer the comparable value method. See Findings, ¶¶ 5, 8-10, 12, 14. 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 Carter Creek 2001 and Carter Creek 2002 that the Department had a reasoned basis for applying the comparable value method to determine the value of Chevron’s production. Carter Creek 2001, ¶¶ 34-51; Carter Creek 2002, ¶¶ 31-47. In the Department’s articulation of its reasons for selecting the comparable value method, we find no error or carelessness.

115.    As a result of the timing of the hearing in Carter Creek 2000, the Department had access to extensive information about both the Carter Creek and Whitney Canyon operations of Chevron 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 hearings then taking place, or to delineate what information developed during the course of those hearing related to selection, rather than application, of the comparable value method. Chevron has not persuaded us that the information available to the Department by virtue of the hearing scheduled to begin 10 days after the date of the 2002 selection letter should cause us to set aside the Department’s selection of method. We also note that Chevron was a participant in both the Whitney Canyon 2000 hearing which concluded just prior to the Department’s September 1, 2002, selection and the Painter 2000 hearing which was ongoing on September 1, 2002. Whitney Canyon 2000; Union Pacific Resources, et al., Docket No. 2000-149 et al., September 30, 2003, 2003 WL 22321611 (Wyo. St. Bd. Eq.).

116.    Chevron responded to the Department’s selection of method by a letter requesting use of the proportionate profits method. Findings, ¶ 15. In statutory terms, the letter was 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 the letter as a contemporaneous expression of Chevron’s 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), and that Chevron would not acquiesce in the Department’s selection until it obtained “final and non-appealable decisions.” Findings, ¶ 15.

117.    Although the Department did not respond to Chevron’s letter, the Department was not obligated to do so by any statute or regulation. We also found that by the time the letters were received, the Department and Chevron were firmly committed to conflicting positions. Findings, ¶¶ 15-16.

118.    In our Findings, we have described the issues stated in Chevron’s letter as: (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, ¶¶ 28-29, 32-33, 44. We found that Chevron failed to carry its burdens of proof and persuasion with regard to these issues. Findings, ¶¶ 30, 34, 44.

119.    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 Petitioner’s production? Carter Creek 2001, ¶¶ 256-261; Carter Creek 2002, ¶¶139-146. Chevron’s claims with respect to the determinative formula method were considered at greater length, and rejected, after the hearing of the first Carter Creek comparable value appeal. Carter Creek 2000, ¶¶ 171-178. Similar claims were rejected by the Wyoming Supreme Court. BP America v. Department of Revenue, 2005 WY 60, 112 P.3d 596.

120.    After review of Chevron’s October, 2002, letter and the issues to which the letter spoke, we conclude there was no error or carelessness in the Department’s selection of method.

121.    The record does not include any evidence of further communication between Chevron and the Department prior to the time this appeal was filed. This is not surprising in view of Bolles’ testimony that “Chevron had a pretty good understanding of what the Department was going to do and that it was going to continue with comparable value method and the comparables that it had selected and that Chevron would continue to report and pay under proportionate profits.” Findings, ¶ 16. Nor is it surprising given Chevron’s position to “maintain the status quo.” [Exhibit 901]; See Findings, ¶ 15.

Relative merits of competing methods

122.    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; Carter Creek 2000, ¶ 99. Again, Chevron has not acknowledged this principle.

123.    When we used this principle in Carter Creek 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. Carter Creek 2000, ¶ 99. Our task was relatively easy, because Chevron made no effort to demonstrate that the proportionate profits method reached fair market value. Carter Creek 2000, ¶¶ 60-64, 138.

124.    Our record includes one exhibit originally prepared for the hearing in Carter Creek 2002 which purports to compare the results of alternative calculations of value for several production years. [Exhibit 117]. Our decision in that case placed little reliance on such comparisons. Carter Creek 2002, ¶ 134-135. We conclude Exhibit 117 illustrates the importance of addressing revenue and cost information in the context of applying the method.

125.    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. Carter Creek 2002, ¶¶ 240-241. 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, ¶¶ 8, 10, 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, ¶¶ 10, 14. 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.

Miscellaneous issues raised by Chevron

126.    Chevron identified nine issues of law in its pre-hearing issues of law and discussed seven issues in its post-hearing brief. Contentions and Issues, supra. As with Chevron’s issues of fact, these issues of law are subsumed by the issues of law identified and determined above. Therefore, we will briefly discuss the issues as framed by Chevron for the sake of clarifying our decision.

127.    Chevron contends comparables do not exist or do not achieve fair market value. 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 Conclusions, ¶¶ 89-91. It is therefore a question pertaining to the application of the Department’s selected method. See Conclusions, ¶¶ 102-106.

128.    Chevron contends the Department must demonstrate its selected method accurately reflects fair market value, a circumstance which would only be true if the Department had failed to notify Chevron 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, Findings, ¶¶ 5, 8-10, 14, but that testimony is only one consideration.

129. Chevron has framed this question in a way that tends to ignore the fact that the Department is authorized to select among four methods, all of which may determine fair market value. Conclusions, ¶¶ 125, 128. 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).

130.    The statutorily authorized methods must be correctly applied. During the period at issue, Chevron insisted on use of a version of the proportionate profits method which was not authorized by statute. Specifically, it 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, ¶ 59.

131.    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 taxpayer in this case. Findings, ¶ 14. 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 Carter Creek 2001, ¶¶ 271-272; Carter Creek 2002, ¶¶ 246.

132.    To the extent that Chevron means to argue that no other method is available, and that the proportionate profits method must be used by default, See Carter Creek 2000, ¶ 3, 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.

133.    We have specifically found that there was a reasoned basis for the Department’s selection of the comparable value method. Findings, ¶¶ 8-10, 14, 48.

134.    Chevron contends the Department’s actions deprived Chevron of its rights to due process. We understand this issue to have two dimensions: first, whether the Department was required to involve Chevron in the process leading up to its September 1, 2002, selection of the comparable value method for production years 2003, 2004 and 2005; and second, whether the Department was required to adopt rules defining the terms of the statutory comparable value method.

135.    The first dimension concerns the process undertaken by the Department in selecting the method to be applied. While Chevron argues it was denied due process because it was not involved in the process leading up to the Department’s September 1, 2002, selection, Chevron has not cited any cases to support its position. [Petitioner’s Posthearing Brief, pp. 29, 31-33]. The Wyoming Supreme Court has held that the change in valuation system does not require the adoption of rules so long as the right to protest and contest is afforded to the taxpayer. Pathfinder Mines Corp. v. State Board of Equalization, 766 P.2d 531, 535-536 (Wyo. 1988). The process used by the Department in selecting the method did not violate Chevron’s due process rights.

136.    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 Petitioner’s Posthearing Brief, we note that we have addressed this argument in previous opinions regarding application of the comparable value method to Carter Creek production. Carter Creek 2001, ¶¶ 85-148, 152-164, 256-261; Carter Creek 2002, ¶¶ 64-127, 131-138, 201-230.

137.    Chevron’s argument that rules must be adopted by the Department defining the terms used in the comparable value statute, Wyo. Stat. Ann. § 39-14-203(b)(vi), has been rejected by the Wyoming Supreme Court, BP America Production Company v. Department of Revenue, 2005 WY 60 ¶ 23, 112 P.3d 596, 607-608 (Wyo. 2005), as has the argument that the department must adopt rules when it selects a valuation method. Pathfinder Mines Corp. v. State Board of Equalization, 766 P.2d 531, 535-536 (Wyo. 1988).

138.    Chevron has raised an issue concerning whether there were procedural deficiencies in this matter. This issue is an adjunct to the due process issues address above. Conclusions, ¶¶ 134-137. Chevron argues it was deprived of its opportunity to respond and present evidence and argument on the issues involved in this matter. As such it is primarily a question of fact. Chevron presented extensive testimony and evidence on the contracts which have been identified and used by the Department as comparables in applying the comparable value method during the preceding triennial period. Findings, ¶¶ 36-38. We conclude Chevron was not deprived of its opportunity to respond and present evidence. We also find this is primarily an issue of the application of the method.

139.    Chevron contends it was not treated in a uniform, nondiscriminatory manner. This is an issue of the application, rather than selection, of the method. The issue raises questions of 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. We note that we have considered, and rejected, this argument in previous opinions regarding application of the comparable value method to Carter Creek production. Carter Creek 2001, ¶¶ 165-179, 263-277; Carter Creek 2002, ¶¶ 147-159, 238-247.

140.    In addition to the contested issues of law gleaned from Petitioner’s Posthearing Brief, Conclusions, ¶¶ 126-139, there remain four issues from Chevron’s pre-hearing filings which warrant comment for the sake of clarifying our decision. [Petitioner’s Issues of Fact and Law and Exhibit Indices, pp. 2-3].

141.    Chevron contends that any doubt in the applicable tax statutes must be construed most strongly in its favor. This is true, however, only if the statutes “are ambiguous or doubtful. Kelsey v. Taft, 1953, 72 Wyo. 210, 263 P.2d 135, 138; Equitable Life Assurance Society of the United States v. Thulemeyer, 1935, 49 Wyo. 63, 52 P.2d 1223.” Belco Petroleum Corp. v. State Board of Equalization, 587 P.2d 204, 210 (Wyo. 1978). Since neither the statute authorizing the Department to select a method nor the statute defining the selected method is ambiguous, this rule does not apply. See Conclusions, ¶ 80.

142.    Chevron contends the comparable value method must be applied in accordance with recognized appraisal standards. We find this issue to be a holdover from prior litigation involving the application of the comparable value method. We have held that appraisal standards do not apply in the context of the comprehensive statutory scheme for the valuation of oil and gas. Carter Creek 2000, ¶¶ 65, 149-158, Carter Creek 2001, ¶¶ 149-151, 224-225; Carter Creek 2002, ¶¶ 128-130, 209-210. However, our conclusion is of no legal significance in the context of this case.

143.    Chevron contends the comparable value statute, Wyo. Stat. Ann. § 39-14-203(b)(vi)(A) and the point of valuation statute, Wyo. Stat. Ann. § 39-14-203(b)(iv) require the Department to allow for processing expenses in an amount at least equal to the actual direct costs incurred by the taxpayer to process the gas. This is an issue of the application, rather than the 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. We note that we have considered, and rejected, this argument in a previous opinion regarding application of the comparable value method to Carter Creek production. Carter Creek 2002, ¶¶ 57-63, 131-138, 201-230.

144.    Chevron has raised an issue concerning whether the doctrines of collateral estoppel, judicial estoppel, res judicata or waiver prevent the Department from selecting the comparable value method to value Chevron’s Carter Creek production for production years 2003 through 2005. Chevron, however, presented no argument in its post-hearing brief 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 Carter Creek 2000 (we refer to Carter Creek 2000 because Chevron did not advance specific argument on this issue in the current case), we understand the core of Chevron’s 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, May 26, 1992, 1992 WL 126533 (Wyo. St. Bd. Eq.). 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, ¶¶ 109 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 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 Carter Creek 2000 (we refer to Carter Creek 2000 because Chevron did not advance specific argument on this issue in the current case), we understand Chevron 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, Findings, ¶¶ 28-29, 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, Carter Creek 2000, ¶¶ 189-191.

149.    Based on Carter Creek 2000, we understand Chevron’s 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 Carter Creek 2000. Carter Creek 2000, ¶¶ 192-195. Chevron apparently argues that the failure of the 1992 approach should be deemed a waiver of any comparable value approach. Chevron rests its 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, ¶¶ 28-29; Conclusions, ¶ 119.

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, ¶ 31. Further, and in response to a theory Chevron advanced in Carter Creek 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, Chevron’s characterization of the facts in this case is in dispute.

151.    Chevron’s extensive reliance in its post-hearing brief on Amoco Production Company v. State Board of Equalization, 882 P.2d 866 (Wyo. 1994), is misplaced. As previously noted, that case arose from the determinative formula litigation. Findings, ¶ 28, 45. 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 proceeding.

152.    We have also previously concluded that Chevron had no difficulty understanding the Department’s view of the comparable value method; Chevron simply refused to accept the Department’s position. Findings, ¶ 12, 32, 36-38.

153.    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 Chevron’s Carter Creek production within the meaning of Wyo. Stat. Ann. § 39-14-203(b)(viii). In doing so, we have considered and specifically reject all other contentions of Chevron.

ORDER

           IT IS THEREFORE HEREBY ORDERED the Department’s selection of method for production years 2003 through 2005, for Chevron’s Carter Creek 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 December, 2005.

                                                                  STATE BOARD OF EQUALIZATION

                                                                  _____________________________________

                                                                  Alan B. Minier, Chairman

                                                                  _____________________________________

                                                                  Thomas R. Satterfield, Vice-Chairman

                                                                  _____________________________________

                                                                  Thomas D. Roberts, Board Member

ATTEST:

________________________________

Wendy J. Soto, Executive Secretary