BEFORE THE STATE BOARD OF EQUALIZATION

FOR THE STATE OF WYOMING

IN THE MATTER OF THE APPEAL OF                     )

POWDER RIVER COAL COMPANY FROM        ) Docket No. 2003-156

PRODUCTION TAX AUDIT ASSESSMENT             )

BY THE MINERAL TAX DIVISION OF THE            )

DEPARTMENT OF REVENUE                                   )

(Rawhide Mine - Production Years 1997-1999)       )

IN THE MATTER OF THE APPEAL OF                    )

POWDER RIVER COAL COMPANY FROM       ) Docket No. 2003-157

A PRODUCTION TAX AUDIT ASSESSMENT        )

BY THE MINERAL TAX DIVISION OF THE           )

DEPARTMENT OF REVENUE                                  )

(North Antelope Mine - Production Year 1997)      )

IN THE MATTER OF THE APPEAL OF                   )

POWDER RIVER COAL COMPANY FROM      ) Docket No. 2003-158

A PRODUCTION TAX AUDIT ASSESSMENT       )

BY THE MINERAL TAX DIVISION OF THE          )

DEPARTMENT OF REVENUE                                 )

(Caballo Mine - Production Years 1997-2000)       )

IN THE MATTER OF THE APPEAL OF                   )

POWDER RIVER COAL COMPANY FROM      ) Docket No. 2003-159

A PRODUCTION TAX AUDIT ASSESSMENT        )

BY THE MINERAL TAX DIVISION OF THE           )

DEPARTMENT OF REVENUE                                  )

(Rochelle Mine - Production Year 1997)                  )

IN THE MATTER OF THE APPEAL OF                    )

POWDER RIVER COAL COMPANY FROM       ) Docket No. 2003-160

A PRODUCTION TAX AUDIT ASSESSMENT        )

BY THE MINERAL TAX DIVISION OF THE           )

DEPARTMENT OF REVENUE                                  )

(North Antelope Rochelle Complex                          )

Production Years 1998-2000)                                   )

___________________________________________________________________________________________________________________________

 

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

_____________________________________________________________________________________________________________

APPEARANCES

Lawrence J. Wolfe, Holland & Hart, LLP, for Powder River Coal Company (Petitioner or Powder River).

Karl D. Anderson and Ryan T. Schelhaas, Wyoming Attorney General’s Office, for the Wyoming Department of Revenue (Department).

JURISDICTION

The Board shall review final decisions of the Department on application of any interested person adversely affected, including boards of county commissioners. Wyo. Stat. Ann. § 39-11-102.1(c). Taxpayers are specifically authorized to appeal final decisions of the Department. Wyo. Stat. Ann. § 39-14-209(b). The taxpayer’s appeal must be filed with the Board within thirty days of the Department’s final decision. Wyo. Stat. Ann. § 39-14-209(b); Rules, Wyoming State Board of Equalization, Chapter 2, § 5(a). By Notices of Appeal dated December 15, 2003, Powder River timely appealed five final audit determinations of the Department. The Board accordingly has jurisdiction to hear the matter.

The Board held a hearing on June 20 through 24, 2005, before Alan B. Minier, Chairman, Thomas R. Satterfield, Vice-Chairman, and Thomas D. Roberts, Board Member.

STATEMENT OF THE CASE

Petitioner contested an audit finding that self-insured employee healthcare costs must be allocated to operating functions as direct costs under the proportionate profits valuation method stated in Wyo. Stat. Ann. § 39-13-203(b)(vii). We find for the Department of Revenue, except for two accounts related to healthcare costs of former employees.

CONTENTIONS AND ISSUES

Petitioner stated the issue of fact in this case as follows:

Did the Department incorrectly include employee health care costs in the direct cost ratio and allocate such costs to the operational functions using direct labor?

[Petitioner Powder River Coal Company’s Issues of Facts and Law and Exhibit Lists, p. 2].

Petitioner stated the issues of law as follows:

Whether the Department’s failure to accept PRCC’s classification of certain expenses and costs as indirect costs (subject to allocation by the direct cost ratio in the same manner as all other indirect costs) is consistent with Wyo. Stat. 39-14-103(b).

Whether the Department properly allocated costs as set forth in Exxon Coal (In the Matter of the Appeal of Exxon Coal U.S.A., Inc., SBOE Docket No. 93-107, decided October 6, 1994); in Wyodak Resources Development Corp. v. State Board of Equalization, 9 P.3d 987 (Wyo. 2000); and in Powder River Coal Company v. Wyoming State Board of Equalization, 2002 WY 5, 38 P.3d 423.

Whether the Department’s final determinations are arbitrary, capricious and an abuse of discretion.

[Petitioner Powder River Coal Company’s Issues of Facts and Law and Exhibit Lists, p. 3].

The Department stated a single issue of mixed fact and law:

Did the Department properly classify and treat Petitioner’s employee health care costs?

[Wyoming Department of Revenue’s Updated Issues of Fact, Issues of Law and Exhibit Index, pp. 2-3].

FINDINGS OF FACT

A. Background on Petitioner and the issues

1. Powder River Coal Company owns three coal mines in Campbell County, Wyoming. It owns the North Antelope Rochelle mine directly, and owns the Rochelle and Caballo mines through an intermediary company. [Transcript Vol. II, pp. 310-311]. Powder River is itself a subsidiary of Peabody Energy. [Transcript Vol. I, p. 150].

2. All of the coal produced from Powder River’s three mines is sold away from the mouth of each mine. [Transcript Vol. II, pp. 344-354, 356-357].

3. The Wyoming Department of Audit conducted audits of the taxable values Powder River reported for all three mines for production years 1997 through 2000. These appeals arise from the Department’s final determination of the fair market value of Powder River’s coal, based on those audits. [Exhibits 700-716].

4. The audits produced a complex array of issues. [Notices of Appeal]. Although many of these issues were unresolved when the Board commenced its hearing [Exhibit 115], the parties settled all but one issue by the close of the hearing. [Transcript Vol. IV, pp. 724-727; Vol. V, pp. 814-817]. The single remaining issue turns on the characterization of Powder River’s employee health care costs.

5. The characterization of health care costs is important because the fair market value of Powder River’s coal for tax purposes is determined by a valuation formula which applies to coal sold away from the mouth of a mine. Wyo. Stat. Ann. § 39-14-103(b)(vi). For the purposes of this case, the most important feature of the formula is a direct cost ratio that is applied to the sales value of extracted coal. Wyo. Stat. Ann. § 39-14-103(b)(vii). Generally speaking, the ratio consists of direct mining costs divided by total direct costs. Total direct costs include direct mining costs plus direct costs for processing and transporting, up to the point the coal is loaded for shipment. Wyo. Stat. Ann. § 39-14-103(b)(vii). By statute, the ratio does not include “indirect costs, royalties, ad valorem production taxes, severance taxes, black lung excise taxes and abandoned mine lands fees.” Wyo. Stat. Ann. § 39-14-103(b)(vii)(D).

6. Powder River argues its employee health care costs were indirect costs, and should not have been included in direct mining costs when the direct cost ratio was calculated. Findings, infra, ¶¶ 44-62. Generally speaking, the Department considered employee health care costs that could be allocated to mining to be direct mining costs. Findings, infra, ¶¶ 39, 64-66 .

7. If employee health care costs are direct mining costs, the fair market value of Powder River’s coal determined by the formula is greater than if employee health care costs are excluded from the calculation.

 The record does not include a precise calculation of the value at issue. The only calculation of value is found in Confidential Exhibit 104B, which is a calculation premised on a favorable ruling on all of Powder River’s issues. [Confidential Exhibit 104B; Transcript Vol. III, pp. 432, 486-492]. The entries related to the healthcare issue appear on page PRCC113 of Exhibit 104B, and are identified as the shaded costs under the category, “Fringe Benefit Calculation.” [Transcript Vol. III, p. 546-547].

B. Powder River’s healthcare plan

8. Susan Crowder is the director of benefits administration for Peabody Investments Corporation. [Transcript Vol. I, p. 56]. She described Powder River’s benefits program. Peabody Investments administers benefits for all affiliates and subsidiaries of Peabody Energy, including Powder River. [Transcript Vol. I, p. 56]. Crowder was familiar with all Peabody Energy healthcare plans in place from 1997 through 2000. [Transcript Vol. I, p. 63].

9. All Peabody plans are self-insured with the aid of a third party administrator. [Transcript Vol. I, pp. 61, 88, 263]. The principal advantage to Peabody is cost. Peabody avoids paying the profit margin an insurance company needs on an insurance contract. Peabody also is large enough to absorb occasional spikes in costs. [Transcript Vol. I, pp. 62-63, 264]. In addition, employee appeals regarding coverage go to federal court rather than state court. [Transcript Vol. I, p. 62]. Peabody also retains more control over the plan, and can introduce changes more quickly when necessary. [Transcript Vol. I, p. 62]. Crowder stated that most of the large companies in coal and related industries are now self-insured. [Transcript Vol. I, p. 63].

10. During production year 1997, the Powder River plan was administered by Blue Cross Blue Shield of Missouri. In 1998 the plan was moved to Blue Cross Blue Shield of Wyoming. [Transcript Vol. I, p. 64]. The record includes a sample contract with a plan administrator, which is always an independent contractor. [Exhibit 105D; Transcript Vol. I, p. 79]. Powder River paid the plan administrator a monthly fee based on employee head count. [Transcript Vol. I, pp. 66, 70].

11. The plan administrator paid claims based on an eligibility determination made by Peabody Investments. [Transcript Vol. I, p. 64]. Based on that eligibility determination, Powder River became responsible for claims made by its employees and paid by the plan administrator under the terms of the plan. [Transcript Vol. I, pp. 65, 71, 79]. Plan participants received the advantage of favorable rates available from providers in the plan administrator’s network of providers. [Transcript Vol. I, pp. 67-69, 77].

12. The plan administrator provided aggregate weekly billings to Peabody Investments. [Transcript Vol. I, p. 109]. The plan administrator reported complete claims data on a monthly basis. [Transcript Vol. I, pp. 80, 109]. The monthly report identified employee claims by social security number, which enabled Peabody Investments to allocate claims costs back to the Powder River mine which employed the plan participant. [Transcript Vol. I, pp. 109-110].

13. During any reporting period, the claims for any specific employee, with any associated dependents, range from nothing to the very large amounts associated with catastrophic medical conditions. [Transcript Vol. I, p. 148].

14. Only personnel of Peabody Investments had access to claims information for individuals. [Transcript Vol. I, pp. 95, 148, 309]. Managers at specific mines were provided only enough information to comment on aggregate claims attributable to the mine. [Transcript Vol. I, pp. 140-141]. This restriction insulated managers of operating units from any possible complaint that a management or personnel decision was based upon medical costs associated with an employee. [Transcript Vol. I, pp. 95-96].

15. For active employees, Powder River’s healthcare plan is governed by the Employee Retirement Income Security Act of 1974 (ERISA). [Transcript Vol. I, pp. 76, 81,121]. Peabody, rather than Blue Cross Blue Shield or any other plan administrator, was responsible for ERISA compliance. [Transcript Vol. I, p. 78]. Exhibit 105 includes the summary plan descriptions that established the respective rights of Powder River and its employees during the audit period. [Exhibit 105; Transcript Vol. I, pp. 80-81]. Powder River provided each employee a summary plan description. [Transcript Vol. I, p. 123]. A new description was issued whenever the plan changed, as when employee co-payments were introduced in 2000. [Transcript Vol. I, pp. 82-83, 86].

16. The plan description included many of the same features as traditional insurance plans, such as limits on pre-existing conditions, exclusions, and pre-certification for some procedures. [Transcript Vol. I, p. 107].

17. After April, 1997, employees who participated in Powder River’s healthcare plan had to pay $25 per month for an individual participant; $50 per month for an employee plus one dependent, and $75 per month for a family. [Transcript Vol. I, pp. 92, 105]. Powder River paid $1200 per year to employees who had other coverage and chose to opt out of plan participation. [Transcript Vol. I, pp. 113-114, 117]. One employee in a family commonly chose to opt out when Powder River employed two members of the same family. [Transcript Vol. I, p. 119].

18. ERISA only governed Powder River’s healthcare plan for active employees. [Transcript Vol. I, p. 121]. Certain employees, principally former employees, had the right to continue group health benefits for limited periods of time under Consolidated Omnibus Budget Reconciliation Act (COBRA). See http://www.dol.gov/dol/topic/health-plans/cobra.htm. They had to pay for the coverage based on a reasonable estimate of what the coverage actually costs the employer. [Transcript Vol. I, pp. 111, 114]. An actuarial consultant annually calculated COBRA rates based on average charges for all Powder River employees. [Transcript Vol. I, pp. 127, 142]. Former employees paid COBRA premiums directly to Powder River, but Peabody Investments allocated them back to specific mines. [Transcript Vol. I, pp. 111, 135]. Blue Cross Blue Shield administered the healthcare plan for all employees without regard to whether ERISA or COBRA governed plan participation. [Transcript Vol. I, p. 143].

19. As part of total compensation, Powder River health benefits were a substantial inducement for a prospective employee to take a job with Powder River. [Transcript Vol. I, pp. 115, 127, 261]. Peabody Energy and Powder River viewed the generous healthcare program as one of the things the company offered to discourage unionization. [Transcript Vol. I, p. 262]. Jeff Maher, assistant controller of operations for Peabody Investments, acknowledged that if one were going to compare union and non-union compensation, one would consider healthcare costs. [Transcript Vol. II, p. 324].

C. Powder River’s accounting system

20. Jeff Maher testified to the overall structure of the accounting system of Peabody Energy and its subsidiaries, including Powder River. [Transcript Vol. I, p. 150 et seq.]. Peabody has been using the same accounting system since the early 1980's. [Transcript Vol. I, p. 153]. Peabody moved each subsidiary like Powder River onto the system as it was acquired. [Transcript Vol. I, p. 153].

21. In the context of this case, a key fact is that the Peabody/Powder River accounting system was not designed around Wyoming tax statutes. [Transcript Vol. I, p. 154]. At the same time, information the system generates could be and was used for tax reporting. [Transcript Vol. I, p. 155]. As we consider how Powder River’s accounting system was translated into a Wyoming tax report, we accept the characterization of Powder River’s accounting system as “one of the best in the Powder River Basin.” [Transcript Vol. II, p. 372]. We also accept the testimony that all coal producers in Wyoming did not and do not have accounting systems which capture the functional detail characteristic of Powder River’s accounting system. [Transcript Vol. II, p. 364].

22. The Peabody accounting system had two principal objectives. The first was to allow Peabody to consolidate results company-wide. [Transcript Vol. I, p. 154]. The second was to allow the management of each mine to monitor costs against a budget. [Transcript Vol. I, p. 154]. To this latter end, the system included a series of modules that housed transactional detail. [Transcript Vol. I, p. 156].

23. Our record includes the confidential monthly cost reports for all the three Powder River mines for December, 1999. [Confidential Exhibit 103; Transcript Vol. II, p. 333; most dollar amounts were maintained as confidential at the hearing, but we find that the general structure of the reports was not]. Maher testified at length to various aspects of the reports. [Transcript Vol. I, p. 165 et seq.].

24. For the North Antelope/Rochelle mine, the specific functional cost categories of the reports were identified by the specified activities of bankshooting (drilling and shooting overburden); stripping; loading; haulage; roads; maintenance and support; dozers; preparation; haulage from prep plant; reclamation; water pollution control; other environmental; permitting and monitoring; training; engineering, land and drilling; power; warehousing; and mine administrative. [Confidential Exhibit 103, pp. 0055-0072]. The sum of all costs for these activities is identified as “Total Functional Costs.” [Confidential Exhibit 103, p. 0072]. The monthly reports for Powder River’s other two mines differed slightly. For example, the Caballo mine report included the activity of scrapers/pans. [Confidential Exhibit 103, p. 0032].

25. For some of the functional cost accounts, the accounting system captured a high degree of detail. Individual employees listed the number of hours they had worked, the piece of equipment they were using, and the activity the equipment was performing. [Transcript Vol. I, p. 157]. Payroll clerks then keyed that information into the payroll system and ultimately to the general ledger. [Transcript Vol. I, p. 158]. For most of the individual functional activities, the monthly report provided an overall summary broken down into three main categories: labor, supplies, and other. [Transcript Vol. I, p. 172].

26. The high degree of detail was not captured for all activities that comprise total functional costs; for example, warehousing was not charged to a specific function, but only to an activity called warehousing. [Transcript Vol. I, p. 159].

27. Healthcare costs appeared in each mine’s monthly report following the listing of Total Functional Costs. [Confidential Exhibit 103, p. 0072]. As an immediate practical consequence, no healthcare costs were included in the labor costs that are captured for specific functional activities. [Confidential Exhibit 103]. At the same time, only 20 to 25 of the 600 to 700 North Antelope/Rochelle employees were office administrative, so most of the aggregate fringe benefits in the monthly reports wound up supporting mining, processing, and transportation. [Transcript Vol. II, pp. 327-328].

28. During the course of the hearing, Powder River presented evidence regarding the detailed classification of costs related to the healthcare benefit. [Exhibit 106; Transcript Vol. II, pp. 213-216, 313]. The details of some classifications were presented for the first time to the Department at the time of the hearing [Transcript Vol. IV, pp. 776-777], and prompted the Department to agree that some healthcare related accounts should not be considered direct mining costs. [Transcript Vol. IV, pp. 738-741]. See infra, ¶ 66. The five accounts at issue, with their identifying numbers, are:

337x – Group Health ASO (ASO refers to administrator service fees) – Active Salaried. These are the service fees paid to Blue Cross Blue Shield and Delta Dental to administer the plan. Supra ¶ 10. A plan administrator’s fee reflects a rate charged per employee per month.

339x – Group Health ASO – Extended Salaried. In the main, extended employees are those who have been terminated and are getting COBRA coverage.

348x – Group Health Insurance – Extended Salaried. This amount, also for extended employees, represents an expense based on the healthcare claims processed by Blue Cross Blue Shield and Delta Dental on a weekly basis. This expense is reduced by the amount of payments received from the covered employees.

353x – Group Health Insurance – Active Salaried. This is the principal account at issue. It represents an expense based on the healthcare claims processed by Blue Cross Blue Shield and Delta Dental on a weekly basis. This expense is reduced by the amount of payments received from the covered employees.

375x – Health Care Other – Non Rep. This account reflects the expense of fees paid on behalf of employees for such services as alcohol and family counseling.

[Exhibit 106; Transcript Vol. II, pp. 213-216, 313-316].

29. Each mine’s monthly reports contained other accounts, included among fringe benefits commonly associated with healthcare benefit packages, which Powder River has chosen not dispute in this proceeding. These included 337x, “life and AD&D insurance,” which were life insurance premiums associated with each employee, and 381x, “Health Group Life Insurance,” which was life insurance program cost. [Exhibit 103; Transcript Vol. II, pp. 316-318].

30. Some costs did not appear anywhere in the monthly cost reports. For example, retiree healthcare costs were carried as an accrued liability on the books of Powder River, and claims for those liabilities were charged against the accrued liability when paid. [Transcript Vol. II, pp. 208, 305]. Retirement benefits were accounted for at the Powder River Group level and the Peabody consolidated level, so that nothing came out of the current balances for which a mine manager was held accountable. [Transcript Vol. II, p. 310]. Similarly, the costs of services provided by Susan Crowder’s organization, supra ¶ 8, were an intra-company service billing that was not included in pre-overhead operating profit. [Transcript Vol. II, p. 208].

31. While Peabody as a whole operated on an accrual basis, there were no accruals for health care expenses. [Transcript Vol. II, pp. 209-210]. Nor were there any reserves for healthcare costs, which were simply paid as claims were incurred. [Transcript Vol. II, p. 211].

D. Powder River’s reporting

32. One cannot fully appreciate the implications of Powder River’s arguments in this case without an understanding of how the Department obliged coal taxpayers to report cost information. To self-report taxable value (see infra, ¶ 80), Powder River first had to identify costs that were direct mining, direct transportation, and direct processing costs within the meaning of the statute. Supra ¶ 5. Powder River had to record the identified costs on Form 8151, which was prescribed by the Department for an Annual Gross Products Report. [E.g., Confidential Exhibit 104b, page 2].

33. Form 8151 requested information for fourteen specific line item costs. These line item costs did not correspond precisely to the cost categories in Powder River’s monthly reports. The categories were not entirely self-explanatory. They were: (1) Labor; (2) Supplies; (3) Fuel, Power and Utilities; (4) Other functional costs; (5) Current Reclamation; (6) Mine Engineering; (7) Depreciation; (8) Depletion; (9) Prop Tx, Sales Tx, Ins; (10) Coal Sampling & Testing; (11) Def. Overburden Removal; (12) Other Direct Costs, which includes four specified subheadings; (13) Transport costs not subject to allocation; and (14) Total Direct Costs. [E.g., Confidential Exhibit 104b, page 2]. The Department’s requirements for completing specific categories are apparently flexible; Powder River chose to report four line item costs and one subheading of Other Direct Costs as “included above [in other reported items].” [Confidential Exhibit 104b, page 2]. The complex nature of the reporting task was underscored during the testimony of Powder River’s expert, when the expert acknowledged that his illustrative calculation contained a multimillion dollar error – favorable to the taxpayer – in carrying forward an entry from a supporting schedule. [Transcript Vol. III, pp. 491-492].

34. Each of the fourteen line item cost categories on Form 8151 was broken out into separate subcategories for Mining, Transportation, and Standard Processing, creating a chart with three cells across for each of the line item cost categories. [E.g., Confidential Exhibit 104b, page 2]. Transportation Costs were handled separately, in part because they were allocated by a total average distance hauled (expressed in feet), divided to in-mine and out-of-mine based on the location of the mine mouth. [E.g., Confidential Exhibit 104b, page 2, lines 16-20].

35. Total Direct Mining Costs on line 21 of Form 8151 were the sum of (1) Total Direct Costs for mining on line 14 and (2) allocated in-mine direct transportation costs from line 19. [E.g., Confidential Exhibit 104b, page 2, lines, 14, 19, 22]. The cost data on Form 8151 can be tied together more than one way. For example, Total Direct Costs on line 22 of Form 8151 equaled the sum of all Total Direct Costs on line 14 for the subcategories Mining, Transportation, and Standard Processing; and also equaled the sum of (1) Total Direct Mining Costs in line 21, (2) allocated out-of-mine direct transportation costs in line 20, and (3) Total Direct Costs for Standard Processing on line 14. [E.g., Confidential Exhibit 104b, page 2].

36. Powder River used the values for Total Direct Mining Costs from line 21 of Form 8151, and Total Direct Costs from line 22 on Form 8151 to calculate a Direct Cost Ratio. The Direct Cost Ratio was in turn used to complete the calculation of taxable value on the Department’s single-page Form 8101. [E.g., Confidential Exhibit 104b, page 1, lines 4 through 10]. Form 8151 is the summary page for an Annual Gross Products Report for Coal. [E.g. Confidential Exhibit 104b].

37. Neither Form 8101 nor Form 8151 required information about a taxpayer’s indirect costs. [E.g., Confidential Exhibit 104b, pages 1 and 2].

38. For production year 1997, corporate staff in Powder River’s Gillette, Wyoming, office prepared its annual gross products report. [Transcript Vol. II, p. 238]. That year, Powder River reported all of the healthcare costs at issue as direct costs, except a relatively small portion of healthcare costs related strictly to mine administrative functions, such as clerical and legal. [Transcript Vol. II, pp. 189, 202, 217, 241; Vol. IV, pp. 745-746]; supra ¶ 27. Powder River allocated the healthcare costs based on the values of other direct labor costs. [Transcript Vol. IV, p. 746].

39. The production year 1997 reporting was consistent with the longstanding policy of the Department. The Department had always included fringe benefits, including healthcare costs, in the labor components of the direct cost ratio calculation. [Transcript Vol. IV, p. 742; see Confidential Exhibit 104b, page 2, line 1]. Other than the claims made in this case, all coal producers have been reporting in the established manner since the statute became effective in 1990. [Transcript Vol. IV, p. 742]. Healthcare costs have been included whether the producer was self-insured or insured through another party. [Transcript Vol. IV, p. 742]. Most producers allocated healthcare costs either by reference to other direct labor costs, or on a head count by function. [Transcript Vol. IV, p. 742]. The Department pursued this same policy in audits. [Transcript Vol. IV, p. 742].

40. In 1998, Peabody closed divisional offices around the country and centralized corporate services in the St. Louis area. [Transcript Vol. I, p. 152]. When Jeff Maher recognized that he did not have the knowledge to apply Powder River’s cost accounting information to prepare a Wyoming tax return, he retained the services of a consultant, Don Coovert. [Transcript Vol. II, p. 239]. By profession, Mr. Coovert is a Certified Public Accountant [Transcript Vol. II, p. 340], but this professional credential is supplemented by extensive experience in the coal industry.

E. Powder River’s position on healthcare costs

41. Coovert has had a long involvement in coal taxation in Wyoming, beginning as a property tax supervisor for a Wyoming coal producer in 1974. [Transcript Vol. II, p. 341]. He was directly involved in many of the tax disputes of the late 1980's. He was chairman of the tax committee of the Wyoming Mining Association during the period when the current statutory provisions were considered, and eventually adopted, by the Wyoming Legislature in 1990. [Transcript Vol. II, pp. 342, 358-362].

42. During his testimony, Coovert frequently stated personal views about statutory interpretation and legislative history. [E.g., Transcript Vol. II, p. 394; Vol. II, pp. 448-449, 453, 549, 637]. We are, of course, bound to interpret statutes according to settled principles, Conclusions, infra, ¶ 81-82, and to ignore individual views about legislative history. Conclusions, infra, ¶ 84. At the same time, we find it appropriate to consider a taxpayer’s rationale for the manner in which it discharges its self-reporting duties. We therefore consider Coovert’s extensive testimony for the purpose of understanding how and why Powder River reported taxable value as it did.

43. Although Coovert prepared the Powder River tax returns, Jeff Maher remained responsible for every ultimate decision about cost classification, in consultation with his consultant. [Transcript Vol. II, pp. 238-239]. Maher deferred to Coovert for all details of the returns. [Transcript Vol. II, p. 331].

44. Maher articulated a single reason for viewing healthcare costs as indirect costs under the Wyoming statute. [Transcript Vol. II, pp. 240-241]. Maher argued healthcare costs were indirect because they do not track directly with employee wages, and Powder River could not attribute healthcare costs to a particular function where the employee works. [Transcript Vol. II, pp. 240, 244, 255, 258-259].

45. Coovert’s support for Powder River’s argument rested on a glossary of his own devising, four items of which (“allocation,” “attribution,” “operational function,” and “indirect costs”) tie directly to pertinent wording of the statute. [Transcript Vol. II, p. 363; Exhibit 116]. The glossary goes beyond defining the terms to include commentary on usage. [Exhibit 116]. Because this glossary was central to Powder River’s position, we quote it in its entirety. Many of the terms are interrelated, so we have underlined words and phrases that are themselves included as terms in the glossary:

Allocation: A method used to split a group of costs and assign them to specific functions, when costs are not captured by the accounting system.

Attribution: A more specific method of assigning costs, “attribution” is mentioned in the coal valuation statute. Attribution involves calculating the actual cost by function, when the costs are not captured by the accounting system by function. For example property tax on equipment and machinery is not captured by function (mining, transportation, and processing); it is assigned by PRCC to one account and treated as an indirect cost. However, it is possible, with a lot of work, to attribute property tax to each item of equipment and machinery. It involves taking the asset listing and calculating the individual tax burden for each asset and then assigning that cost to a particular function. The DOR [Department of Revenue] went through that exercise in more than 100 pages of work papers and PRCC [Powder River] does not disagree with the end result. But PRCC does not believe that all that work gives any better result than simply treating the cumulative tax as an indirect cost and using the direct cost ratio to allocate.

Captured costs: Those costs that are specifically identified with and assigned by the accounting system to each function.

Charge back: An accounting method used to distribute cost to the functions (for example: equipment operating costs being assigned to the functions based on hours of use).

Function(s): As used in the coal valuation statute and in PRCC’s accounting system, the broadest grouping of costs into the three components of the direct cost ratio: mining, transportation, and processing. Functions are further broken down into operational functions and non-operational functions.

Operational functions: Generally the primary activities that are grouped together are mining, transportation and processing and further subdivided into stripping, hauling, current reclaiming, etc.

Non-operational functions: Generally include support functions such as shop, maintenance, support, warehouse and administration.

Functional areas: a general term used to describe specific operational and non-operational areas within the overall mining, transportation and processing operations. Bank shooting, stripping, hauling, loading, processing can each be called a functional area.

Functional costs: In PRCC’s accounting system are direct Labor, direct Supplies, and direct Other (a category that includes power and maintenance and support costs) and certain specific functional costs such as direct Lease/Rental. PRCC’s accounting system assigns direct costs to one of these functional areas within each function and then the costs are further broken down by functional areas.

Multifunctional costs: Costs that are expended for more than one function.

Indirect costs: In PRCC’s accounting system indirect costs are all costs that are not assigned to a function. Indirect costs are also called overhead. Functional costs plus indirect costs (overhead) equals total costs. In Wyoming’s Coal Statutes “Indirect costs include but are not limited to allocations of corporate overhead, data processing costs, accounting, legal and clerical costs, and other general and administrative costs which cannot be specifically attributed to an operational function without allocation.”

[Exhibit 116].

46. According to Coovert, the two most critical glossary definitions are allocation and attribution. Coovert believes that Wyo. Stat. Ann. § 39-14-103(b)(viii) makes a significant distinction between attribution and allocation. [Transcript Vol. III, pp. 367, 449]. The statutory definition of direct mining costs closes with a catchall phrase, “. . .and any other direct costs incurred prior to the mouth of the mine that are specifically attributable to the mining operation.” Wyo. Stat. Ann. § 39-14-103(b)(vii)(B). The statutory definition of total direct costs similarly closes with the catchall phrase, “. . . and any other direct costs incurred that are specifically attributable to the mining, processing or transportation of coal up to the point of loading for shipment to market.” Wyo. Stat. Ann. § 39-14-103(b)(vii)(C). The statutory definition of indirect costs closes with a somewhat different catchall phrase, “. . . and other general and administrative costs which cannot be specifically attributed to an operational function without allocation.” Wyo. Stat. Ann. § 39-14-103(b)(vii)(C). [Emphasis supplied in each phrase].

47. In each of the catchall phrases above, “attributable” or “attributed” read consistently with the common dictionary definition of the verb “attribute,” which is “assign or ascribe (to).” Webster’s New World College Dictionary (4^th Edition, 2001), p. 92. For example, one can easily understand the closing phrase of the statutory definition direct mining costs to mean, “. . .and any other direct costs incurred prior to the mouth of the mine that are specifically assigned or ascribed to the mining operation.” See Wyo. Stat. Ann. § 39-14-103(b)(vii)(B).

48. Coovert’s glossary definition of “attribution,” which associates the root verb “attribute” with a technical accounting term, does not translate easily or well. The core of his definition is this sentence: “Attribution involves calculating the actual cost by function, when the costs are not captured by the accounting system by function.” Supra ¶ 45. Inserting this definition into the catchall phrase for direct mining costs, we have something like, “. . . and any other direct costs incurred prior to the mouth of the mine that are specifically calculated by the actual cost for a function, when the cost is not captured by the taxpayer’s accounting system by function, to the mining operation.” [Coovert’s definition of attribution inserted in place of the word “attributable”]. See Wyo. Stat. Ann. § 39-14-103(b)(vii)(B). Even if this thought could be stated more coherently, our understanding of Powder River’s position is that any such statement would necessarily introduce and rely upon Coovert’s definitions of “captured costs” and “function.” Supra ¶ 45. As we have already seen, Coovert’s definition of “function” incorporates additional distinctions and definitions. Supra ¶ 45. Since the legislature did not see fit to erect this edifice, the Board must not do so. We do not address the question of the Department’s power to do so by future rule making, should it so choose.

49. Coovert’s definition of allocation is a way to break up an amount when costs are not captured by function. [Transcript Vol. II, p. 366]. Again, Powder River asks us to introduce and rely on two additional definitions, “captured (costs)” and “function,” along with the other definitions nested in “function.” Supra ¶ 45.

50. By his definitions of attribution and allocation, Coovert would inescapably make the details of taxpayer’s accounting system the central focus to interpretation of the statute. A taxpayer’s choice of the costs which it chooses to identify, and how the taxpayer chooses to assign those costs in the context of the management of its operations, affect whether attribution in Coovert’s sense is possible. This would introduce radical change to utilizing the structure of the existing statutory valuation method of Wyo. Stat. Ann. § 39-14-203(b)(vii).

51. Coovert has seen most of the accounting systems of Wyoming coal companies. [Transcript Vol. II, p. 363]. He confirmed that some companies do not have an accounting system organized by function. [Transcript Vol. II, p. 363]. We accept this as true. It follows that there are immediate practical impediments to applying Coovert’s definition of attribution to such companies, since we must doubt that any actual cost can be attributed, i.e., calculated “by function,” if the accounting system is not organized by function. Whatever the merits of Coovert’s approach might be for Powder River Coal Company alone, his approach becomes problematic as a general policy for the Department. The Department must deal with taxpayers who use different, and in some cases less refined, accounting systems.

52. Coovert indirectly confirmed the scope of the failure of industry accounting systems to neatly capture costs by functions in a manner suitable for calculation of taxable value. He testified that the industry is concerned about a proliferation of accepted cost allocation methods, which now number between fifty and one hundred. [Transcript Vol. II, p. 379]. Coovert testified that ideally, there would be almost no allocations. [Transcript Vol. II, p. 379]. We doubt Coovert’s view of the ideal. Because accounting systems vary, we find that it is wiser to view the growth of allocations over time as evidence that the Department and the industry have established conventions to resolve many potential disputes over the application of the statute.

53. Despite these difficulties with Coovert’s definition of attribution, the fact remains that the word “allocation” appears only in the statute’s definition of indirect costs. Supra ¶ 46. Because this is so, Coovert concludes that allocation can only be used for one purpose, i.e., to allocate costs that are specifically listed in the statute as direct, as opposed to indirect. [Transcript Vol. III, p. 449]. As we shall relate, he views even this use of allocations as circumscribed by an implied condition of materiality. Infra, ¶ 56. Nonetheless, Coovert’s view of the distinction between attribution and allocation affected how he calculated and reported taxable value for Powder River.

54. Coovert’s first step was to consult the statutory definitions of direct mining costs and total direct costs, and to identify the items that were specifically listed. [Transcript Vol. III, pp. 371, 523; see also Transcript Vol. II, p. 394]. We understand specifically listed items to include at least:

. . . mining labor including mine foremen and supervisory personnel whose primary responsibility is extraction of coal, supplies used for mining, mining equipment depreciation, fuel, power and other utilities used for mining, maintenance of mining equipment, coal transportation from the point of severance to the mouth of the mine. . .

Wyo. Stat. Ann. § 39-14-103(b)(vii)(B). If Coovert viewed the listed items as being captured (supra ¶ 45) in the accounting system, that’s the way they ended up on the return. [Transcript Vol. III, p. 523].

55. Coovert’s second step was to identify direct mining costs and total direct costs that were not captured by the system. [Transcript Vol. III, p. 523]. He handled these costs by attribution as explained in his glossary definition. [Transcript Vol. II, p. 394]; supra ¶ 45.

56. Coovert placed a materiality constraint on his use of attribution. [Transcript Vol. II, p. 394]. If, in his estimation, there was an allocation methodology that reached a result not materially different than attribution, he considered its counterproductive and inefficient to spend the time to break the costs down on an actual basis. [Transcript Vol. III, p. 448]. He argued that the Department’s policy should be to require detailed calculations if the results are material, but not if they don’t make any difference, despite his view that the statute requires attribution of direct costs. [Transcript Vol. III, p. 453].

57. If there was a direct mining cost or total direct cost specifically listed in the statute which could not be attributed as that word was defined by Coovert, Coovert broke it down by allocation and placed it in the direct cost ratio. [Transcript Vol II, p. 394].

58. After considering the specifically listed costs, Coovert turned to costs that fell within the catchall phrases, (1) “any other direct costs incurred prior to the mouth of the mine that are specifically attributable to the mining operation,” and (2) “and any other direct costs incurred that are specifically attributable to the mining, processing or transportation of coal up to the point of loading for shipment to market.” [Transcript Vol. III, pp. 524-525]. He recognized that direct mining costs included costs, not specifically listed in Wyo. Stat. Ann. § 39-14-103(b)(vii)(B), that were nonetheless incurred prior to the mouth of the mine and were specifically attributable to the mining operation. [Transcript Vol. III, p. 526]. However, Coovert only included these costs if they could be attributed, as defined in his glossary. [Transcript Vol. III, p. 526]. If costs described by the catchall phrases could not be so attributed, then Coovert treated them as indirect costs. [Transcript Vol. III, pp. 526-527]. Treatment as indirect tended to happen with multi-functional costs, which could be assigned to different functions only by allocation. [Transcript Vol. III, p. 530]. As we have seen, any costs treated as indirect went unreported on the Department’s Forms 8101 and 8151. Supra ¶ 37.

59. Taken in its entirety, Coovert’s approach would destabilize tax preparation conventions which have accumulated since the passage of the statute in 1990. Powder River plainly intends to question the inclusion of other fringe benefits in mining labor if they are successful in this proceeding. [Transcript Vol. III, pp. 547-548]. Coovert’s principles would also lead to questions about such long-settled practices as the allocation of road costs in the mine, supra ¶ 34, because, as Coovert noted, one can argue about whether roads in the mine are specifically listed as a direct mining cost. [Transcript Vol. III, p. 487].

60. Coovert offered two broad factual statements as the basis of his arguments for excluding Powder River’s healthcare costs from direct costs of mining. The first statement was that Powder River’s health care costs cannot be attributed at all, because they don’t vary in proportion to wages, salaries, or similar elements of mining labor. [Transcript Vol. III, pp. 468, 563]. Instead, they correlate to dependents and claims paid in a given period. [Transcript Vol. III, p. 563]. This statement is true.

61. As a variation on this first statement, Coovert opined that healthcare cost is closer in kind to a general and administrative cost than mining labor. [Transcript Vol. III, p. 557]. The Department holds the opposite view, which we find more persuasive. Infra, ¶ 64. Maher conceded that Powder River’s monthly reports did not include general and administrative costs as defined in Wyo. Stat. Ann. § 39-14-203(b)(vii)(D). [Transcript Vol. II, pp. 325-326]. However, if Coovert’s definitions were taken as a premise, it would follow that healthcare costs are a general and administrative cost that can only be broken down into operational functions by allocation (as Powder River itself did for production year 1997), not by attribution. This characterization would fit squarely within Coovert’s reading of the statutory definition of indirect cost in Wyo. Stat. Ann. § 39-14-203(b)(vii)(D). Powder River has not persuaded us to accept Coovert’s definitions.

62. The second broad factual statement is that in Coovert’s experience in the accounting industry, “direct labor” means the actual hourly wage or salary paid and nothing else. [Transcript Vol. III, pp. 468, 551, 624]. In his view, direct labor does not include fringe benefits such as healthcare. [Transcript Vol. III, p. 468]. He acknowledges that other accounting authorities have the contrary view. [Transcript Vol. III, pp. 551-552]. He acknowledges that the statute refers to “mining labor” rather than “direct labor.” [Transcript Vol. III, p. 635]. Coovert did not persuade us that his view of accounting practice obliges us, as a proposition of fact, to find that mining labor means or should mean the actual hourly wage or salary paid and nothing else.

F. The Department’s position on healthcare costs

63. Craig Grenvik, Administrator of the Department’s Mineral Tax Division, testified for the Department. [Transcript Vol. IV, p. 677].

64. The Department’s position is that healthcare costs fall within the definition of mining labor, which includes wages, payroll taxes, and fringe benefits. [Transcript Vol. IV, p. 743]. The Department sees the words mining labor as being all costs associated with retaining that labor. [Transcript Vol. IV, p. 744]. For about fifteen years, the Department has looked at healthcare costs as being part of the compensation an employee receives, and part of the expense a producer incurs. [Transcript Vol. IV, pp. 742, 745]. All producers have followed this policy until the claims now made by Powder River. [Transcript Vol. IV, p. 742].

65. Producers have commonly allocated healthcare costs either by labor costs or by head count by function. [Transcript Vol. IV, p. 742]. The Department has never required a producer to allocate more precisely than with those methods. [Transcript Vol. IV, pp. 748, 753].

66. After having a full opportunity to review the explanation of the five accounts at issue, Grenvik concluded as follows for each of the accounts:

337x – Group Health ASO (ASO refers to administrator service fees) – Active Salaried. The ASO, based on a rate per employee, is an actual charge for the healthcare plan, and should be collected as a direct cost.

339x – Group Health ASO – Extended Salaried. Since this is a charge for employees not currently working at the mine, it should not be included among direct costs.

348x – Group Health Insurance – Extended Salaried. Since this is a charge for employees not currently working at the mine, it should not be included among direct costs.

353x – Group Health Insurance – Active Salaried. This is a direct labor expense. However, this expense is reduced by the amount that Powder River collects from its employees for health insurance, since what employees pay is not an expense to the coal producer.

375x – Health Care Other – Non Rep. Counseling services should be included as direct.

[Transcript Vol. IV, pp. 738-742, 771-772]. In other words, the Department agrees that the costs in two of the five accounts at issue should not be allocated among direct costs.

67. The Department does not object to Powder River’s distinction between attribution, in the sense of being specifically identified, and allocation, in the sense of being some other basis to get mining and processing costs into the direct cost ratio. [Transcript Vol. IV, pp. 781-782]. However, the Department rejects the many conclusions that Powder River draws from this distinction. For example, the Department disagrees that a cost that cannot be attributed, but can only be allocated, must be indirect. [Transcript Vol. IV, p. 780].

68. For the Department, the first and most important question is whether the cost is a direct cost, and if so, the cost must be included in the ratio. [Transcript Vol. IV, p. 780]. From this perspective, Grenvik noted that the statute uses a broad term, “mining labor,” rather than a more limited phrase such as wages or salaries. [Transcript Vol. IV, p. 770]. Grenvik also pointed out that the statutory list of direct mining costs includes costs, such as warehousing, that were classically viewed as administrative. [Transcript Vol. IV, pp. 780-781]. For example, if a warehouse is located in the mine pit and only focuses on activities in the mine pit, the Department views it as a direct mining cost. [Transcript Vol. IV, p. 780].

69. Powder River’s sharpest criticism of the Department concerns two sets of letters in which the Department gave advice to another taxpayer about the reporting of health care costs. [Transcript Vol. IV, pp. 789-793; Exhibits 100, 101]. In the first set of letters, a representative of RAG American Coal Holding, Inc. (RAG) sought an interpretation from the Department on twenty-four cost classification issues. The letter included the following:

From William M. Hartzler to Randy Bolles, April 17, 2004:

RAG has reported as an indirect cost the following actual costs incurred:

4.   Medical, dental and vision costs – RAG self-insures for these costs. Included in the medical, prescription drug, dental and vision cost is the cost of providing these benefits for the employee’s family members. Because we are self-insured, one or two serious illnesses or accidents can dramatically increase these costs and may or may not be for an employee. In addition, we are unable to identify what portion of the cost pertains to an individual employee or his family member because of the privacy requirements included in the Health Insurance Portability Accountability Act of 1996.

[Exhibit 100, p. PRCC 0004]. The Department specifically responded to only four of the twenty-four issues in Hartzler’s letter, and did not respond to the medical, dental and vision costs item. [Exhibit 100, pp. PRCC 0006-0007].

70. The second set of letters is more directly on point. By this time Hartzler was writing on behalf of Foundation Coal. The letters show this exchange:

From William M. Hartzler of Foundation Coal to Craig Grenvik, April 8, 2005:

Foundation has reported as an indirect cost the following actual costs incurred:

* * *

3.   Medical, dental and vision costs – Foundation self-insures for self-insures for these costs. Included in the medical, prescription drug, dental and vision cost is the cost of providing these benefits for the employee’s family members. Because we are self-insured, one or two serious illnesses or accidents can dramatically increase these costs and may or may not be for an employee. In addition, we are unable to identify what portion of the cost pertains to an individual employee or his family members because of the privacy requirements included in the Health Insurance Portability and Accountability Act of 1996.

[Exhibit 101, p. PRCC 0011].

71. The Department’s reply from Matthew Sachse, Valuation Manager, Mineral Tax Division, to William L. Hartzler, April 25, 2005, stated:

The Department disagrees with the handling of the following expenses:

3. Medical, dental and vision costs – While the actual expenses paid to health care providers for specific medical procedures should not be considered direct expenses, the accruals made by Foundation to reserve accounts or payments made for reinsurance during the year should be allocated to the functions by the production labor expenses.

[Exhibit 101, p. PRCC 0016].

72. The Department concedes the similarities between the Powder River and Foundation Coal healthcare programs. [Transcript Vol. IV, p. 684]. Powder River believes the Department’s letter to be a confession that the healthcare costs at issue in this case are not direct costs, and hence should not be included in the direct cost ratio. We find to the contrary.

73. Grenvik testified that the correspondence with Foundation Coal occurred in the context of an agreement with the taxpayer that employee fringe benefits were to be treated as mining labor. [Transcript Vol. IV, p. 778]. The question at hand was therefore what the correct number for healthcare benefits would be. The Department favored the allocation of an assumed accrual, thereby approximating a spread among employees as if there were a traditional insurance policy. [Transcript Vol. IV, pp. 685, 699-701, 733, 735, 750, 771]. After its reply of April 25, 2005, the Department learned that Foundation made no such accruals. [Transcript Vol. IV, p. 733]. In verbal discussions that followed with Hartzler as representative of Foundation, the Department directed Foundation to spread the actual healthcare costs according to labor costs of head count by function, which is the same way the Department has handled the corresponding Powder River healthcare costs in this case. [Transcript Vol. IV, pp. 736, 773].

74. Powder River did not call Mr. Hartzler to contradict Grenvik’s testimony, and we find Grenvik’s testimony to be credible. We specifically refuse to find that the Hartzler letters are evidence of how Foundation Coal or RAG actually reported its costs, in the absence of a competent witness from Foundation Coal or RAG. [See Powder River Coal Company’s Proposed Findings of Fact, Conclusions of Law and Order, p. 23]. In this regard, it is our intention to give less weight to correspondence between the Department and a third party than we would to correspondence between the Department and a petitioner. See Conclusions of Law, ¶¶ 90, 113.

75. The Petitioner further directs our attention to a portion of Grenvik’s testimony. In the testimony in question, we understood Grenvik to be responding to questions based on how a third party might have interpreted the Department’s letters to Hartzler – not in response to questions about the Department’s position. [Transcript Vol. IV, pp. 702-710; Powder River Coal Company’s Proposed Findings of Fact, Conclusions of Law and Order, pp. 17-18]. Petitioner would have us find that Grenvik made broad concessions that healthcare costs should be treated as indirect costs, then later recanted this testimony. Such broad concessions would, of course, be inconsistent with the longstanding policy of the Department, and inconsistent with the thrust of the second letter, which is the Department’s expectation that some value for healthcare costs would be reported among direct labor costs. We decline to characterize Grenvik’s testimony as Powder River would have us do. We find no reason to view Grenvik’s testimony with utmost suspicion, as Petitioner urges us to do, or with any suspicion at all. [See Powder River Coal Company’s Proposed Findings of Fact, Conclusions of Law and Order, pp. 30-31].

76. 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

77. The Board’s Rules provide for the burdens of going forward and 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. For all cases involving a claim for exemption, the Petitioner shall clearly establish the facts supporting an exemption.

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

78. The method for determining the value of coal sold away from the mouth of a mine is set by statute:

b) Basis of tax (valuation). The following shall apply:

        (i) Coal shall be valued for taxation as provided in this subsection;

        (ii) The value of the gross product shall be the fair market value of the product at the mouth of the mine where produced, after the mining or production process is completed;

        (iii) Except as otherwise provided, the mining or production process is deemed completed when the mineral product reaches the mouth of the mine. In no event shall the value of the mineral product include any processing functions or operations regardless of where the processing is performed;

* * *

        (vi) In the event the product as defined in paragraph (iii) of this subsection is not sold at the mouth of the mine by bona fide arms-length sale . . . . the department shall determine the fair market value of coal in accordance with paragraph (vii), (viii), (ix) or            (x) of this subsection;

        (vii) For coal sold away from the mouth of the mine pursuant to a bona fide arms-length sale, the department shall calculate the fair market value of coal by multiplying the sales value of extracted coal, less transportation to market provided by a third party to the extent included in sales value, all royalties, ad valorem production taxes, severance taxes, black lung excise taxes and abandoned mine lands fees, by the ratio of direct mining costs to total direct costs. Nonexempt royalties, ad valorem production taxes, severance taxes, black lung excise taxes and abandoned mine lands fees shall then be added to determine fair market value. For purposes of this paragraph:

* * *

(B) Direct mining costs include mining labor including mine foremen and supervisory personnel whose primary responsibility is extraction of coal, supplies used for mining, mining equipment depreciation, fuel, power and other utilities used for mining, maintenance of mining equipment, coal transportation from the point of severance to the mouth of the mine, and any other direct costs incurred prior to the mouth of the mine that are specifically attributable to the mining operation;

(C) Total direct costs include direct mining costs determined under subparagraph (B) of this paragraph plus mineral processing labor including plant foremen and supervisory personnel whose primary responsibility is processing coal, supplies used for processing, processing plant and equipment depreciation, fuel, power and other utilities used for processing, maintenance of processing equipment, coal transportation from the mouth of the mine to the point of shipment, coal transportation to market to the extent included in the price and provided by the producer, and any other direct costs incurred that are specifically attributable to the mining, processing or transportation of coal up to the point of loading for shipment to market;

(D) Indirect costs, royalties, ad valorem production taxes, severance taxes, black lung excise taxes and abandoned mine lands fees shall not be included in the computation of the ratio set forth in this paragraph. Indirect costs include but are not limited to allocations of corporate overhead, data processing costs, accounting, legal and clerical costs, and other general and administrative costs which cannot be specifically attributed to an operational function without allocation.

Wyo. Stat. Ann. § 39-14-103(b).

79. The statutory valuation method is supported by a number of specific definitions:

           (a) As used in this article: 

* * *

        (v) "Mining or production" means drilling, blasting, loading, roadwork, overburden removal, pre-mouth of the mine reclamation, transportation from the point of severance to the mouth of the mine, and maintenance of facilities and equipment directly relating to any of the functions stated in this paragraph;

        (vi) "Mouth of the mine" means the point at which a mineral is brought to the surface of the ground and is taken out of the pit, shaft or portal. For a surface mine, this point shall be the top of the ramp where the road or conveying system leaves the pit. For an in situ mine, the point shall be the wellhead;

        (vii) "Processing" means crushing, sizing, milling, washing, drying, refining, upgrading, beneficiation, sampling, testing, treating, heating, separating, tailings or reject material disposal, compressing, storing, loading for shipment, transportation from the mouth of the mine to the loadout, transportation to market to the extent included in the price and provided by the producer, processing plant site and post-mouth of mine reclamation, maintenance of facilities and equipment relating to any of the functions stated in this paragraph, and any other function after severance that changes the physical or chemical characteristics or enhances the marketability of the mineral;

* * *

        (xv) "Value of the gross product" means fair market value as prescribed by W.S. 39-11-101, less any deductions and exemption allowed by Wyoming law or rules.

Wyo. Stat. Ann. § 39-14-101(a)(v), (vi), (vii), (xv).

80. Wyoming mineral taxpayers calculate and report taxable value (subject to audit) for state-assessed mineral property; such taxable value is commonly said to be self-reported. Wyo. Stat. Ann. § 39-14-107(a); see Wyo. Stat. Ann. § 39-14-207(a) (oil and gas); Wyoming Department of Revenue v. Michael T. Guthrie, 2005 WY 79, ¶14, 115 P.3d 1086, 1092 (2005).

81. The Wyoming Supreme Court has recently summarized the fundamental principles of statutory interpretation in Wyoming:

In interpreting statutes, our primary consideration is to determine the legislature’s intent. All statutes must be construed in pari materia and, in ascertaining the meaning of a given law, all statutes relating to the same subject or having the same general purpose must be considered and construed in harmony. Statutory construction is a question of law, so our standard of review is de novo. We endeavor to interpret statutes in accordance with the legislature’s intent. We begin by making an inquiry respecting the ordinary and obvious meaning of the words employed according to their arrangement and connection. We construe the statute as a whole, giving effect to every word, clause, and sentence, and we construe all parts of the statute in pari materia. When a statute is sufficiently clear and unambiguous, we give effect to the plain and ordinary meaning of the words and do not resort to the rules of statutory construction. Wyoming Board of Outfitters and Professional Guides v. Clark, 2001 WY 78, ¶ 12, 30 P.3d 36, ¶ 12 (Wyo. 2001); Murphy v. State Canvassing Board, 12 P.3d 677, 679 (Wyo. 2000). Moreover, we must not give a statute a meaning that will nullify its operation if it is susceptible of another interpretation. Billis v. State, 800 P.2d 401, 413 (Wyo. 1990) (citing McGuire v. McGuire, 608 P.2d 1278, 1283 (Wyo. 1980)).

           Moreover, we will not enlarge, stretch, expand, or extend a statute to matters that do not fall within its express provisions. Gray v. Stratton Real Estate, 2001 WY 125, ¶ 5, 36 P.3d 1127, ¶ 5 (Wyo. 2001); Bowen v. State, Wyoming Real Estate Commission, 900 P.2d 1140, 1143 (Wyo. 1995).

Loberg v. Wyo. Workers’ Safety & Comp. Div., 2004 WY 48, ¶ 5, 88 P.3d 1045, ¶ 5 (Wyo. 2004) (quoting Board of                                                                County Comm’rs of Teton County v. Crow, 2003 WY 40, ¶¶ 40-41, 65 P.3d 720, ¶¶ 40-41 (Wyo. 2003)). . .

BP America Production Co., et al, v. Department of Revenue, 2005 WY 60, ¶ 15, 112 P.3d 596, 604 (Wyo. 2005).

82. The Wyoming Supreme Court has also provided general guidance for the interpretation of the statutes at issue in this case:

To properly interpret the various statutes applicable to coal valuation, we must first review their fundamental objective. The Wyoming Constitution requires the gross products 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. The legislature defined “value of the gross product” as the fair market value less deductions and exemptions, Wyo. Stat. Ann. § 39-14-101(a)(xv) (LexisNexis 2001), and the “fair market value” as “the amount . . . a well informed buyer is justified in paying for a property and a well informed seller is justified in accepting, assuming neither party to the transaction is acting under undue compulsion.” Wyo. Stat. Ann. § 39-11-101(a)(vi) (LexisNexis 2001). With regard to the valuation of coal, the value of the gross product is the fair market value of the product at the mouth of the mine where produced, after the production process is completed, and mining or production is deemed completed when the mineral product reaches the mouth of the mine. Wyo. Stat. Ann. § 39-14-103(b) (LexisNexis 2001). The “mouth of the mine” for a surface mine, such as Wyodak’s, is further defined as “the top of the ramp where the road or conveying system leaves the pit.” Wyo. Stat. Ann. § 39-14-101(a)(vi) (LexisNexis 2001). All these provisions read together provide the context in which the specific valuation methods contained in § 39-14-103(b) must be interpreted. While the valuation statutes may not result in seamless coverage of all possible mining situations, we conclude the legislature intended for those statutes to be interpreted so that mineral production would be valued at its full fair market value. . .

Wyodak Resources Development Corporation v. Wyoming Department of Revenue, 2002 WY 181, ¶ 33, 60 P.3d 129, 141-142 (Wyo. 2002).

83. “The construction placed on a statute by the agency charged with its execution is entitled to deference as long as it does not conflict with the legislature’s intent.” Laramie County Board of Equalization v. Wyoming State Board of Equalization, 915 P.2d 1184, 1190 (Wyo. 1996).

84. “Affidavits by legislators or other persons involved in the enactment of a statute are not a proper source of legislative history.” Independent Producers Marketing Corp. v. Cobb, 721 P.2d 1106, 1108 (Wyo. 1986).

85. This Board has previously ruled that estimated final reclamation accruals were not direct costs of mining. Exxon Coal U. S. A., Inc., Docket No. 93-107, October 6, 1994, 1994 WL 569436 (Wyo. St. Bd. Eq.). The main points of the ruling were explained as follows:

Initially we should emphasize that the costs at issue are “final reclamation accruals,” as opposed to the costs of annual, on-going reclamation, which both the Department and Petitioner agree are direct costs, and thus utilized in the direct cost ratio. Final reclamation accruals differ however in that they are not current, out-of-pocket expenses, but rather estimates of the final costs for reclaiming the entire mine site upon the [cessation] of mining operations, including removal of coal silos and other structures, reclamation of roads, permanent redistribution of topsoil, and permanent re-vegetation of the entire mine permit area. As these reclamation accruals are not current costs actually paid for work done, there is no specific basis for charging the same to a distinct portion of the mine operations, whether it be mining, processing, or transportation. As the “final reclamation” is not currently in process, the costs which might be subsequently attributable to each phase of the mining operation can only be accomplished by allocation. The statutes recognize only the direct cost ratio as an authorized allocation method not for costs specifically attributed to an operational function. The Department may not [choose] among other allocation methods (i.e., allocation on an acreage basis), when the laws provide otherwise.

Although the Petitioner asserts the statutory language in question is ambiguous. . . we do not agree. . .

. . . As the final reclamation accruals at issue are not current expenses chargeable to a specific operation or function, the only mechanism to attribute the accrual to a function is through allocation by the direct cost ratio. Clearly, in developing the current valuation methodology for coal set forth in W.S. 39-2-209, the Wyoming Legislature recognized the possibility certain costs could not be identified with a particular function, and thus provided those costs would be considered through some reasonable allocation process. The allocation process is application of the direct cost ratio. Arguably, the Legislature anticipated costs of this type in addition to “administrative costs” through inclusion of the term “general” in providing what other costs might be indirect based upon the need for allocation. W.S. 39-2-209(d)(iv).

Exxon Coal U. S. A., Inc.,1994 WL 569436 ¶¶ 8-10.

86. The Wyoming Supreme Court held the expenses for relocating a highway to be direct mining costs. Wyodak Resources Development Corp. v. State Board of Equalization, 9 P. 3d 987 (Wyo. 2000). The Court specifically addressed an argument based on the statutory definition of indirect costs:

Wyodak asserts that the road relocation costs were better classified as indirect costs which “cannot be specifically attributed to an operational function without allocation.” We disagree. The agreement dictates that, before Wyodak could mine the coal under and around the right-of-way, it had to incur relocation and replacement expenses. They were necessary expenses of extracting the coal and were, therefore, specifically attributable to Wyodak’s mining operation.

Wyodak Resources Development Corp., 9 P.3d 987, 990.

87. The Wyodak Resources Court also addressed an argument based on this Board’s decision in Exxon Coal U. S. A., Inc., supra:

In that case, Exxon Coal made yearly accruals for its final reclamation costs. In re Appeal of Exxon Coal U. S. A., Inc., 1994 WL 569436, at 2. In the case at bar, the accrued expenses were not an estimate for reclaiming the entire mine site. As the State Board of Equalization pointed out in its order in the case, “reclamation by definition indicates the process of returning something to a natural state. . . [S]ince Petitioner was returning a man-made object, specifically State Highway 51, to a prior location, a reclamation argument is inapposite.” We concur and add that the 1988 agreement forces the conclusion that the relocation and replacement expenses were direct costs because they were or will be incurred as a condition of mining the specific coal under and around the right-of-way. Wyodak moved the highway so that it could mine the coal. The fact that ongoing mining operations precluded the highway’s immediate and permanent replacement, resulting in the accrual of the final replacement costs, does not change the logical conclusion that the costs were specifically attributable to the mining operations.

Wyodak Resources Development Corp., 9 P.3d 987, 991.

88. The Wyoming Supreme Court held that a bonus payment to the federal government for a coal lease was an indirect cost rather than a direct cost. Powder River Coal Company v. Wyoming State Board of Equalization, 2002 WY 5, 38 P. 3d 423 (Wyo. 2002). In pertinent part, the Court reasoned as follows:

. . . The proportionate profits method adopted by the legislature recognizes that indirect costs occur proportionately over all functions, production, processing, and transportation, in the same ratio as direct costs. Costs which “cannot be specifically attributed to an operational function without allocation” are considered indirect costs. Section 39-14-103(b)(vii)(D). To determine whether a bonus paid for the purchase of a coal lease is a direct mining cost or an indirect cost, we must again employ the rules of statutory construction in an attempt to glean the legislative intent.

The legislature defined mining and production. . . Obviously, a bonus is not explicitly listed as a direct mining cost, and we must determine whether it falls into the catch-all phrase “any other direct mining costs. . .specifically attributable to the mining operation.” Such general words, following an enumeration of words with specific meanings, should be construed to apply to the same general kind or class as those specifically listed. [citations omitted] Applying this doctrine of ejusdem generis requires the conclusion that the phrase direct mining costs was not intended to include such expenses as a bonus payment required for the purchase of the coal lease. Had the legislature intended to include costs not associated with the actual act of mining, we must presume it would have done so expressly and not by use of a catch-all phrase that follows a very detailed list of costs incurred in the physical act of mining.

This court considered the meaning of direct mining costs in Wyodak Resources Development Corp. v. State Board of Equalization, 9 P.3d 987 (Wyo. 2000). There a coal company was required to relocate a state highway in order to remove the coal from underneath the road. The expenses of that effort were consistent with the type of costs listed in the statute and were, therefore, determined to be properly classified as direct mining costs. Costs like federal bonus payments, which are necessary and beneficial to the entire operation, bear no resemblance to such hard mining costs as the excavation costs of moving a state highway.

In addition to the difference in kind of a bonus payment from hard mining costs, bonus payments are not specifically attributed to an operational function without allocation. A similar result was reached in General Portland Cement Co. v. United States, 438 F. Supp. 27 (N.D. Tex. 1977), affirmed in part, reversed in part by General Portland Cement Co. v. United States, 628 F.2d 321 (5^th Cir. 1980), when the court determined that, in applying the proportionate profits method, interest payment on loans not traceable to either mining or processing functions must be indirect costs. Not only is a bonus payment not traceable to the mining function of the operation, but the amount of the bonus is actually based upon the sales value of the coal after mining, processing, and transportation to the point of sale. To determine whether a bonus bid reflects the fair market value of the federal coal, the Secretary of the Interior uses either comparable sales or a discounted cash flow analysis, both of which rely upon the sales price of the coal measured from the point of sale. Therefore, by its very nature, the bonus reflects the total value of the coal sold and not simply the value of the coal at the mouth of the mine, the point at which taxable value is determined. As such, a bonus can only be fairly allocated as an indirect cost to both the mining and processing/transportation functions of the taxpayer’s operation.

The Department argues that, since the bonus is necessary to acquire a coal lease which allows the mining of coal, it is a direct cost of mining. This argument ignores the fact that the coal lease authorizes not only the mining of coal but the construction and operation of processing and transportation facilities. . . The Department’s argument that, “but for” the coal lease being issued, no mining could take place ignores the fact that many undeniably indirect costs are necessary before mining can occur including the cost of mining permits, environmental impact statements, planning, and engineering. However, since the benefits of those costs cannot be allocated solely to either the mining or the processing function of the operation, they must be considered indirect. In Amax Coal Company v. Wyoming State Board of Equalization, 819 P.2d 825 (Wyo. 1991), we found, under a different valuation method, reclamation costs attributable to the processing and transportation areas of the mine operation were not mining costs even though a mine could not have been built without commitment to those costs.

The parties did not identify a method to allocate the bonus payment over all the operations. Given the character of the bonus payment and the statutory definition of the applicable terms, we conclude the legislature must have intended for a bonus payment to be treated as an indirect cost benefitting the entire operation.

Powder River Coal Company, 2002 WY 5, ¶¶ 18-23, 38 P.3d 423, 429-430.

89. This Board has previously ruled that certain mine development cost were indirect costs. Marigold Land Company, Docket No. 2001-106, August 8, 2002, 2002 WL 1998581 (Wyo. St. Bd. Eq.). While generally following the principles of Powder River Coal Company, 2002 WY 2005, supra ¶ 88, the Board also rested its decision on the Petitioner’s inability to produce supporting documentation for the mine development costs in question, and on Petitioner’s arbitrary method of allocating the costs:

Petitioner treated the entirety of its mine development costs as a single separate asset and depreciated the cost as a lump sum over the life of the Caballo Rojo mine. . .

Petitioner claims the mine development costs were incurred in developing the mine and as a result are direct costs. . . However, Petitioner could not explain how each of these expenses specifically related to the mine operation. . .

When mine development costs are not explicitly listed as direct mining costs or total direct costs in Wyoming Statute 39-2-209(d)(ii), (iii), it must be determined whether they fall within the catch-all phrases “any other direct costs... specifically attributable to the mining operation,” or “any other direct costs... specifically attributable to the mining, processing or transportation of coal...” Such general words, following an enumeration of words with specific meanings, should be construed to apply to the same general kind or class as those specifically listed. . .

Direct costs are costs associated with the “actual act of mining.” [citation omitted]. Mine development costs are not associated with the actual act of mining but are preparing to mine. They are not of the same general kind or class of costs enumerated as direct costs in the statute. . .

Since mine development costs could not be specifically attributed to an operational function without allocation, Petitioner developed an “arbitrary” method for allocating those costs to the operational functions for the sole purpose of including mine development costs in the direct cost ratio of the proportionate profits formula. . .

Petitioner has a clear duty to properly report its costs to the Department and to also maintain and provided proper documentation of such costs upon audit...

Petitioner has failed to produce source documents to support the mine development costs. . .

There was testimony that not only were the mine development costs allocated but that they were allocated on an arbitrary basis. . .

Based on the nature of the mine development costs and the statutory definitions of direct and indirect costs, the mine development costs at issue fall squarely within the category of general and administrative costs which cannot be specifically attributed to an operational function without allocation and must therefore be indirect costs.

The allocation method Petitioner used to assign mine development costs to specific direct costs in the proportionate profits formula is not reasonable because the costs are not related to the asset costs used to develop the allocation. . .

Marigold Land Company, ¶¶ 72-84.

90. The legislature has specifically provided for interpretation requests by a taxpayer:

           (a) Interpretation requests. The following shall apply:

(i) The taxpayer may request a value determination from the department and propose a value determination method which may be used until the department issues a value determination. The taxpayer shall submit all available data relevant to its proposal and any additional information the department deems necessary. After the department issues its determination, the taxpayer shall make adjustments based upon the value established or request a hearing by the board;

(ii) A taxpayer may request and the department shall provide written interpretations of these statutes and rules. When requesting an interpretation, a taxpayer must set forth the facts and circumstances pertinent to the issue. If the department deems the facts and circumstances provided to be insufficient, it may request additional information. A taxpayer may act in reliance upon a written interpretation through the end of the calendar year in which the interpretation was issued, or until revoked by the department, whichever occurs last if the pertinent facts and circumstances were substantially correct and fully disclosed.

Wyo. Stat. Ann. § 39-14-109(a).

CONCLUSIONS OF LAW: APPLICATION OF PRINCIPLES

91. The record supports Powder River’s characterization of its healthcare program. Powder River operates a self-insurance program for employees and pays the costs of the program regardless of labor assignments, which are made under a technician system that has employees working in all parts of the mine. The employee healthcare costs are not captured by operational function. Findings, ¶¶ 25-27. A mine manager therefore does not control the costs of the program. Findings, ¶¶ 14, 22. Nor does any mine manager keep records of the individual medical costs associated with mine employees and their dependents. Findings, ¶ 14. Program costs are incurred as a result of factors, such as marital status, number of dependents, age, general health, personal habits, that bear no relation to where an employee works in the mine.

92. In contrast, Powder River did not persuade us that its definition of “attribution”should govern the interpretation of the word “attributable” as that word appears in Wyo. Stat. Ann. § 39-14-103(b). As a principle of law, we are bound to use the ordinary and obvious meaning of statutory language. Conclusions, ¶ 81. As we have already noted, the ordinary and obvious meaning of the verb “attribute,” from which the adjective “attributable” is derived, is “assign or ascribe (to).” Findings, ¶ 47; Webster’s New World College Dictionary (4^th Edition, 2001), p. 92. The same dictionary distinguishes between the synonyms attribute, ascribe, and assign in this way:

SYN. – ascribe, in this comparison, implies assignment to someone of something that may reasonably be deduced [to ascribe a motive to someone]; attribute implies assignment of a quality, factor, or responsibility that may reasonably be regarded as applying [to attribute an error to carelessness;. . . assign implies the placement of something in a particular category because of some quality, etc. attributed to it [to assign a poem to the 17^th century]. . .

Webster’s New World College Dictionary (4^th Edition, 2001), p. 82. The dictionary we have quoted provides no definition of “attribute” that resembles Powder River’s definition. Another source on which we routinely rely defines “attribution” only as “The process – outlined in the Internal Revenue Code – by which a person’s or entity’s stock ownership is assigned to a related family member or entity for tax purposes.” Black’s Law Dictionary (7^th Edition, 1999), p. 125.

93. We have also found several practical problems arise when one attempts to use Powder River’s definition of “attribution.” These include:

•   Powder River’s concept of attribution can be much more cumbersome to apply than an allocation method; Powder River accordingly urges the use of a materiality standard to relieve taxpayers of the burdens that would result from rigorous application of Powder River’s definition. Findings, ¶ 56. Of course, no such materiality standard appears in the statute. Wyo. Stat. Ann. §39-14-103(b).

•   Some taxpayers do not have accounting systems organized by function. Findings, ¶ 51. From the record made in this case, we cannot determine what effect Powder River’s arguments would have on these taxpayers.

                        •     The acceptance of Powder River’s definition would cast doubt on such long-established practices as the allocation of costs for roads within the mine. Findings, ¶ 59. Powder River asks us to undermine industry-wide allocation conventions which have taken years to establish through a process of reporting, auditing, departmental advice, and appeals. See Findings, ¶ 52.

94. Since we do not accept Powder River’s circumscribed definition of attribution, the catchall provision of the indirect costs definition no longer provides an independent basis for concluding that Powder River’s healthcare costs must be viewed as indirect costs. That is, the catchall phrase in the indirect costs definition in Wyo. Stat. Ann. § 39-14-103(b)(vii)(D), “and other general and administrative costs which cannot be specifically attributed to an operational function without allocation,” does not express a mandatory and overarching distinction between two types of accounting procedure. So, even if Powder River’s healthcare costs cannot be calculated by function, and even if Powder River’s accounting system does not capture those costs by function, Findings, ¶ 27, those facts are of no overriding significance for determining whether Powder River’s healthcare costs are indirect costs. Instead, we look first to whether Powder River’s healthcare costs are within the ambit of the definitions of direct mining costs and total direct costs.

95. We also decline to accept Powder River’s alternative accounting argument, based on Mr. Coovert’s experience, that “direct labor” is limited to salary expense and does not include fringe benefits. Powder River failed to persuade us this was a universally accepted accounting principle. Findings, ¶ 62. Indeed, the Department has presented numerous authorities to the contrary. [Department of Revenue’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 70-74, 78-79]. We also note that the ordinary definition of direct cost is “[t]he amount of money for material, labor, and overhead to produce a product.” Black’s Law Dictionary (7^th Edition, 1999), p. 349. This ordinary definition does not include the limitation to which Coovert testified.

96. Established principles of law further oblige the Board to reject those aspects of Mr. Coovert’s testimony that could purport to be a source of legislative history on this subject. Conclusions, ¶ 84; see Findings, ¶ 42.

97. We must rule in favor of the Department if Powder River’s healthcare costs are direct mining costs. We can reach such result by either (1) concluding that Powder River’s healthcare costs are “mining labor,” or (2) concluding that Powder River’s healthcare costs are “other direct costs incurred prior to the mouth of the mine that are specifically attributable to the mining operation.” Wyo. Stat. Ann. § 39-14-103(b)(vii)(B). We hold for the Department primarily because we conclude that employee healthcare costs, allocated as the Department has directed, are “mining labor” within the meaning of Wyo. Stat. Ann. § 39-14-103(b)(vii)(B). An allocation of healthcare costs would result in distribution of those costs over all operational functions; however, the parties have found it convenient to focus on “mining labor” rather than all operational functions, and we have adopted that way of describing what is at issue. It is helpful to bear in mind that, by statute, total direct costs incorporate direct mining costs; and that as direct mining costs increase, the taxable valuation for a taxpayer using the proportionate profits method will also increase.

98. There is no dispute that healthcare costs are part of the total compensation paid to mine employees. Findings, ¶ 19. At the simplest level, it makes more common sense to view “mining labor” as embracing employee healthcare costs in the manner urged by the Department. The words are certainly broad enough for this purpose. Also, as the Department points out, the legislature could have excluded fringe benefits by using more limited language such as “mining wages and salaries,” but did not do so. [Department of Revenue’s Proposed Findings of Fact and Conclusions of Law, ¶ 69].

99. Conversely, even if, as Powder River argues, “mining labor” might be viewed something less than total employee compensation, Powder River has not provided a persuasive, principled account of what labor-related costs must be included in mining labor, and what labor-related costs must be excluded. As a general principle, it would be unwise for us to limit the scope of “mining labor” based on the testimony of one expert appearing on behalf of one taxpayer with a superior accounting system. Even with a superior accounting system at its disposal, there is an uneasy fit between Powder River’s accounting and the tax reporting necessary to administer the statute. Findings, ¶¶ 32, 51-52, 54-58. The statute must take precedence. A taxpayer is obliged to report, as required under a reasonable interpretation of the plain language of the statute, even when it is awkward or inconvenient for the taxpayer to do so. Any other approach to self-reporting would jeopardize constitutional requirements for uniform taxation.

100. More broadly, we conclude that accounting distinctions can offer guidance to statutory interpretation only when handled with care, because they give rise to apparent contradictions with the statute. Among other examples, the parties appear to agree that some portion of warehousing costs should be associated with direct mining costs, even though Powder River’s accounting system does not capture warehousing costs in that manner. Findings, ¶ 26.

101. In the end, the dispute between Powder River and Department turns on an approach to the items specifically listed in the statutory definition of direct mining cost, such as “mining labor,” “supplies for mining,” and “maintenance of mining equipment.” Powder River argues that such listed items must be interpreted through a filter of accounting practice. This argument is supported nowhere in the statute, and as a practical matter might well cause great mischief. See Conclusions, ¶ 93. We refuse to exalt accounting principles and practice above either the plain language of the statute or above any other tool that might, on occasion, be of assistance in interpreting the statutory valuation method at issue in this case.

102. With our insistence on care in considering the guidance offered by accounting principles, we believe that we also provide protection for all taxpayers from the idiosyncratic positions of some taxpayers. As Mr. Coovert observed, “One of the problems that we have, we, the industry have with the State of Wyoming ... is, that our accountants at these facilities love to call things mining.” [Transcript Vol. III, p. 591]. If on some future occasion a taxpayer’s accountant identifies some cost as mining that the Department has consistently been treated as transportation or processing, our decision today implies that we will be slow to rule that the accountant’s concession displaces settled practice and interpretation.

103. As an independent reason for our conclusion regarding “mining labor,” we note that the Department interprets employee healthcare costs as falling within the ambit of “mining labor.” Findings, ¶ 64. The Department’s interpretation is not essential to our ruling. However, the Department’s view is something that the Board may properly take into account. See Conclusions, ¶ 83.

104. Even if we were to accept arguendo Powder River’s view that the words “mining labor” do not include healthcare costs, we would be persuaded that those healthcare costs were “other direct costs incurred prior to the mouth of the mine that are specifically attributable to the mining operation.” Wyo. Stat. Ann. § 39-14-103(b)(vii)(B); Conclusions, ¶¶ 78-79. On this point, we find it significant that healthcare costs have readily been attributed, assigned, or ascribed to the mining operation for all of the years that the statute has been in effect, and that Powder River was able to do so in 1997. Findings, ¶ 38. This is not a case in which there is doubt about whether such an attribution can be made.

105. Powder River argues that we cannot hold for the Department because four prior rulings of this Board and the Wyoming Supreme Court require us to hold for Powder River. [Powder River Coal Company’s Proposed Findings of Fact, Conclusions of Law and Order, ¶¶ 46-52]. None of the four cases is authority contrary to our conclusion that Powder River’s healthcare costs were “mining labor” within the meaning of the definition of direct mining costs. Instead, each of the cited cases involved the interpretation of the catchall phrase, i.e., whether the costs were “other direct costs incurred prior to the mouth of the mine that are specifically attributable to the mining operation.” Exxon Coal U. S. A., Inc., ¶ 7; Wyodak Resources Development Corp., 9 P.3d at 990-991; Powder River Coal Company,¶ 19; Marigold Land Company, ¶74. We will conclude that none of the four rulings controls this case, even if we were to assume that the catchall phrase applies.

106. In Exxon Coal U. S. A., Inc., this Board ruled that estimated final reclamation accruals were not direct costs of mining. Conclusions, ¶ 85. These accruals differ from the healthcare benefits in this case, because they were “not current, out-of-pocket expenses.” Conclusions, ¶ 85. As the Board stated at the time, because the accruals were “not current costs actually paid for work done, there is no specific basis for charging the same to a distinct portion of the mine operations, whether it be mining, processing, or transportation.” Conclusions, ¶ 85. This case is different. The Department has a longstanding method for allocating the indisputably current, out-of-pocket healthcare costs to a distinct portion of the mine operations. Findings, ¶ 39. Exxon Coal U. S. A., Inc., does not control this case.

107. In Wyodak Resources Development Corp., the Wyoming Supreme Court held that expenses for relocating a highway were direct mining costs. Conclusions, ¶ 86. In so doing, the Court specifically rejected an argument that those costs “were better classified as indirect costs which ‘cannot be specifically attributed to an operational function without allocation,’” and instead reasoned that highway relocation costs were “necessary expenses of extracting the coal.” Conclusions, ¶ 86. The Court also considered an argument based on the fact that the expenses in question were accruals. Conclusions, ¶ 87. Based on the Court’s discussion of that issue, we also conclude that, even if Powder River’s healthcare costs had been accruals, as the Department incorrectly supposed about the healthcare costs of RAG, Findings, ¶¶ 71, 73, they still could have been charged to a distinct portion of the mine operations. We conclude that our ruling in this case is entirely consistent with the Wyodak Court’s rationale.

108. In Powder River Coal Company, the Wyoming Supreme Court held that a bonus payment to the federal government for a coal lease was an indirect cost rather than a direct cost. Conclusions, ¶ 88. The Court in that case was faced with a considerably more complex decision than faces us here. The Court first considered whether the lease bonus payment was of “the same general kind or class as those [costs] specifically listed” in Wyo. Stat. Ann. § 39-14-203(b)(vii)(B). Powder River Coal Company, ¶ 19. We conclude that even if we assume Powder River’s healthcare costs were not mining costs, they are, at the very least, of the same general kind or class as mining labor costs, and as such, should be treated as “hard mining costs.” Powder River Coal Company, ¶ 20.

109. The Court’s second step was to consider whether the coal bonus payments might fall under the statutory definition of indirect costs. In doing so, the Powder River Court directed its attention to the economic nature of a coal bonus payment. Here, the Court noted that “the amount of the bonus is actually based upon the sales value of the coal after mining, processing, and transportation to the point of sale.” Powder River Coal Company, ¶ 21. Indisputably, Powder River’s healthcare costs are unrelated to the sales value of the coal – they are a cost. The Court went on to conclude that “by its very nature, the bonus reflects the total value of the coal sold and not simply the value of the coal at the mouth of the mine, the point at which taxable value is determined.” Powder River Coal Company, ¶ 21. By their very nature, Powder River’s employee healthcare costs are not similarly related to the total value of coal sold. In sum, when we consider the economic nature of Powder River’s employee healthcare costs in the manner suggested by the Court in Powder River Coal Company, we conclude that healthcare costs are not indirect.

110. Finally, the Powder River Court noted that the “parties did not identify a method to allocate the bonus payment over all the operations.” Powder River Coal Company, ¶ 23. There is no similar difficulty in this case. Powder River itself allocated and reported its healthcare costs for production year 1997, Findings, ¶ 39, and the Department persuasively testified to acceptable allocation methods. Findings, ¶ 65.

111. In Marigold Land Company, this Board ruled that certain mine development costs were indirect costs. Conclusions, ¶ 89. Adhering to the pattern of analysis in Powder River Coal Company, the Board in Marigold Land Company concluded that the mine development costs in question were not of the same general kind or class of costs enumerated as direct costs in the statute. Conclusions, ¶ 89. We believe it independently significant that the Petitioner in Marigold Land Company was unable, on audit, to produce source documents to substantiate the claimed development costs. Conclusions, ¶ 89. The Board also concluded that the Petitioner’s allocation method was arbitrary. Conclusions, ¶ 89. Any one of these three points is sufficient to distinguish Marigold Land Company from this case.

112. As a separate and final point, Powder River argues that we should view the testimony of Craig Grenvik concerning the Department’s correspondence with Foundation Coal and RAG as a concession that employee healthcare costs are indirect costs. [Powder River Coal Company’s Proposed Findings of Fact, Conclusions of Law and Order, ¶¶ 53-56]. We have addressed this argument largely as a proposition of fact. Findings, ¶¶ 69-75. We supplement those Findings with the observation that the Department was plainly expecting Foundation Coal to include a substantial amount for employee healthcare costs in the direct cost ratio. Powder River’s fixation on the words “indirect costs” in the Foundation Coal correspondence introduced an element of confusion. The Department initially thought Foundation Coal’s healthcare costs would be associated with accruals which would be adjusted in subsequent periods by the actual costs incurred, Findings, ¶¶ 71, 73, in much the same way that Powder River handles its retirement costs. Findings, ¶ 30. In an accrual environment, the actual costs would be treated as indirect and thereby ignored. Findings, ¶ 37. The idea of treating a direct cost as indirect is hardly foreign to Powder River; the same concept appears in Coovert’s definition of “attribution.” Findings, ¶ 45. The Department had plainly expected some healthcare cost amount to be included in the direct cost ratio, an expectation that was consistent with the Department’s longstanding policy, and is now consistent with our ruling in this case.

113. Some portion of Powder River’s ire regarding the testimony of Mr. Grenvik stems from an assumption that Powder River is entitled to rely on statutory interpretations provided to other taxpayers. The statute does not support this assumption. The statute states the terms under which a taxpayer requesting a statutory interpretation from the Department may rely on that interpretation. Conclusions, ¶ 90. Powder River did not make the requests on which it wishes to rely. Findings, ¶¶ 69-71.

114. This leaves only the issue of the “Extended Salaried” accounts, 339x and 348x. Findings, ¶ 28. The Department now views these accounts as indirect based on a factual understanding developed during the course of the hearing. Findings, ¶ 66. For these accounts, the Department’s position rests on the fact that the costs in question related to employees not currently working at the mine. Findings, ¶ 66. The Department reasonably concluded that these expenses were not for mining labor, and we agree.

ORDER

           IT IS THEREFORE ORDERED:

           a. The Department’s decision to include allocated portions of the employee healthcare costs found in accounts numbered 337x, 353x, and 375x as direct costs in the direct cost ratio for the years at issue is hereby affirmed; and

           b. The matter is otherwise remanded to the Department to exclude from direct costs in the direct cost ratio for the years at issue those costs found in accounts numbered 339x and 348x.

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 October, 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