BEFORE THE STATE BOARD OF EQUALIZATION

FOR THE STATE OF WYOMING

IN THE MATTER OF THE APPEAL OF                    )

CHEVRON U.S.A., INC., FROM A NOTICE           )

OF VALUATION FOR TAXATION                            )         Docket No. 2003-64

PURPOSES BY THE MINERAL TAX DIVISION     ) 

OF THE DEPARTMENT OF REVENUE                    )

(Production Year 2002, Carter Creek)                        ) 

FINDINGS OF FACT, CONCLUSIONS OF LAW, DECISION AND ORDER

APPEARANCES

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

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

JURISDICTION

In the spring of 2003, Chevron filed annual gross products returns with the Department related to its 2002 natural gas production processed through the Carter Creek Gas Plant. Chevron reported its taxable value using the proportionate profits method, without the inclusion of taxes and royalties in the direct cost ratio. The Department did not accept Chevron’s reported values. Rather, the Department valued Chevron’s 2002 production using the comparable value method. The Department notified Chevron of its fair market value determination by Notice of Valuation dated May 15, 2003. On June 12, 2003, Chevron appealed the Department’s taxable value determination to the State Board of Equalization (Board) pursuant to Wyo. Stat. Ann. §§ 39-14-209(b) and 39-13-102(n). The Board may hear objections to the Department’s determination of the fair market value of natural gas production, and accordingly has jurisdiction to consider this appeal.

A hearing was held September 13 through September 16, 2004, before the Board, consisting of Vice Chairman Alan B. Minier (Chairman at the time of the Decision and Order) and Board Member Thomas R. Satterfield (Vice Chairman at the time of the Decision and Order), with Gayle R. Stewart acting as Hearing Officer. Board Member Thomas D. Roberts considered this matter by reviewing the file, exhibits, and transcript, and participated in this Decision and Order.

STATEMENT OF THE CASE

On May 31, 2005, the Wyoming Supreme Court issued its decision in BP America Production Co. v. Department of Revenue, 2005 WY 60, 112 P.3d 596 (Wyo. 2005) affirming our decision in Union Pacific Resources, et al., Docket No. 2000-147, June 9, 2003, 2003 WL 21774603 (Wyo. St. Bd. Eq.)(hereinafter Whitney Canyon 2000). The decision is important because those proceedings involved the Department’s valuation of production processed at the Whitney Canyon Gas Plant using the comparable value method; because the facts herein are similar; because the gas processing plants in that case and here are designed to process sour gas and have processed gas from the same sources; and because most of the legal and factual issues raised in Whitney Canyon 2000 have been raised in this case. It remains for the Board to apply the legal principles announced by the Court in Whitney Canyon 2000 to the facts developed in this case.

This case completes a statutory three year cycle which began with the Department’s August 31, 1999, selection of the comparable value method, and the application of that method to value Petitioner’s 2000 through 2002 oil and gas production processed through its Carter Creek Gas Plant. In prior litigation, this Board affirmed the Department’s selection and application of the comparable value method for production year 2000 and its application of the comparable value method for production year 2001. Chevron USA, Inc., Docket No. 2002-162, June 16, 2005, 2005 WL 1464851 (Wyo. St. Bd. Eq.) (hereinafter Carter Creek 2001); Chevron U.S.A., Inc., Docket No. 2000-152, et al., October 15, 2003, 2003 WL 22422677 (Wyo. St. Bd. Eq.) (hereinafter Carter Creek 2000).

In this proceeding, Petitioner calls the Board’s attention to changed market conditions and urges the Board to reach different conclusions than it did for production years 2000 and 2001. Petitioner’s factual claims are similar to, and in some instances the same as, the claims it made for production years 2000 and 2001. Petitioner’s statutory and constitutional claims are also similar to, and in many instances the same as, the claims it made for production years 2000 and 2001. See Carter Creek 2000; Carter Creek 2001.

We affirm the Department’s determination of value. Petitioner failed to show either that the Department’s valuation was not in accordance with the constitutional and statutory requirements for valuing state-assessed property, or that the Department’s valuation was contrary to its rules, regulations, orders, or instructions.

CONTENTIONS AND ISSUES

Petitioner’s principal contentions may be summarized as follows:

[T]he use of the individual comparables does not result in fair market value of the 2002 production and … the comparable value methodology as applied by the Department does not yield fair market value of the gas produced from the Carter Creek field for production year 2002.

[Petitioner’s] use of the proportionate profits methodology is the only methodology authorized by W.S. § 39-14-203(b)(vi) that results in fair market value being determined for its condensate and gas production processed at the Carter Creek Plant, and … its use of that methodology in prior years has been confirmed on audit by the Wyoming Department of Audit.

While the netback methodology under W.S. § 39-14-203(b)(vi)(C) is another method for valuing production, Chevron is statutorily precluded from using the netback method because Chevron, as the owner of the Carter Creek plant, processes its own production.

[T]he comparable value methodology using the alleged comparables identified by the Department do not accurately reflect the fair market value of the Carter Creek condensate and gas production for the following reasons, which include, but are not limited to:

A.    Wyo. Stat. Ann. § 39-14-203(b)(vi)(B) as applied by the Department is unconstitutional.

B.    The Department failed to follow standard appraisal techniques in its application of Wyo. Stat. Ann. § 39-14-203(b)(vi)(B).

C.    The comparables selected by the Department do not meet the statutory requirements.

D.    Concepts of judicial estoppel and res judicata prevent a decision in this matter different from that reached by the Wyoming Supreme Court.

[Petitioner’s Updated Summary of Contentions].

Petitioner elsewhere identified eighteen contested issues of fact and twenty-seven contested issues of law. [Petitioner’s Issues of Fact and Law and Exhibit Indices]. Many issues were restated, some new issues were added, and some issues were not specifically addressed in [Petitioner’s Proposed Findings of Fact and Conclusions of Law].

The Department contends:

1.    The Department’s objective in valuing minerals for taxation purposes is to determine the fair market value of the mineral.

2.    The proportionate profits method, using the direct cost ratio which the taxpayer has used (which excludes production taxes and royalties from direct production costs), does not render full value of the minerals.

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

4.    The State Board affirmed the Department’s use of the comparable value method for the 2000 production year for Carter Creek production.

5.    Inconsistent with Petitioner’s repeated declarations that the use of a comparable is impossible, other producers in related plants have in the past reported taxable values using comparable values for various gas productions.

6.    There exists sufficient information and documentation from which the Department can apply the comparable value method using a 25% processing deduction as the comparable fee for the 2002 production year.

7.    The use of the selected 25% comparable processing deduction yields an accurate reflection of the fair market value of Petitioner’s gas for the 2002 production year.

[Department’s Updated Summary of Contentions].

In its Issues of Fact and Law, the Department posed a single question of fact:

Whether the Department properly and correctly applied the comparable value method of valuation, as set forth in Wyo. Stat. § 39-14-203(b)(vi)(B), to value the oil and gas produced by Chevron USA Inc. for production year 2002?

and a single issue of law:

Whether the Department properly and correctly applied the comparable value method of valuation, as set forth in Wyo. Stat. § 39-14-203(b)(vi)(B), to value the oil and gas by Chevron USA Inc. for production year 2002?

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

In its proposed findings, the Department further described its contentions as follows: The Department’s selection of the comparable value method was proper and lawful because there exist other processing contracts which can be used to establish the fee charged to process “other parties” gas of “like quantity” which is of similar “quality” and processed under similar “terms and conditions.” The Department’s contentions may be summarized as follows:

1.    As to each of the Whitney Canyon plant owners, the other owners are “other parties” within the meaning of the statute.

2.    The 25% fee established by the Whitney Canyon Construction and Operation Agreement is a reasonable processing fee, and the maximum fee ever charged by the plant for processing, regardless of quantity or quality of gas or terms and conditions.

3.    The 25% fee is reflective of the marketplace and is the proper processing deduction regardless of whether or not the fee yields either a return on investment or covers the processing costs incurred in a given production year.

4.    The proportionate profits method does not produce a representative fair market value for the Petitioner’s products processed at the Carter Creek Gas Plant.

5.    The proportionate profits method violates the Wyoming Constitution’s requirement that minerals be valued at 100% of their fair market value.

6.    The comparable value statute requires use of fees charged to other parties and therefore does not contemplate whether these fees actually cover the taxpayer’s expected return on investment nor taxpayer’s actual costs of processing.

[Department’s Proposed Findings of Fact and Conclusions of Law, pp. 3-6].

As in other proceedings, the parties have not provided us with a clear and consistent statement of the issues they would have us adjudicate. See Carter Creek 2000, Carter Creek 2001. Based on our review of the notice of appeal, the respective statements of contentions, the respective listing of issues of fact and law, and the respective proposed findings of fact and conclusions of law, we have grouped the subject matter of the parties’ contentions into seven issues of fact and four issues of law that encompass all of the contentions raised by the parties.

The seven issues of fact, and our answers, are:

Did the Department have a reasoned basis for determining the value of Petitioner’s production?

Yes.

Was the Department’s processing allowance of 25% equal to or greater than Petitioner’s actual processing costs?

In the context of production year 2002, no.

Did Petitioner demonstrate that the Department improperly applied the comparable value method by its selection of sources of comparable value?

No.

Did Petitioner demonstrate that the Department erred by not applying general appraisal principles when determining the value of Petitioner’s production using the comparable value method?

No.

Did Petitioner demonstrate that the values determined by the Department did not reach fair market value?

No.

Did Petitioner demonstrate that the Department violated prescribed procedures when determining the value of Petitioner’s gas production?

No.

Did Petitioner demonstrate that there were other similarly situated taxpayers who were allowed to report taxable value using the proportionate profits method?

No.

The four issues of law, and our answers, are:

Did the Department correctly apply the comparable value method to determine the value of Petitioner’s production?

Yes.

Did the Department violate statutory requirements by the procedures it used to determine the value of Petitioner’s production?

No.

Did the Department violate any constitutional standard?

No.

Was the Department barred from use of the comparable value method by collateral estoppel or judicial estoppel?

No.

FINDINGS OF FACT

The Carter Creek and Whitney Canyon fields and gas plants

1.        In 1978, Chevron drilled a wildcat well in Lincoln County, Wyoming, discovering significant gas and condensate reserves. The gas from the well was “sour,” containing lethal levels of hydrogen sulfide, which required processing to be marketable. See Wyo. Stat. Ann. § 39-14-201(a)(xxv). Because there was no processing facility available to remove the hydrogen sulfide, the well was shut in. [Stipulations of the Parties, ¶ 3]. Nonetheless, Chevron continued its successful drilling program in the Carter Creek field. [Transcript Vol. I, p. 36].

2.        From 1977 through 1983, Amoco (now BP America) drilled exploratory wells in the Whitney Canyon field. These wells, like Chevron’s wells in the Carter Creek field, contained high levels of hydrogen sulfide requiring processing to be marketable and were shut in. [Stipulations of the Parties, ¶¶ 7-15].

3.        In 1980, a wildcat well was drilled between Chevron’s Carter Creek field and Amoco’s Whitney Canyon field. It confirmed the Chevron and Amoco fields were part of a single field, “ranking among the largest natural gas fields in the North America continent.” [Exhibit 924, pp. 53, 64; Transcript Vol. I, p. 64].

4.        As the result of its successful drilling program, Chevron built the Carter Creek Gas Plant to monetize its gas reserves. [Transcript Vol. I, p. 53]. The Carter Creek Gas Plant was constructed in the early 1980s and began processing gas in 1982. [Transcript Vol. I, p. 36]. The Carter Creek Gas Plant was designed to process 150 million cubic feet of raw inlet gas per day. [Transcript Vol. I, pp. 53-54]. The original cost to construct the Carter Creek Gas Plant was 442 million dollars. [Stipulations of the Parties, ¶ 6]. Because the Carter Creek Gas Plant has only one owner, there is no Construction and Operating Agreement. Chevron does not charge itself a processing fee. [Stipulations of the Parties, ¶ 4; Transcript Vol. I, pp. 94-95, 98, 115].

5.        While the Carter Creek Gas Plant was being constructed by Petitioner, the Whitney Canyon Gas Plant was being constructed by its owners, which at the time did not include Chevron. [Stipulations of the Parties, ¶¶ 19, 33]. The construction, ownership and operation of the Whitney Canyon Gas Plant is governed by the Agreement for the Construction, Ownership and Operation of the Whitney Canyon Gas Processing Plant (Whitney Canyon C&O Agreement) executed by the Whitney Canyon Gas Plant owners prior to the start of construction. [Exhibit 927]. The Whitney Canyon Gas Plant was completed in 1983. [Stipulations of the Parties, ¶ 22]. The Whitney Canyon Gas Plant was designed to process 250 million cubic feet of sour gas per day. [Stipulations of the Parties, ¶ 24]. The cost to construct the Whitney Canyon Gas Plant was approximately 340 million dollars. [Stipulations of the Parties, ¶ 22].

6.        The Carter Creek Gas Plant and the Whitney Canyon Gas Plant are located, as the crow flies, approximately 6 to 8 miles from each other. [Transcript Vol. I, p. 38].

7.        In 2002, there were four sources of gas processed through the Carter Creek Gas Plant: the Carter Creek field, the Exxon Road Hollow field, and 2 other wells. [Transcript Vol. I, pp. 37, 52, 61-62, 99; Exhibit 225, MTD #01024 – Champlin 457D, #01051 – ACG #6A; Exhibit 230, pp. 717-740]. All the sources of gas processed at the Carter Creek Gas Plant were commingled before the start of processing and went through the same processes. [Transcript Vol. I, pp. 63-64, Vol. II, pp. 321-322].

8.        In 2002, the Carter Creek Gas Plant processed approximately 3.5 million standard cubic feet per day of Exxon Road Hollow gas. This was approximately 4% of the total volume of the gas processed through the Carter Creek Gas Plant in 2002. [Transcript Vol. I, p. 100]. The gas was processed pursuant to a 1992 Carter Creek Gas Plant Processing Agreement (Exxon Road Hollow Agreement) which remains in effect pursuant to its evergreen provision. [Transcript Vol. I, pp. 100, 105; Exhibit 200].

9.        In 2002, the Whitney Canyon Gas Plant processed gas for six producers: BP America, RME (Anadarko), Chevron, Forest, Anschutz, and Merit. [Stipulations of the Parties, ¶ 36]. The gas produced by BP America, RME (Anadarko), Chevron and Forest from the Whitney Canyon Field was processed pursuant to Exhibit F to the Whitney Canyon C & O Agreement. [Exhibit 927]. The gas produced by Anschutz was processed pursuant to the Wahsatch Gathering System Processing Agreement. [Exhibit 943]. The gas produced by Chevron from areas other than the Carter Creek field was processed at the Whitney Canyon Gas Plant pursuant to 1995 Chevron Agreement. [Exhibit 529]. Gas produced by Merit was processed at the Whitney Canyon Gas Plant pursuant to the the Merit Agreement. [Exhibit 944]. Each of these agreements is discussed hereinafter. Infra ¶¶ 37, 40, 42, 43, 65-78, 101-121.

10.      In addition, Chevron production from the Carter Creek field was processed at the Whitney Canyon Gas Plant for a period of about 30 days in August and September, 2002. [Transcript Vol. I, pp. 47, 76, 112]. The production was processed at the Whitney Canyon Gas Plant pursuant to a 1993 Whitney Canyon/Carter Creek Mutual Back-up Agreement. [Transcript Vol. I, p. 112; Exhibit 516].

11.      The sources of gas processed at the Carter Creek Gas Plant and at the Whitney Canyon Gas Plant are commingled at each plant prior to processing and goes through the same processes at each plant. [Transcript Vol. II, pp. 321-322].

12.      All sales of gas from Carter Creek occur at or near the tailgate of the Carter Creek Gas Plant. [Transcript Vol. III, pp. 383-384].

Procedures for reporting and determining taxable value

13.      On August 31, 1999, the Administrator of the Department’s Mineral Tax Division issued a Memorandum to all Wyoming oil and gas producers. The Memorandum notified all producers that the Department elected the Comparable Value Method of valuation for production years 2000, 2001, and 2002, where oil and gas production was not sold at or prior to the statutory point of valuation. [Exhibit 912]. By this Memorandum, the Department satisfied its obligation to notify taxpayers of the selected method as required by Wyo. Stat. Ann. § 39-14-203(b)(vi). The Memorandum recited the statutory definition of the Comparable Value Method:

(B) Comparable value - The fair market value is the arms-length sales price less processing and transportation fees charged to other parties for minerals of like quantity, taking into consideration the quality, terms and conditions under which the minerals are being processed or transported;

14.      The Memorandum obliged the taxpayer to notify the Department if the “. . . taxpayer has made a determination that a representative Comparable Value does not exist for a specific mineral property . . ..” [Exhibit 912].

15.      By letter dated October 28, 1999, Petitioner objected to the use of comparable value method for natural gas processed through its Carter Creek Gas Plant and requested the use of the proportionate profits method as a substitute. In its letter, Chevron stated that “ . . . to the best of its knowledge, no appropriate comparables exist for the listed properties. Any review of the comparable methodology is inclusive of the like-quantity, like-quality, and anti-trust and confidentiality tests. The Proportionate Profits method that Chevron intends to utilize is provided for in W.S. Sec. 39-14-203(b)(vi)(D) - recodified statutes.” [Exhibit 913].

16.      On November 16, 1999, the Department sent Petitioner a letter broadly requesting documentation “. . . to verify your claim of the non-existence of a comparable value and/or your believe (sic) that comparable value does not represent fair market value for the referenced properties . . ..” [Exhibit 914].

17.      In a November 30, 1999, letter to the Department requesting an extension of time to provide contracts, Petitioner identified one agreement at Carter Creek, the Whitney Canyon C&O Agreement (including the attached gas processing agreement), and the agreement with Whitney Canyon Gas Plant and the Carter Creek Gas Plant for back-up processing as other contracts. However, Petitioner argued these contracts were not comparable. [Exhibit 915]. The manager of upstream property tax for Petitioner, Christopher Chambers, generally referred the Department to agreements that had been in place during audits. There were specific references to Chevron contracts related to properties in Wyoming, including the statement “. . . that the agreements/contracts that Chevron’s Tax Department is aware of include one at Carter Creek that neither meets the like quality not like quantity tests for a comparable. Carter Creek also has an agreement with Whitney Canyon for short-term processing during Whitney Canyon turnarounds that does not meet like quantity.” There was no specific reference to other contracts with other producers to process gas either at the Whitney Canyon Gas Plant or the Carter Creek Gas Plant. [Exhibit 915]. The Department allowed the extension. [Exhibit 916].

18.      The contracts related to the processing of gas at the Carter Creek Gas Plant included the Exxon Road Hollow Agreement [Exhibit 200], the Whitney Canyon/Carter Creek Mutual Back-up Agreement [Exhibit 516], and the Anschutz Back-up Agreement [Exhibit 201].

19.      The contracts related to processing of gas at the Whitney Canyon Gas Plant included the 1995 Chevron Agreement [Exhibit 529], the Wahsatch Gathering System Processing Agreement [Exhibit 943], the Merit Agreement [Exhibit 944], Whitney Canyon/Carter Creek Back-up Agreement [Exhibit 516], and Exhibit F to the Whitney Canyon C & O Agreement [Exhibit 927].

20.      On February 4, 2000, the Department informed Petitioner it had reviewed the agreements provided prior to that time, and reiterated the requirement that Petitioner determine taxable value using the Comparable Value Method. [Exhibit 917]. On March 3, 2000, Petitioner requested reconsideration of the Department’s denial of its request for use of the proportionate profits method. [Exhibit 918].

21.      In response to Petitioner’s March 3, 2000, letter, the Department again informed Petitioner the comparable value method should be used to value the natural gas processed through the Carter Creek Gas Plant. The Department identified the Whitney Canyon C&O Agreement and the Exxon Road Hollow Agreement as comparables and advised Petitioner it would not allow a processing fee of more that 25% for Carter Creek production. [Exhibit 919, p. 2].

22.      We find the Department unequivocally communicated its position nearly a year before annual reports for production year 2000 were due from Chevron and some two years before reports for production year 2002 were due. Wyo. Stat. Ann. §39-14-207(a)(i). Any lingering doubt about the Department’s view was dispelled during the litigation concerning the selection and application of the comparable value method to production year 2000. See Carter Creek 2000; Whitney Canyon 2000.

23.      Petitioner claims the Department’s notice was insufficient. In the absence of rules, regulations, policies or precedents, it was unable to determine how it was supposed to calculate its tax liability. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 207–211]. Petitioner, however, did not seek an interpretation of the comparable value statute from the Department, or the promulgation of rules. [Transcript Vol. II, pp. 312, 319, Vol. III, pp. 409-410]. We find that by the spring of 2003, when Petitioner filed its annual reports for production year 2002, the Department’s policy was clear. We specifically reject Petitioner’s suggestion that the selection of the valuation method by the Department required the Department to specify the comparables to be used by a taxpayer. [See: Proposed Findings of Fact and Conclusions of Law, ¶¶ 207-208, 210].

24.      From its initial attestation to the Department that “. . . no appropriate comparables exist”; through its first response to the Department’s request for contracts, “[o]ne [contract] at Carter Creek that neither meets the like quality or like quantity tests . . . ” and one contract “that does not meet like quantity”; and its second response, “no appropriate comparables exist for its producer/processor properties . . .” based on its “review of the comparable methodology . . . inclusive of the like-quantity, like-quality, and anti–trust and confidentiality tests;” Chevron maintained its position that there were no comparables. [Exhibits 913, 915, 918].

25.      At the core of Chevron’s position is an assumption, dating from the 1990 legislative session when the current valuation statutes were adopted, that Chevron and three other large sour gas producer-processors would be able to use the proportionate profits method to value their production into the indefinite future. [Transcript Vol. II, pp. 337-339, 350-351]. It remains for the Board to test that assumption against the facts developed for production year 2002 and the applicable statutes.

26.      Chevron understood the Department expected it to report its taxable value using the comparable value method, but chose instead to report utilizing a variant of the proportionate profits method. It did not treat production taxes and royalties as direct costs of production, contrary to a series of rulings by this Board dating from 2001. [Transcript Vol. II, pp. 269-270, 317-318]. E.g., Amoco Production Company, Docket No. 96-216, June 29, 2001, 2001 WL 770800 ; Amoco Production Company, Docket No. 96-216, September 24, 2001, 2001 WL 1150220 (Order on Reconsideration); See Burlington Resources/LL&E, Docket No. 2004-24, August 5, 2005, 2005 WL 2100264 at ¶ 114, for a complete list of the Board’s decisions on this issue. None of the claims that the Department’s position was unclear are credible.

27.      Generally speaking, a taxpayer’s annual ad valorem reports do not disclose what valuation method the taxpayer actually uses to calculate its processing deduction. Petitioner did not provide its proportionate profits calculations to the Department at the time it filed its annual ad valorem reports. [Transcript Vol. II, pp. 271-272].

28.      The Department responded to Chevron’s annual reports by preparing a Notice of Valuation. [Exhibit 233]. The Department adjusted the processing deduction for the Carter Creek Mineral Groups by applying a 25% processing deduction against Chevron’s reported Gross Sales Value of plant products, and recalculating Taxable Value using the 25% processing deduction. [Transcript Vol. II, p. 279; Vol. III, p. 410]. The only thing that changed was the processing fee deduction. [Transcript Vol. III, pp. 410-411].

29.      Chevron reported part of its 2002 production, gas processed at the Whitney Canyon Gas Plant, using a netback method, taking a 25% processing fee deduction. [Transcript Vol. II, p. 317].

30.      There is no dispute in this case concerning the Department’s mathematical calculations of the comparable value processing allowance or the taxable value that results from the Department’s calculations.

Did the Department have a reasoned basis for determining the value of Petitioner’s production?

31.      The Department concluded the words “of like quantity,” as they appear in the statutory definition of the comparable value method, Wyo. Stat. Ann. § 39-14-203(b)(vi)(B), were clear and were satisfied by the Department’s application of the comparable value method. In principal part, the Department observed that the fee charged under pertinent processing agreements was never greater than 25% in-kind regardless of the quantity of gas processed. [Transcript Vol. III, p. 414]. In all cases the Department observed that there was never a fee charged that was more than 25% in-kind of the gas product at the tailgate of the plant. [Transcript Vol. III, pp. 414, 415].

32.      The Department concluded that the word “quality,” as it appears in the statutory definition of the comparable value method, was satisfied by the Department’s application of the comparable value method. The Department concluded that:

           a.        The gas covered by contracts was processed or could be processed at the Carter Creek Gas Plant.

           b.        The gas from various wells required the same functions as provided at the Carter Creek Gas Plant.

           c.        The contracts did not contain an adjustment in the processing fee based on the quality of the gas processed.

[Transcript Vol. III, pp. 415-417].

33.      The Department concluded that the words “terms and conditions,” as they appear in the statutory definition of the comparable value method, were satisfied by the Department’s application of the comparable value method to all processing contracts that charged producers a maximum processing fee of 25%. Further the Department concluded that:

           a.        Terms and conditions referred to the terms and conditions of the contracts.

           b.        The terms and conditions of the contracts which were provided were similar, if not identical.

           c.        The processing of the gas, including the fee paid, did not change depending upon the priority of the gas. Since gas is not taxed until produced and sold, priority has no significance for tax purposes.

[Transcript Vol. III, pp. 417-418].

34.      The Department concluded the statutory definition of the comparable value method did not require a processing fee charged to other parties be arms-length, reasoning that the words “arms-length” only modified the words “sales price.” The Department further concluded each of the contracts included a processing fee charged to an “other party” within the meaning of the statute. [Transcript Vol. III, p. 413].

35.      The Department’s March 30, 2000, correspondence with Chevron identified two contracts as comparable contracts which could be used to determine the processing deduction for valuing Chevron’s production processed through the Carter Creek Gas Plant. [Exhibit 919, p.28]. The contracts identified were the Exxon Road Hollow Agreement and the Whitney Canyon C&O Agreement. [Exhibits 919, 927, 200].

36.      The Department concluded the Exxon Road Hollow Agreement was a comparable which the Department could use to determine the processing deduction for valuing Chevron’s production. [Exhibit 200]. Because of Chevron’s confidentiality concerns, our discussion of the Department’s reasoning for selecting this agreement as a comparable must be of a general nature. The Department generally concluded that:

           a.        The Exxon Road Hollow Agreement was an arms-length contract, with Exxon as an “other party.” [Transcript Vol. III, pp. 447-448].

           b.        The Exxon Road Hollow Agreement contained quality requirements. However the gas could be accepted for processing if the quality specifications were not met, with an adjustment of the processing fee. However, no specific provisions addressed how the processing fee would be adjusted. [Transcript Vol. III, pp. 448-449].

           c.        The Exxon Road Hollow gas was commingled with Chevron’s gas at the inlet of the Carter Creek Gas Plant. [Transcript Vol. III, p. 449].

           d.        The Exxon Road Hollow agreement contained a maximum quantity provision with a sliding fee scale that decreased as the quantity increased. [Transcript Vol. III, pp. 449-450].

           e.        The maximum fee under the Exxon Road Hollow Agreement did not exceed the processing fee seen in other processing contracts. [Transcript Vol. III, p. 450].

37.      The Department concluded Exhibit F to the Whitney Canyon C&O Agreement, under which each producer paid the plant owners a processing fee of 25% of the gas product, was a comparable which the Department could use to determine the processing deduction for valuing Chevron’s production. [Exhibit 919]. Specifically, the Department concluded that:

           a.  Each of the parties negotiated the C&O Agreement in an arms-length manner because each party was acting in its own best interest, the parties were not controlled by each other, and the parties were competitors. [Exhibit 927; Transcript Vol. III, pp. 426-427].

           b.  The processing fee paid by each producer individually to the plant owners jointly was, for each individual company, a fee charged by the plant owners to an other party within the meaning of the statutory definition of comparable value. [Transcript Vol. III, pp. 427-428].

           c.  For production years 1983 through 1988, Amoco, one of the parties to the C&O Agreement, asserted the C&O Agreement was an arms-length agreement. [Transcript Vol. III, pp. 429-431].

           d.  The 25% processing fee is a fee charged to other parties with no adjustments related to the quality or quantity of the gas. [Exhibit 927; Transcript Vol. III, pp. 427-428, 432]. The terms and conditions of all of the contracts that reference a 25% fee are very similar if not the same. [Transcript Vol. III, p. 432].

           e.  All gas was commingled and goes through the same processing. [Transcript Vol. III, pp. 428-429]. The C&O Agreement does not set forth any quality or quantity limitations. [Exhibit 927; Transcript Vol. III, p. 428].

           f.   The terms and conditions of the Exhibit F gas processing agreement were the same for all producers. [Exhibit 927; Transcript Vol. III, p. 425].

           g.  The gas processed under the C&O Agreement can be processed at either the Carter Creek Gas Plant or the Whitney Canyon Gas Plant, and has been processed at the Carter Creek Gas Plant during a turnaround. [Transcript Vol. III, pp. 416-417, 432-433].

38.      The Department also concluded other processing agreements disclosed through discovery or during hearings supported its allowance of a processing fee of no more than 25% for Carter Creek production. The agreements were the Carter Creek/Whitney Canyon Mutual Backup Agreement, the Wahsatch Gathering System Processing Agreement, the Merit Agreement, and the Carter Creek Gas Plant/Anschutz Back-up Processing Agreement. [Transcript Vol. III, p. 469; Exhibits 516, 943, 944, 201].

39.      The Department concluded the Carter Creek/Whitney Canyon Mutual Back-up Agreement was a comparable which the Department could use to determine the processing deduction for valuing Chevron’s production. [Exhibit 516]. Specifically, the Department concluded that:

           a.  The Carter Creek/Whitney Canyon Mutual Back-up Agreement provides for the continued processing of gas. When one gas plant is shut down, the production normally processed at that plant is processed at the other gas plant. [Transcript Vol. III, pp. 433-434].

           b.  There is no adjustment to the fee based on the quality or quantity of gas. [Transcript Vol. III, p. 434].

           c.  The gas processed pursuant to the Carter Creek/Whitney Canyon Mutual Back-up Agreement is commingled prior to processing. [Transcript Vol. III, p. 435].

           d.  There was no difference in the processing fee based on the processes within either gas plant. [Transcript Vol. III, p. 434].

           e.  There was no quantity limitation other than the capacity of the plant processing the gas. [Transcript Vol. III, p. 435].

           f.   The priority of the gas being processed pursuant to the Mutual Back-up Agreement did not have any effect on the fee. The difference in priority was not significant because gas is not taxed until it is produced, processed and sold. [Transcript Vol. III, p. 437].

           g.  The fee set under the terms of the Mutual Back-up Agreement was less than the fee allowed by the Department. [Transcript Vol. III, p. 435].

40.      The Department concluded the Merit Agreement, under which Merit paid the Whitney Canyon Gas Plant owners a processing fee of 25% of the gas product and 100% of the sulfur product, was a comparable which the Department could use to determine the processing deduction for valuing Chevron’s production. [Exhibit 944]. The Department generally concluded that:

           a.  Merit is not an owner of the Whitney Canyon Gas Plant. [Transcript Vol. III, pp. 443, 445-446].

           b.  The processing fee paid by Merit to the Whitney Canyon Gas Plant owners was a fee charged to an other party. [Transcript Vol. III, p. 446].

           c.  The terms and conditions of the Merit Agreement are almost identical to the provisions of the Exhibit F to the Whitney Canyon C&O Agreement. [Transcript Vol. III, pp. 445, 446]. The only difference between the Merit Agreement and Exhibit F to the Whitney Canyon C&O Agreement was the percent of sulfur. [Transcript Vol. III, pp. 444-445]. The sulfur is not a substantial revenue generator because the cost of sulfur transportation negates the revenue generated from sulfur sales. [Transcript Vol. III, p. 445].

           d.   The processing fee does not vary depending on the quantity of gas processed. [Transcript Vol. III, p. 446].

           e.  Both the Whitney Canyon Gas Plant and the Carter Creek Gas Plant are capable of processing the Merit gas. [Transcript Vol. III, p. 444].

41.      The Department concluded the Carter Creek Gas Plant/Anschutz Back-up Processing Agreement under which Anschutz paid Chevron a processing fee of 25% of the gas product was a comparable which the Department could use to determine the processing deduction for valuing Chevron’s production. [Exhibit 201]. Because of Chevron’s confidentiality concerns, our discussion of the Department’s reasoning for selecting this agreement as a comparable must be of a general nature. The Department generally concluded that:

           a.  Chevron and Anschutz Corporation entered into an arms-length contract for the processing of Anschutz gas at the Carter Creek Gas Plant. [Transcript Vol. III, pp. 451-453]. This is the same gas processed at the Whitney Canyon Gas Plant pursuant to the Wahsatch Gathering System Agreement. [Transcript Vol. III, p. 452; See Exhibit 943 ].

           b.  Under the agreement Anschutz pays as a fee a percentage of the gas product. While the agreement included an additional percentage fee for inlet compression, the Department understood that the inlet compression fee was not charged. [Transcript Vol. III, p. 451].

           c.  The agreement does not contain any quality requirements. [Transcript Vol. III, p. 452].

           d.  The Carter Creek Gas Plant can process the gas, and has processed the gas. [Transcript Vol. III, p. 452].

           e.  The Anschutz gas composition is more similar to the Carter Creek field than to the Exxon Road Hollow gas. [Transcript Vol. III, 452].

           f.    The gas was commingled with Chevron’s gas at the inlet of the Carter Creek Gas Plant. [Transcript Vol. III, p. 452].

           g.  The fee for processing the Anschutz gas is the same as the fee charged Exxon even though the composition of the gas is different. [Transcript Vol. III, pp. 452-453].

42.      The Department concluded the Wahsatch Gathering System Whitney Canyon Plant Processing Agreement for Yellow Creek gas, under which the producer (Anschutz) paid the Whitney Canyon Gas Plant owners a processing fee based on a sliding scale with a maximum of 25% of the gas product, was a comparable which the Department could use to determine the processing deduction for valuing Chevron’s production. [Exhibit 943]. While this agreement was not discussed in detail, the Department generally concluded it was a comparable which the Department could use. [Transcript Vol. III, p. 469].

           a.  The maximum fee charged under the Wahsatch Gathering System Processing Agreement is 25%. [Transcript Vol. III, p. 544].

           b.  The Department did not consider the provision for a compression fee in addition to the processing fee to be significant because it had no information that compression was being used. [Transcript Vol. III, pp. 544, 546].

           c.  The Carter Creek Gas Plant was capable of processing the Yellow Creek gas and did so under the Carter Creek-Anschutz Back-up Processing Agreement. [Exhibit 201; Transcript Vol. III, p. 452].

43.      Finally, the Department concluded that the 1995 Chevron Agreement, under which Chevron paid the Whitney Canyon Gas Plant owners a processing fee of 25% of the gas product, confirmed the fact that the 25% fee was a reasonable processing allowance, even though the 1995 Chevron Agreement could not itself be a comparable. [Exhibit 529]. Specifically, the Department concluded that:

           a.  The fee charged for the processing of Chevron’s gas at the Whitney Canyon Gas Plant under the agreement does not exceed 25%. [Transcript Vol. III, p. 439].

           b.  The 1995 Chevron Agreement contains a sliding fee scale based on the quantity of the gas. The fee decreases as the quantity of gas increases, with a maximum fee of 25%. [Transcript Vol. III, pp. 440-441, 442].

           c.  The agreement does not meet the “other party” requirement of the comparable value statute. [Transcript Vol. III, pp. 438-439].

           d.  The agreement does not contain any fee adjustment for the quality of gas being processed. [Transcript Vol. III, p. 442].

           e.   The terms and conditions of the agreement are similar to Exhibit F to the Whitney Canyon C&O Agreement. [Transcript Vol. III, p. 442].

           f.    A portion of Chevron’s gas production listed in the 1995 Chevron Agreement was processed at the Carter Creek Gas Plant. [Transcript Vol. III, p. 440].

44.      Although the Department was generally committed to the application of the comparable value method, its witnesses commented on the Department’s position with regard to whether other methods were available. The Department took the position that the statutory netback method could not be used by Chevron for its Carter Creek production because it was a producer-processor. [Transcript Vol. III, p. 386]. The comparable sales method could not be applied because all sales of the Carter Creek gas occurred after the point of valuation, near the tailgate of the plant. [Transcript Vol. III, pp. 383-384].

45.      The Department favors the comparable value method because it is closer to what the fair market value would be in an open market. The comparable value method uses actual contractual terms that better reflect what the parties would agree to than the proportionate profits method which is simply a calculation based on an allocation of costs. [Transcript Vol. III, p. 587]. The Department disfavors the proportionate profits method because it does not, in all economic conditions, produce a representative fair market value. [Transcript Vol. III, p. 394].

46.      The Department also disfavors the proportionate profits method for administrative reasons. In the Department’s experience, taxpayers using the proportionate profits method classify costs differently among themselves in the same plant. [Transcript Vol. III, p. 393]. In addition, some taxpayers have reclassified or shifted costs from one category to another resulting in a reduction in taxes calculated using the proportionate profits method. [Transcript Vol. III, pp. 390-392, 394].

47.      The Board finds the Department had a reasoned basis for applying the comparable value method to value Petitioner’s production. However, it remains for us to consider whether all the details of the Department’s conclusions are sound in light of the contrary views of Petitioner.

Was the Department’s processing allowance of 25% equal to or greater than Petitioner’s actual processing costs?

48.      For production year 2002, Petitioner asserts a processing allowance of 25% was less than its actual direct costs of processing, including depreciation. Petitioner further asserts that a processing allowance of 25% would have covered its costs of processing in only two out of the twenty years the Carter Creek Gas Plant has been in operation. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, pp. 3-4; Transcript Vol. II, pp. 275, 285].

49.      In this case, the parties have relied on consistent revenue and expense information. [Exhibits 208, 209, 502]. Chevron introduced documentation of the sources of its revenues related to gas production processed through the Carter Creek Gas Plant. [Exhibits 208, 212, 225; Transcript Vol. II, p. 273]. For the wells in the Carter Creek field, Chevron provided its annual gross products returns, containing volume, revenue, royalty, claimed processing, and calculated taxable value by Mineral Group. [Exhibit 230]. Revenue related to production from two additional wells, 457D and ACG #6A, was included in Chevron’s gross revenue figure and its calculations. [Exhibits 208, 225]. For these two wells, Chevron did not provide its annual gross products returns.

50.      Chevron also introduced summary accounting system documentation of its costs, and explained how those costs tied to its claimed direct costs and its proportionate profits calculation. [Exhibits 208, 209, 226, 227, 228, 229; Transcript Vol. II, pp. 274–279]. Chevron’s confidential proportionate profits calculation and its claimed processing allowance appear on Exhibit 208. [Transcript Vol. II, pp. 271–272].

51.      In performing its calculations for 2002, the Department used gross revenue, production expense, processing expense, and royalty figures consistent with the figures used by Petitioner. [Compare Exhibits 208 and 209 with Exhibit 502]. We accept these figures for purposes of our analysis.

Whether plant costs exceeded a processing allowance of 25% of gross revenue in 2002

52.      Based on the evidence presented, we find the processing deduction allowed by the Department in 2002 using the comparable value method, 25% of gross revenue, was less than the amount claimed by Chevron as direct costs of processing, including depreciation. This finding is based on a comparison of the Department’s processing allowance found at line H of Exhibit 502, page 12, with Chevron’s direct processing expenses found at line B of Exhibit 502, page 12. The Department’s 2002 processing allowance of 25% of gross revenue allowed Chevron a processing deduction of slightly more than 87% of its reported direct processing costs, including depreciation, with Exxon and Whitney Canyon Gas Plant expenses deducted. [See Exhibit 502, p. 14; Exhibit 209, p. 2].

Whether plant costs exceeded a processing allowance of 25% of gross revenue in other years

53.      Chevron offered a chart and spreadsheet to support its argument that a processing allowance of 25% of gross revenue would have covered its costs of processing in only two out of the twenty years the Carter Creek Gas Plant has been in operation. [Exhibits 223, 224]. The Department did not offer a similar analysis.

54.      In reviewing Exhibits 223 and 224, we found that Chevron understated the Department’s processing allowance for 2002. [Compare Exhibit 502, p. 12 line H with Exhibit 224, row “Comparable,” column “2002"]. Chevron’s spreadsheet and chart understated the Department’s allowed processing deduction for 2002 by just under 12% due to its use a different method of calculating the deduction. [Transcript Vol. II, pp. 281, 331]. The spreadsheet and chart also reflect the effects of Chevron’s restatement of impaired assets in 1996. [Transcript Vol. II, p. 333]. Because of the different calculation method employed by Petitioner and the absence of an explanation of how the figures should be adjusted, if at all, to reflect the Department’s calculation of the processing deduction, we are unable to find that plant costs exceeded a processing deduction of 25% of gross revenue in any given year based on Chevron’s exhibit.

55.      The evaluation of this evidence also requires that it be placed in historical context. With the exception of 2000 and 2001, the Department did not utilize the comparable value method to value Chevron’s production processed through the Carter Creek Gas Plant. In the 1980's a netback method was used for determining taxable value. In 1991, 1992, and 1993 Chevron’s production was valued using a mutually agreed upon approach authorized by Wyo. Stat. Ann. §3 9-14-203(b)(vii). [Transcript Vol. II, p. 294]. In 1994 through 1999, Chevron’s production was valued using the proportionate profits method. [Transcript Vol. II, p. 294].

56.      Because the historical perspective offered by Chevron differs from what actually occurred, we decline to draw any inferences therefrom for production year 2002. The only significant finding for 1990 through 2001 that may be drawn from the evidence presented is that the processing deduction allowed Chevron by the Department, utilizing the settlement for 1991 through 1993, the proportionate profits method for 1994 through 1999, and the comparable value method for 2000 and 2001, was equal to or greater than Chevron’s actual costs of processing, plus depreciation.

2002 Return on Investment

57.      The parties generally agreed, albeit for different reasons, an analysis of an annual return on investment, expressed as a percentage of capital invested, should be made. For Chevron, the return on investment tied to its concept of a “merchant plant,” a plant built to process third party gas with a fee set to allow the plant owner to recover (1) the costs of operation, (2) the investment in the plant, and (3) a return on the investment in the plant. [Transcript Vol. I, p. 95; Vol. II, p. 202].     By evaluating return on investment, we are not making a finding that any particular return on investment was contemplated by the 25% processing allowance. Nor are we making a finding that the application of the 25% processing allowance requires that any profit be made on processing.

58.      The core of the Department’s comparison of plant revenues and plant costs was an estimate of an implied rate of return, calculated in a series of steps. The Department’s calculations are contained on Exhibit 502 at page 12.

59.      The Department began with a gross revenue figure, line G of the Comp. III Statistics. [Exhibit 502, p. 12]. The Department then calculated a surrogate for plant revenue. This was done by simply multiplying gross revenue by the 25% processing allowance. [Exhibit 502, p. 12 (Line G times .25)]. This surrogate for plant revenue is identified as Line H, “DOR processing allowed.” [Exhibit 502, p. 12].

60.      To make a comparison, the Department accepted the processing costs used by Chevron in its proportionate profits calculation. [Compare Exhibit 502, p. 12, line B “Total Proc Expenses” with Exhibits 208, 209 “Carter Creek Plant Expense - 2002 Production”]. The Department computed an un-depreciated asset balance for Chevron by using the un-depreciated asset balance from the case for 2001, Carter Creek 2001, and subtracting Chevron’s claimed 2002 depreciation. [Exhibit 502, p. 12, line D with notation “Comp II - C”]. The un-depreciated asset balance appears as line D in the Comp III Statistics. [Exhibit 502, p. 12]. Chevron did not offer a different un-depreciated asset balance, so we accept the figure used by the Department in its calculations.

61.      Finally, the Department computed an implied rate of return on investment. It subtracted total processing expenses from the surrogate for plant revenue, then divided by the un-depreciated asset balance. [Exhibit 502, p. 12, (Line H, “DOR Processing allowed” minus line B “Total Proc Expenses) divided by line D “Undepreciated Asset Balance)]. The result appears as line M, “ROI on Assessed Processing.” [Exhibit 502, p. 12].

62.      For comparison, the Department computed a rate of return on investment using Chevron’s claimed, or reported, processing deduction as a surrogate for plant revenue. The result appears as line L, “ROI on Reported Processing.” [Exhibit 502, p. 12]. The Department’s results, which we find not to be confidential, were:

           ROI on Assessed Processing:  -8.80%

           ROI on Reported Processing:  63.77%

[Exhibit 502, p. 12]. If we calculate the average of the two ROIs, the result is still substantially greater than the internal rate of return Chevron uses to determine whether to retain or dispose of an existing project. [Transcript Vol. II, pp. 362-363]. In other words, the result of the comparable value method, though negative, is closer to Chevron’s internal rate of return on an existing project than the result of the proportionate profits method.

63.      The aggregate difference between the Department’s approximation of the comparable value processing allowance and the processing allowance reported by Chevron using the proportionate profits method approximates the taxable value at stake in this case. [Exhibit 502, p. 12, line U “Delta Reported to Assesed (sic) TV”]. We note that a comparison of 2002 plant revenue and plant costs with Carter Creek 2001 reflects a decline in plant revenue, which in turn reflects a decline in gas prices between 2001 and 2002 and a decline in production related to the Carter Creek Gas Plant turnaround in August and September 2002. [Exhibits 212, 235]. See Carter Creek 2001 ¶¶ 66-84.

Did the Petitioner demonstrate that the Department improperly applied the comparable value method by its selection of sources of comparable value?

64.      Chevron asks the Board to view each of the Department’s selected comparable contracts in light of numerous criticisms. For purposes of our review, we have relied on Petitioner’s Proposed Findings of Fact and Conclusions of Law as a guide to the specific matters on which Chevron relies for its position that the Department misapplied the comparable value method. We have endeavored to address each of the many fact issues raised by Petitioner, even though some bear marginally on the ultimate issues in the case.

Exhibit F to the Whitney Canyon C&O Agreement

65.      Petitioner identified two primary arguments to support its position that Exhibit F to the Whitney Canyon C&O Agreement is not a comparable: 1) Chevron is not an “other party” to the agreement; and 2) the terms and conditions under which the gas is being processed are very different. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶ 220].

66.      The Whitney Canyon C&O Agreement includes, as Exhibit F, a Gas Processing Agreement (hereinafter Exhibit F Gas Processing Agreement). [Exhibit 927, pp. 0170-193]. The Department selected the Exhibit F Gas Processing Agreement as a comparable which the Department could use to determine the processing deduction for valuing Chevron’s production processed at the Carter Creek Gas Plant. Supra ¶ 37. Based on its partial ownership interest in the Whitney Canyon Gas Plant, Chevron argues there is no “other party” for which a processing fee may be inferred. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 219-223].

67.      The Exhibit F Gas Processing Agreement obliges each producer to pay the Whitney Canyon Gas Plant owners an in-kind processing fee of 25% of the plant products recovered during each settlement period which are attributable to the producer. [Exhibit 927, pp. 0170-0193, Exh. F, Section 12.1, p. 185.1]. The plant owners are responsible for all operating costs of the Whitney Canyon Gas Plant. [Exhibit 927 p. 0170, Exh. F, Section 12.2, p. 185.1]. The Exhibit F Gas Processing Agreement further provides the in-kind processing fee percentage “. . . can be readjusted to provide a discounted cash flow rate of return of 25% after Federal Income Taxes . . .” if the anticipated capital investment of slightly more than $336 million is exceeded. [Exhibit 927 at Exh. F, Section 12.3, pp. 185.1-186]. The 25% in-kind fee has never been changed. [Exhibit 927, Exh. F]. The Exhibit F Gas Processing Agreement continues to govern the fees paid for processing by the original producers and their successors in interest.

68.           In Whitney Canyon 2000 and Carter Creek 2000, we found the Whitney Canyon C&O Agreement created a business entity separate from the four taxpayers as producers. Whitney Canyon 2000, ¶ 8; Carter Creek 2000, ¶ 49. The Wyoming Supreme Court subsequently affirmed our findings in Whitney Canyon 2000. BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶ 25, 112 P.3d 596, 608 (Wyo. 2005). No facts were presented to us in this case that would lead to a different finding.

69.      We find the Department had sound reasons for considering the co-owners of the Whitney Canyon Gas Plant to be other parties. Supra ¶ 37. The Whitney Canyon Gas Plant owners were unrelated. [Transcript Vol. III, p. 426]. The co-owners negotiated the Whitney Canyon C&O Agreement with their own best interests in mind. [Transcript Vol. III, p. 426]. There is language in the Whitney Canyon C&O Agreement indicating the parties acted in an arms-length manner. [Transcript Vol. III, pp. 426-428]. (For an in-depth discussion of the contract provisions see Carter Creek 2000, ¶¶ 50-59.)

70.      Petitioner asserts Exhibit F to the Whitney Canyon C&O Agreement may not be used as a comparable because of differences in the “terms and conditions” under which the gas is processed. The focus of this argument is on the differences between the Whitney Canyon Gas Plant and the Carter Creek Gas Plant. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶ 224].

71.      There are differences between the Carter Creek Gas Plant and the Whitney Canyon Gas Plant. The Whitney Canyon Gas Plant enjoys a slightly less stringent air quality permit than the Carter Creek Gas Plant. [Stipulations of the Parties, ¶ 50; Transcript Vol. I, p. 48]. As a result, the Carter Creek Gas Plant had a processing unit known as a Stretford unit, the sole purpose of which is to meet the higher air emission requirements for sulfur. [Stipulations of the Parties, ¶ 50; Transcript Vol. I, pp. 48-49]. The Stretford Unit was replaced with a Flexsorb Unit during the Carter Creek Gas Plant turnaround in 2002. [Transcript Vol. I, pp. 40, 43, 45-46].

72.      The two plants have different systems for recovering natural gas liquids, NGLs. The Carter Creek Gas Plant uses a propane refrigeration system while the Whitney Canyon Gas Plant uses a turbo expander. [Transcript Vol. I, p. 96]. As a result of the differing NGL recoveries, the Carter Creek Gas Plant is able to recover about half the propane which the Whitney Canyon Gas Plant recovers but about the same amount of heavier products like butane and natural gasoline. [Stipulations of the Parties, ¶ 51].

73.      There are other differences between the two plants. The Carter Creek Gas Plant has one sulfur plant while the Whitney Canyon Gas Plant has two. The Carter Creek Gas Plant transports the sulfur it recovers by pipeline, while the Whitney Canyon Gas Plant transports the sulfur it recovers by truck. [Stipulations of the Parties, ¶ 53; Transcript Vol. I, p. 97].

74.      On behalf of Chevron, Ms. Adair, who performs analysis of economic and technical issues in the energy industry, and Mr. Chambers each expressed an opinion that the different cost structures and operating costs between the Carter Creek Gas Plant and the Whitney Canyon Gas Plant rendered the use of any Whitney Canyon gas processing contracts as a comparable inappropriate. [Transcript Vol. II, pp. 204-205, 281-285]. Ms. Adair based her opinion on a calculation of the differences in construction cost expressed on a per inlet Mcf basis. [Transcript Vol. II, pp. 204-205]. Mr. Chambers offered a chart showing the processing costs for the Whitney Canyon Gas Plant and the Carter Creek Gas Plant for 1997 through 2003. [Exhibit 216]. The chart includes extraordinary costs experienced at the Carter Creek Gas Plant in 2000 and at the Whitney Canyon Gas Plant in 2001 because of a turnaround. However, even with these extraordinary costs, the seven year average cost comparison reflects the costs of the two plants to be essentially the same. [Exhibit 216]. We find the seven year average to be a better reflection of the costs of the two plants than a comparison for any one year or a comparison based on construction cost per Mcf. The average costs over time appear to be very similar.

75.      The differences between the two plants do not affect the ability of either plant to process gas production from the Whitney Canyon field, the Carter Creek field, or the Yellow Creek field; all such gas production has been processed at the Carter Creek Gas Plant. Supra ¶¶ 7, 18.

76.      We find the similarities between the Carter Creek Gas Plant and the Whitney Canyon Gas Plant to be so great that each offers a reliable reflection of how the other would treat a specific taxpayer if it were a third party producer requiring the services of a gas processing plant. We reach this finding because most of the gas processed by both plants contains high percentages of hydrogen sulfide, and because gas from the same wells has been processed from time to time at both plants. While the plants have some slight differences, each serves the same producers from the same fields with the same ultimate goal, to process gas for sale of NGLs and residue gas. Therefore, we find the processing fee charged to producers who have gas processed at the Whitney Canyon Gas Plant is a comparable fee with respect to Petitioner’s gas processed at the Carter Creek Gas Plant.

77.      Petitioner generally criticizes the Department’s use of the Exhibit F Gas Processing Agreement, asserting that it is not an arms-length or third party agreement. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 219-223]. There is no evidence in the record that the parties to the Whitney Canyon C&O Agreement did not negotiate to protect their individual interests, or that by acquiring Gulf’s interest in the Whitney Canyon Gas Plant the arms-length nature of the agreement changed. Since the Exhibit F Gas Processing Agreement was an element of the Whitney Canyon C&O Agreement, we find it was also an arms-length agreement. Petitioner’s opinions to the contrary are merely statements of Petitioner’s legal position, and are not credible.

78.      Petitioner suggests the fee charged to a producer by the Whitney Canyon Plant owners pursuant to the Exhibit F Gas Processing Agreement does not reflect the true processing costs because each plant owner is also obligated to pay its proportionate ownership share of the costs and expenses of the Whitney Canyon Gas Plant. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶ 226]. This simplistic view would have the Board ignore the fact that each plant owner receives as compensation a portion of all plant products in proportion to its plant ownership share. (25% of total plant products times its ownership interest). In Whitney Canyon 2001, we found this redistribution of the processing fees to the plant owners to be significant, indicating the plant owners received more plant revenue than just the 25% fee each owner paid for processing its own production. Whitney Canyon 2001 ¶¶ 90-96. The obligation of Chevron to pay its share of the plant costs based on its ownership interest in the plant is an obligation of plant ownership, not a fee charged to a producer for the processing of its gas.

Carter Creek - Exxon Road Hollow Agreement

79.      Petitioner contends the Exxon Road Hollow Agreement is not a comparable because of dissimilar quality, quantity, terms and conditions, and because of the benefits Chevron realized due to the processing of Exxon Company, U.S.A.’s (Exxon) gas. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶ 231]. Chevron concedes that it is a arms-length agreement. [Transcript Vol. II, p. 323].

80.      In 1992, Chevron entered into an agreement with Exxon to process gas produced by Exxon from the Road Hollow, Bridger Fork and Collette Creek Areas located in Lincoln County, Wyoming. [Exhibit 200]. It replaced an earlier processing agreement between the parties dated November 17, 1983. [Exhibit 200, ¶ 21.2, p. 0309]. The term of the 1992 Exxon Road Hollow Agreement was a minimum period of 10 years, with a provision that it would continue thereafter until terminated by either party on 12 months prior written notice. [Exhibit 200, ¶21.1, p. 0309]. It set a maximum limit on the amount of the Exxon gas that could be sent to the Carter Creek Gas Plant of 25 million standard cubic feet per day or approximately 15% of plant capacity. [Exhibit 200. ¶ 6.1, p. 299].

81.      While no witness for Chevron directly addressed the age of the Exxon Road Hollow contract as an impediment to its use as a comparable, Mr. Tysse, a Chevron gas control administrator for the majority of Chevron’s Rocky Mountain properties, indicated Chevron looked at whether or not to continue the 1992 Exxon Road Hollow Agreement beyond its term and concluded it would be making some money and wanted to continue the Agreement. [Transcript Vol. I, pp. 92-93, 155-159]. We accept Mr. Tysse’s testimony as evidence of the continued viability of the Exxon Road Hollow Agreement as a source of a comparable processing fee in 2002.

82.      There are differences between the Road Hollow field gas and the Carter Creek field gas. The gas processed under the Exxon Road Hollow Agreement contains a small amount of hydrogen sulfide, approximately .1%, as compared to Carter Creek gas which contains a larger percentage of hydrogen sulfide, between 15.5% and 16%. [Transcript Vol. I, pp. 53, 101]. Still, even this small quantity of hydrogen sulfide prevents the Road Hollow gas from being marketable without processing. [Transcript Vol. I, pp. 107, 101, 141; Transcript Vol. II, pp. 208-209].

83.      The fee charged to Exxon under the Exxon Road Hollow Agreement is a sliding scale based on volume with a maximum of 25%, plus 100% of the sulfur. [Exhibit 200, Section 11.1]. Petitioner takes this fee in kind, meaning that it receives up to 25% of Exxon’s Road Hollow production at the tailgate of the plant. Even though all the gas is commingled, the percentage of each component of the Exxon gas is recorded and the same percentage, of that component, less the processing fee, is delivered to Exxon at the tailgate. [Exhibit 200, Section 11.1]. Thus, Exxon receives higher BTU content than Chevron at the tailgate of the plant. [Transcript Vol. I, p. 103].

84.      Petitioner argues that the Exxon Road Hollow Agreement may not be used as a comparable because of the difference between the volumes processed under the Exxon Road Hollow Agreement and the aggregate volumes of Chevron’s gas processed through the Carter Creek Gas Plant. In doing so, Petitioner has assumed, but not demonstrated, that comparisons of processing agreements must be based on aggregated plant volumes.

85.      In 2002, approximately 4% of the gas processed at the Carter Creek Gas Plant came from the Exxon Road Hollow field. [Transcript Vol. I, p. 100; Exhibit 212]. Petitioner’s witnesses emphasized that this volume was significantly less than the total volume of Petitioner’s gas from the Carter Creek field processed at the Carter Creek Gas Plant in 2002. [Transcript Vol. I, pp. 53, 103]. However, when the volume of production from each well in the Carter Creek field is compared to the volume of Road Hollow gas, Petitioner’s volumetric comparison loses its significance.

86.      The question of like quantity takes on a different complexion when viewed in the context of the unit by which Petitioner actually reports its production, the Mineral Group, or by well. The Mineral Group is often associated with individual wells, and is likewise the pertinent unit for appeal purposes. [Notice of Appeal; Exhibits 212, 225, 233, 502 at p. 16]. If we focus on the producing wells or individual Mineral Groups rather than on an aggregation of Mineral Groups associated with the plant, the Department’s point about the consistency of the 25% fee becomes stronger. It is clear that the fee is a constant despite wide variations in the quantity and quality of gas produced from individual Mineral Groups or wells.

87.      Exhibit 212, showing production by well, and Exhibit 225, showing production by Mineral Group, demonstrate the wide variation in quantities produced by any given well or mineral group. For example, the volume Chevron reported for its Mineral Group with the largest volume processed at the Carter Creek Gas Plant was over 685 times larger than the volume reported for its smallest Mineral Group processed at the Carter Creek Gas Plant. [Exhibit 225, (Group 4731 divided by Group 4762)]. In addition, a comparison of the volumes and gross values reported by Chevron to the Department demonstrates wide variation in quality, as reflected by gross sales value reported per unit of gross sales volume. [Exhibit 230, (Gross Sales Value divided by Gross Sales Volume)]. For example, Chevron’s reported unit value for Mineral Group 4767 was more than three times the unit value it reported for production from Mineral Group 4732, with unit values for Chevron’s other Mineral Groups being well distributed between these two extremes. [Exhibit 230].

88.      Using the percentage of reported Mineral Group gross sales volume (“Gross Sales Volume) to the total gross sales volume of the Mineral Groups processed at the Carter Creek Gas Plant, we can make a rough comparison of the percentage of total volumes by Mineral Group to the percentage of total Carter Creek Gas Plant volume that Exxon Road Hollow gas represents. Of the twelve Mineral Groups with reported gas production processed though the Carter Creek Gas Plant, seven exceeded the Exxon Road Hollow percentage, four were less than the Exxon Road Hollow percentage, and one, Mineral Group 4767, was roughly the same as the Exxon Road Hollow percentage. [Exhibit 230]. Of the volumes of gas processed through the Carter Creek Gas Plant in 2002, only 6 of the 27 Carter Creek field wells had greater production than Exxon. [Exhibit 212, Compare “Total 2002 EXXON” with Well Codes 1-12H through 4-32M]. We find Petitioner’s criticisms based on quantity unpersuasive.

89.      The Exxon Road Hollow Agreement contains a volume limitation. [Exhibit 200, § 6.1]. However the excess capacity of the Carter Creek Gas Plant is well above the Exxon Road Hollow Agreement maximum of 25 million standard cubic feet of gas per day, and the 4 million standard cubic feet per day volume of Exxon Road Hollow gas processed in 2001. We find the production limitation did not affect the commercial viability of the Exxon Road Hollow Agreement.

90.      Petitioner contends the difference in the make-up of the gas streams renders the Exxon Road Hollow Agreement inappropriate to use as a comparable because a given inlet volume of Exxon Road Hollow gas would generate a higher value than an equal inlet volume of Carter Creek field gas. A hypothetical example was provided to support Chevron’s position. [Transcript Vol. II, pp. 209-215; Exhibit 239]. However, the hypothetical example establishes nothing more than gas of a different quality will generate a different revenue. This is true for Chevron’s gas processed at the Carter Creek Gas Plant. [See Exhibit 530; “Gross Sales Value Plant Products” divided by “Gross Sales Volume” for each Lease]. We find that Chevron has failed to meet its burden of proof on this issue.

91.      Petitioner contends the Exxon Road Hollow Agreement is not a comparable because of priority. While the Exxon Road Hollow Agreement does not contain a specific priority for processing Exxon’s gas, Chevron’s witnesses indicated it would be treated as third priority gas and would be shut in before Chevron volumes and mutual backup volumes. [Transcript Vol. I, pp. 57, 109; Exhibit 200]. However, because of its low hydrogen sulfide content, the Exxon gas is the last gas curtailed when the Carter Creek Gas Plant is shut down, and the first gas brought in when the plant is brought on line. [Transcript Vol. I, pp. 53, 105]. This use of the Exxon Road Hollow gas indicates that practical concerns outweigh the significance of Petitioner’s characterization of the gas as third priority. In any event, the Department did not consider priority to be a concern because the fee charged does not vary depending on priority. [Transcript Vol. III, pp. 419, 472-473]. We find priority does not affect the viability of the Exxon Road Hollow Agreement as a comparable.

92.      Petitioner’s witnesses often referred to a “merchant plant” in their testimony. [Transcript Vol. I, pp. 95, 177, Vol. II, p. 202]. Ms. Adair defined a “merchant plant” as a plant built for the sole purpose of processing gas, meant to stand on its own in terms of the profit that it is going to generate for the investors. [Transcript Vol. I, pp. 185-186]. Implicit in the definition is an assumption that contracts entered into by a processing plant built by a producer to process its own gas cannot be used as a source of a comparable processing fee. We disagree with the assumption and find that in processing gas produced by other parties, the Carter Creek Gas Plant is selling its services much as a “merchant plant” would.

93.      Petitioner asserts that the Exxon Road Hollow Agreement is not a comparable because of the benefits Chevron realized due to the processing of Exxon’s Road Hollow gas. At all times, Chevron had a substantial interest in processing greater volumes of gas at the Carter Creek Plant. In principle, incremental production above that from the Carter Creek field affects the economic life of the Carter Creek Plant. Production from a source such as Road Hollow allows the Carter Creek Plant to operate longer, and in doing so, enables Chevron to recover more of the gas in the Carter Creek reservoir. [Transcript Vol. I, pp. 55- 56, 81-82, 106-107, 196; Exhibit 211]. While there is a benefit to incremental production, that benefit is a component of each processing contract we have been asked to consider. It does not affect the use of the contract as a source of a comparable processing fee.

Whitney Canyon-Carter Creek Mutual Backup Agreement

94.      Petitioner contends that the Whitney Canyon-Carter Creek Mutual Backup Agreement may not be used as a comparable because Chevron is not an “other party” to the Agreement and because of dissimilar terms and conditions. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶ 245-248].

95.      The Whitney Canyon-Carter Creek Mutual Back-up Agreement provides for short term processing during plant shutdowns, on a third priority basis. [Exhibit 516]. In 2002, the Whitney Canyon Gas Plant processed gas from the Carter Creek Gas Plant during its turnaround. [Stipulations of the Parties, ¶¶ 93, 94; Exhibit 213]. The contractual fee for processing was 20% in-kind if no inlet compression was used, and 22% if inlet compression was used. [Exhibit 516].

96.      As in Carter Creek 2001, we are not prepared to accept the Mutual Back-up Agreement as a comparable because we do not have adequate evidence of the contractual obligations that support the Department’s position or evidence of how the processing fee is accounted for. Carter Creek 2001, ¶¶ 110-115. We find the Mutual Back-up Agreement lends support to the Department’s general position, but do not find it is a comparable.

Carter Creek - Anschutz Back-up Agreement

97.      Petitioner contends the Carter Creek-Anschutz Back-up Agreement is not a comparable because it does not reflect processing fees charged to other parties for minerals of like quantity and because the terms and conditions under which the production was processed are different. [Petitioner’s Proposed Findings of Fact and Conclusions of Law. ¶¶238-241].

98.      In 2001, Chevron, as operator of the Carter Creek Gas Plant, and Anschutz Marketing and Transportation, Inc., as producer, entered into a processing agreement to provide for processing Anschutz’s Yellow Creek gas during the 2001 Whitney Canyon turnaround. [Exhibit 201]. The initial term of the agreement was for the period from May 1, 2001, through July 31, 2001, with a provision that the agreement would continue until terminated by either party. [Exhibit 201, ¶ 13]. In order to process its gas at the Carter Creek Gas Plant, Anschutz is required to obtain a release from its contract with the Whitney Canyon Gas Plant, that contract being the Wahsatch Gathering System Processing Agreement. [Exhibit 201, ¶ 1]. The Carter Creek Gas Plant had the capacity to process additional volumes, but retained the right to curtail the processing of the gas. [Exhibit 201, ¶ 5]. In 2001, approximately 8 million standard cubic feet of gas per day was processed at the Carter Creek Gas Plant for a short period of time. [Transcript Vol. I, p. 122]. In 2002, no gas was processed pursuant to the agreement. [Transcript Vol. I, p. 122]. There are no physical constraints affecting Chevron’s ability to process the Yellow Creek gas at the Carter Creek Gas Plant. [Transcript Vol. I, pp. 122-123]. No evidence was presented to indicate that the agreement is between related parties.

99.      The Anschutz Back-up Agreement provides for a percentage fee for the processing of the Anschutz gas and for an additional fee for compression services and services provided after the tailgate of the plant. [Exhibit 201, ¶¶ 7, 8].

100.    Two factors were identified by Petitioner to distinguish the Carter Creek-Anschutz Back-up Agreement from the other gas processing agreements. Mr. Tysse was critical of the use of the agreement as a comparable because of its temporary nature. [Transcript Vol. I, p. 125]. He also expressed his opinion that Chevron’s motivation for entering into the agreement was to help Anschutz out, not to make a profit. [Transcript Vol. I, p. 124]. While there are elements of truth in that testimony, we did not find the items listed to be impediments to use of the Carter Creek-Anschutz Back-up Agreement as a source of comparable value. Generally speaking, we do find the terms and conditions of the Carter Creek-Anschutz Back-up Agreement differ from those of the other processing agreements, but the differences did not result in a processing fee materially different than that reflected in other contracts selected by the Department as comparables. We find no evidentiary support for Petitioner’s assertion that Anschutz is not an other party.

Wahsatch Gathering System Processing Agreement

101.    Petitioner generally contends the Wahsatch Gathering System Processing Agreement is not a source for a comparable processing fee because it is not similar in quantity and not subject to similar terms and conditions. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 242-244].

102.    The “Processing Agreement, Wahsatch Gathering System, Whitney Canyon Plant” (Wahsatch Gathering System Processing Agreement), entered into in 1994, provides for the processing of Anschutz’s gas from the Yellow Creek field, commonly referred to as the Wahsatch Gathering System, by the Whitney Canyon Gas Plant. [Stipulations of the Parties, ¶ 78; Exhibit 943]. This is the same gas processed in 2001 at the Carter Creek Gas Plant pursuant to the Carter Creek - Anschutz Back-up Agreement. [Transcript Vol. I, p. 122]. The agreement was entered into originally by Union Pacific Resources Company (UPRC) and the Whitney Canyon Gas Plant operator, on behalf of the Whitney Canyon Gas Plant owners, as part of a larger transaction involving UPRC’s purchase of Amoco Production Company’s interests in the Yellow Creek field. [Stipulations of the Parties, ¶¶ 87-88; Transcript Vol. I, pp. 185-186]; see Whitney Canyon 2001, ¶ 180. Anschutz subsequently acquired UPRC’s interest in late 2000. [Stipulations of the Parties, ¶ 89].

103.    The Wahsatch Gathering System Processing Agreement provides that the gas, condensate, and water be separated and delivered to the Whitney Canyon Gas Plant. [Stipulations of the Parties, ¶ 79; Exhibit 943, Sections 4.5, 4.7, p. 252]. The processing fee has a range from 25% down to 14.17% as the volume delivered for processing per day increases. [Exhibit 943A]. Thus, regardless of the volume produced and processed, Anschutz never paid more than a 25% processing fee. Chevron considers nearly all of the fee to be profit because the Whitney Canyon Gas Plant is not required to provide compression and separation services. [Stipulations of the Parties, ¶ 81]. The gas is third priority gas. [Stipulations of the Parties, ¶ 84].

104.    Petitioner suggests any agreement between the Whitney Canyon Gas Plant and a producer can not be used as a source of a comparable processing fee based on the notion that a “merchant plant” is required. [Transcript Vol. I, pp. 95, 177, Vol. II, p. 202]. Ms. Adair defined a “merchant plant’ as a plant built for the sole purpose of processing gas, meant to stand on its own in terms of the profit that it is going to generate for the investors. [Transcript Vol. I, pp. 185-186]. Implicit in the definition is an assumption that a plant built by a producer to process its own gas cannot be a merchant plant when processing gas produced by others. We disagree with the assumption and find that in processing gas produced by other parties, Whitney Canyon Gas Plant is selling services much as a “merchant plant” would.

105.    Ms. Adair, on behalf of Chevron, expressed her opinion that the Wahsatch Gathering System Processing Agreement was not a comparable because the agreement was entered into in 1994, and because both parties had ownership interests in the Whitney Canyon Gas Plant when the field was sold by Amoco to UPRC. [Transcript Vol. I, pp. 185-186]. She also characterized the agreement as unique because compression and separation services are performed by the producer prior to delivery to the Whitney Canyon Gas Plant for processing. [Transcript Vol. II, pp. 193-194]. Mr. Tysse offered his opinions on the motivations of the parties at the time the agreement was entered into. [Transcript Vol. I, pp. 127-128].

106.    Taking the history of the agreement into account, we nonetheless find that the Wahsatch Gathering System Processing Agreement is a suitable source for determining comparable value. We doubt the contention that the contract was unduly favorable, particularly in view of Chevron’s testimony that the plant costs associated with processing the Wahsatch gas are less than for other gas. [Transcript Vol. I, p. 124]. To the extent that the original processing fee was in some way preferential, that preference must be viewed in the context of the Whitney Canyon Gas Plant owners’ common interest in securing processing revenue from the Wahsatch production, and in light of the costs of transporting the Wahsatch gas to Whitney Canyon. As important, this history has generally ceased to be of interest. In 2002, the producer, Anschutz, did not have any ownership interest in the Whitney Canyon Gas Plant.

107.    We find the delivery and processing of gas in 2002 indicative of present market value. We find it significant that the Whitney Canyon Gas Plant operator has not availed itself of its right to cancel the agreement if the processing becomes uneconomical. [Exhibit 943, Section 25, p. 269].

108.    We accept the general proposition that the Wahsatch producer received less service for its fee than other producers. Even if the Wahsatch producer received less service for its fee than other producers, Petitioner did not persuade us that the Wahsatch Gathering System Processing Agreement cannot be a source of comparable value. A purchaser of services commonly cannot avail itself of the full range of services included in a package of services that has a set fee, even though another purchaser may be able to enjoy all of the benefits of the package. Similarly no one testified that the Wahsatch producer needed these additional services, but was deprived of them. For the purposes of applying the comparable value method, it is enough that gas has been processed in the same plant without substantial special adjustment to the plant operations.

109.    While there are differences in the services provided to Anschutz, we did not find the items listed to be impediments to use of the Wahsatch Gathering System Processing Agreement as a source of comparable value. Generally speaking, we find the terms and conditions of the Wahsatch Gathering System Processing Agreement differ from those of the other processing agreements, but these differences did not result in a processing fee different from that reflected in other contracts selected by the Department as comparables.

Merit Agreement

110.    Petitioner contends the Merit Agreement may not be used as a source of a comparable processing fee primarily because of the small volume of gas processed and its source, a well in which Merit has a 30% working interest, with Whitney Canyon Gas Plant owners owning a majority interest in the well. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 249-251].

111.    The Whitney Canyon Gas Plant processes gas for Merit produced from the Champlin 505B1 well. [Stipulations of the Parties, ¶ 67]. The well is located in the Session Mountain field, approximately three to four miles west of the central part of the Whitney Canyon field. In 2001, the owners of the production from the well were BP America and RME (Anadarko), two of the owners of the Whitney Canyon Gas Plant, and Merit. [Stipulations of the Parties, ¶ 31]. Merit’s portion of the gas production is processed at the Whitney Canyon Gas Plant pursuant to the Merit Agreement which was entered into between the Whitney Canyon Gas Plant operator, acting on behalf of its owners, and Merit’s predecessor in interest, Texaco. [Exhibit 944]. In 2002, the volume of gas processed at the Whitney Canyon Gas Plant pursuant to the Merit Agreement was about 260 mcf per day or .17% of the inlet volume of the Whitney Canyon Gas Plant. [Stipulations of the Parties, ¶ 71]. The processing fee was 25% of the residue gas, condensate and NGLs, and 100% of the sulfur. [Exhibit 944, Section 12.1; Stipulations of the Parties, ¶ 70].

112.    Ms. Adair testified there is a slightly different situation with the Merit gas because Merit has a very small working interest in one well. Because Merit’s interest was combined with gas owned by parties who had large volumes of gas being processed at the Whitney Canyon Gas Plant, it was tied into the gathering system and sent to the Whitney Canyon Gas Plant. [Transcript Vol. I, p. 198]. We find, however, the fact that one or both parties to an agreement were, and still remain, under practical negotiating constraints does not make the contract any less valid and enforceable.

113.    We note that the volume of gas sent by Merit to the Whitney Canyon Gas Plant for processing is small. We nonetheless agree with the Department that quantity did not affect pricing terms. Supra ¶ 40.

114.    If we focus on volume of gas processed from the Champlin 505B1 well rather than the aggregated volumes of gas processed at a gas plant, Merit’s ownership interest, 30% becomes significant. By focusing on the well rather than on a aggregation of wells or mineral groups associated with a plant, the Department’s point about the consistency of the 25% fee becomes stronger. It is clear that the fee is a constant despite variations in the quantity and quality of gas produced from individual wells or mineral groups.

1995 Chevron Agreement

115.    Petitioner contends the 1995 Chevron Agreement may not be used as a source of a comparable processing fee because Petitioner is the producer under the agreement. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 136-142]. The Department generally agrees with Petitioner based on our decision in Carter Creek 2000. [Transcript Vol. III, pp. 438-439]. Carter Creek 2000, ¶¶ 74-79. However, aspects of this agreement and Chevron’s reporting of production from wells covered by this agreement warrant our attention.

116.    Chevron has a working ownership interest in a number of wells located in or adjacent to the Whitney Canyon field. The wells include the AGC #1, AGC #2, AGC #5, AGC #6, Champlin 323 B#1, Champlin 457 A#1, Champlin A#2, Champlin 457 A#3, Champlin 457 B#1A, Champlin 457 B#2, Champlin 457 C#1, Champlin 457 D#1, Champlin 457 E#1, Champlin 457 G#1, Champlin 457 H#1, Champlin 468 B#1, Champlin 505 B#1, Cummings Federal #1, and Kewanee Federal #1. [Exhibit 529, Section 1.1(x), p. 387]. In 1982, it entered into an agreement with the Whitney Canyon Gas Plant to process its gas from these wells. [Exhibit 217, p. 7]. The initial fee charged by the Whitney Canyon Plant Owners, which did not include Chevron at that time, was 50% of the plant products. [Exhibit 217, Section 12.1, pp. 17-18]. The fee was subsequently reduced to 35%, then to 25%, and ultimately to a sliding scale. [Transcript Vol. II, p. 324; Exhibit 529, Attachment 1].

117.    The first reduction in the fee occurred shortly after Chevron’s merger with Gulf and thereby its acquisition of an ownership interest in the Whitney Canyon Gas Plant. [Transcript Vol. II, p. 324]. Currently, the 1995 Chevron Agreement allows Chevron to process gas at the Whitney Canyon Gas Plant for a processing fee between 14.17% and 25% of the product, with the fee decreasing as the volume processed increases. [Exhibit 529, Attachment 1]. The current agreement also gives Chevron the option of sending its gas to Carter Creek Gas Plant. [Exhibit 529, pp. 388, 409].

118.    In 2002, Chevron exercised the option of sending gas covered by the 1995 Chevron Agreement to the Carter Creek Gas Plant and processed a portion of that gas at the Carter Creek Gas plant. [Exhibit 225, AGC # 6A]. The remainder of Chevron’s gas production covered by the 1995 Chevron Agreement was processed at the Whitney Canyon Gas Plant. [Transcript Vol. II, p. 317].

119.    For the production from wells dedicated to and processed through the Whitney Canyon Gas Plant pursuant to the 1995 Chevron Agreement, Chevron deducts 25% of the products charged for processing. Chevron characterizes the methodology used for reporting that production as a netback method. [Transcript Vol. II, p. 317]. In effect, Chevron uses the 1995 Chevron Agreement with the owners of the Whitney Canyon Gas Plant to calculate the processing deduction for those wells. For the production covered by the 1995 Chevron Agreement but taken to the Carter Creek Gas Plant for processing, Chevron claims a processing deduction based on its proportionate profits calculation. [Exhibits 208, 225].

120.    Chevron’s decision to process a portion of the gas covered by the 1995 Chevron Agreement at its Carter Creek Gas Plant is significant. This ability to process its production at either the Carter Creek Gas Plant or the Whitney Canyon Gas Plant is a clear indicator of the appropriateness of the Department’s use of contracts from the Whitney Canyon Gas Plant to value Chevron’s production processed at the Carter Creek Gas Plant. This contract is also significant in establishing that the Whitney Canyon Gas Plant owners are other parties vis-a-vis producers whose gas is processed at the Whitney Canyon Gas Plant.

121.    Because the 1995 Chevron Agreement is an agreement under which Chevron is a producer, it is not a comparable with Chevron as a producer at the Carter Creek field. However, Chevron’s use of the 1995 Chevron Agreement as a third-party processing fee is significant as an indication of Chevron’s understanding of the application of the comparable value method and of the appropriateness of using the Whitney Canyon Gas Plant contracts to value Chevron’s production processed at the Carter Creek Gas Plant. Supra ¶ 119.

General findings regarding contracts

122.    The Exxon Road Hollow Agreement is a reliable source of information, or a comparable, from which the Department could infer and impute a reasonable processing fee which would be paid by an other party for processing of gas of like quantity, taking into consideration the quality, terms and conditions under which the gas was processed. [Exhibit 200]. Exxon is not related to Chevron and is an other party. The contractual fee is a percentage in-kind processing fee which does not exceed 25% of the residue gas and plant products attributable the Exxon Road Hollow interests. Sufficient similarity in quantity is assured by the fact that the processing fee required (except with regard to sulfur) during 2002, under any known gas processing agreement selected by the Department, was a maximum of 25%. Sufficient similarity in quantity is also assured by the fact that the quantity of gas processed pursuant to the Exxon Road Hollow Agreement is within the range of the gas processed from Chevron’s individual wells. Sufficient similarity in quality is assured by the fact the gas processed in the plant is commingled, and the measure of the fee is the product(s) recovered after processing. Sufficient similarity of terms and conditions is assured by comparison of the terms and conditions of the Exhibit F Gas Processing Agreements of the producers, and the terms and conditions of the Exxon Road Hollow Agreement. [Exhibits 200, 927].

123.    Under the Gas Processing Agreement attached to the C&O Agreement as Exhibit F, Chevron is a Producer separate and distinct from the Plant Owners identified in the same Gas Processing Agreement. [Exhibit 927]. The Plant Owners are separate and distinct from Chevron as a Producer. Chevron’s rights and responsibilities as Producer, with respect to the business entity of Plant Owners, are established by the Gas Processing Agreement.

124.    We find that the Exhibit F Gas Processing Agreements of BP, as a Producer, RME (Anadarko), as a Producer, and Forest Oil, as a Producer, are reliable sources of information, or a comparable, from which the Department could infer and impute a reasonable processing fee which would be paid by an other party for processing of gas of like quantity, taking into consideration the quality, terms and conditions under which the gas was processed. The fee is an in-kind 25% of the residue gas and plant products recovered during each settlement period, and attributable to each Producer in question. Sufficient similarity in quantity is assured by the fact that the fee provided in the comparable Exhibit F Gas Processing Agreements does not vary with respect to production. Sufficient similarity in quality is assured by the fact that Chevron’s gas processed at the Carter Creek Gas Plant comes from the same formation as the gas produced from the Whitney Canyon field. Supra ¶ 3. Sufficient similarity is also assured by the fact that gas from the Carter Creek field was processed at the Whitney Canyon Gas Plant in 2002 and by the fact that the measure of the fee is the product(s) recovered after processing. Sufficient similarity of terms and conditions is assured by the consistent use of similar terms and conditions in all of the gas processing agreements we have been provided. We also find the similarities between the Carter Creek gas, field, and Plant and the Whitney Canyon gas, field, and Plant are so great that the Exhibit F Processing Agreements are reliable sources of information, or a comparable, from which the Department could infer and impute a reasonable processing fee which would be paid by an other party. The processing fee paid by the producers pursuant to Exhibit F of the Whitney Canyon C&O Agreement is a comparable from which a reasonable processing fee for gas from the Carter Creek field may be inferred or imputed.

125.    The Wahsatch Gathering System Processing Agreement is a reliable source of information, or a comparable, from which the Department could infer and impute a reasonable processing fee which would be paid by an other party for processing of gas of like quantity, taking into consideration the quality, terms and conditions under which the gas was processed. [Exhibit 943]. The fee is an in-kind 25% of the residue gas and plant products recovered during each settlement period, and attributable the Wahsatch Gathering System interests. Sufficient similarity in quantity is assured by the fact that the processing fee required (except with regard to sulfur) during 2002, under any known gas processing agreement selected by the Department, was a maximum of 25%. Sufficient similarity in quality is also assured by the fact that the Wahsatch gas production has been processed at both the Carter Creek Gas Plant and Whitney Canyon Gas Plant. Sufficient similarity of terms and conditions is assured by comparison of the terms and conditions of the other processing agreements.

126.    The Merit Agreement is a reliable source of information, or a comparable, from which the Department could infer and impute a reasonable processing fee which would be paid by an other party for processing of gas of like quantity, taking into consideration the quality, terms and conditions under which the gas was processed. The fee is an in-kind 25% of the residue gas and plant products recovered during each settlement period, and attributable to Merit. [Exhibit 944]. Sufficient similarity in quantity is assured by the fact that the processing fee required (except with regard to sulfur) during 2002, under any known gas processing agreement related to either the Carter Creek Gas Plant or the Whitney Canyon Gas Plant, was a maximum of 25%. Sufficient similarity in quality is assured by the fact that all gas is commingled prior to processing, and the measure of the fee is the product(s) recovered after processing. Sufficient similarity of terms and conditions is assured by comparison of the terms and conditions of the other processing agreements.

127.    The Carter Creek - Anschutz Back-up Agreement is a reliable source of information, or a comparable, from which the Department could infer and impute a reasonable processing fee which would be paid by an other party for processing of gas of like quantity, taking into consideration the quality, terms and conditions under which the gas was processed. [Exhibit 201]. The fee is an in-kind 25% of the residue gas and plant products attributable to Anschutz’s interests. Sufficient similarity in quantity is assured by the fact that the maximum processing fee required (except with regard to sulfur) during 2002, under any known gas processing agreement selected by the Department, was a maximum of 25%. Sufficient similarity in quality is assured by the fact that all gas processed in the plant is commingled prior to processing, and the measure of the fee is the product(s) recovered after processing. Sufficient similarity of terms and conditions is assured by comparison of the terms and conditions of the other processing agreements.

Did Petitioner demonstrate that the Department erred by not applying general appraisal principles when determining the value of Petitioner’s production using the comparable value method?

128.    In determining the value of Petitioner’s minerals processed through the Carter Creek Gas Plant, the Department did not apply appraisal theories. [Transcript Vol. III, pp. 467-468]. Taking this fact as a key premise, Petitioner challenges the Department’s application of the comparable value method. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 215-217].

129.    On behalf of Chevron, Ms. Adair suggested that professional valuation standards would require a comparable be adjusted to account for differences contained within a contract. [Transcript Vol. II, pp. 203-204]. However, Ms. Adair is not certified as an appraiser or otherwise qualified as an expert in the appraisal industry.

130.    From this testimony, we understand Chevron to argue that the Department must overlay its valuation process with professional valuation standards. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶ 202]. However, Chevron’s witness merely offered her own perspective. While generally criticizing the Department’s application of the comparable value method, the witness did no more than offer a perspective that differed from the perspective of the Department. From our detailed review of the testimony, Ms. Adair did not persuade us that the Department’s approach was invalid, or that the Department had misapplied the statutory comparable value method.

Did Petitioner demonstrate that the values determined by the Department did not reach fair market value?

131.    This is the first case involving the production from the Carter Creek field in which Chevron demonstrated that the comparable value method, as applied, yields a processing deduction less than the total of (1) current operating costs and (2) the depreciation associated with processing, for the production year at issue. See Carter Creek 2001, ¶¶ 64–65.

132.    Petitioner claims the comparable value method did not reach fair market value, but offered no evidence to measure the proportionate profits method against the same standard. Rather, Petitioner advocated for the use of the proportionate profits method as the only statutory method available to the Department if the comparable value method could not be used.

133.    Petitioner suggests that because the deduction allowed by the Department, 25% of gross revenue, was less than Chevron’s plant operating costs and depreciation, it is not reasonable. Strictly speaking, this is a non sequitur, because the processing deduction is not itself revenue. We take this as an assertion that, in principle, the processing deduction should always exceed actual operating costs, including depreciation.

134.    Petitioner presented two Exhibits intended to demonstrate that the comparable value method did not reach fair market value. Mr. Chambers presented an Exhibit he prepared comparing the historical results of the processing deduction allowed under several different valuation methods. [Exhibit 223]. As a threshold matter, a comparison of the costs allowed under the different methods is a hypothetical exercise, because the Department did not use comparable value prior to production year 2000. Supra ¶ 55. The comparison is also suspect for the reasons noted above. Supra ¶ 56. Through the Exhibit Chevron attempted to show the effects of the application of the proportionate profits method over time to reflect fair market value. [Transcript Vol. II, p. 349]. However, our concern is principally with what actually occurred in production year 2002, because production year 2002 is the subject of this appeal.

135.    To the extent Mr. Chamber’s comparison of the plant costs and deductions allowed under different methods is intended to substantiate Chevron’s position regarding the use of the comparable value method or the proportionate profits method, we have already found the analysis to be unpersuasive for production year 2002. E.g. ¶¶ 57-63, supra.

136.    We note that in 2002 a return on investment, calculated on Chevron’s claimed deduction using the proportionate profits method, significantly exceeded Chevron’s confidential hurdle rate, the internal rate of return Chevron used to evaluate investment decisions. [Compare Transcript Vol. II, p. 362 with ¶ 62, supra.]. We further note no evidence was presented to us indicating whether or not Chevron’s combined Carter Creek field and plant operations were unprofitable.

137.    Taking the various facts presented to us into account, we find the Petitioner has not demonstrated the Department’s use of the comparable value method failed to reach fair market value. This finding is based on these facts:

           1.  By definition, each of the the statutory methods yield a fair market value;

           2.  2002 was the low revenue year in the three year statutory cycle during which the Department used the comparable value method to determine the value of gas precessed at the Carter Creek Gas Plant;

           3.  Chevron continued to process Exxon’s Road Hollow gas after a review of the Exxon Road Hollow Agreement;

           4.  The Department had a sensible rationale for preferring the market-oriented comparable value results;

           5.  The statutory netback method Chevron used to report the portion of its production processed at the Whitney Canyon Gas Plant under the 1995 Chevron Agreement yields the same processing deduction, 25% of the plant products, as the comparable value method selected by the Department for valuing the portion of the gas Chevron elected to process at the Carter Creek Gas Plant pursuant to the 1995 Chevron Agreement; and

           6.  We could and did consider the foregoing in the context of the degree to which plant revenues failed to cover plant operating costs and plant depreciation in production year 2002.

138.    Although Petitioner did not demonstrate that the Department’s use of the comparable value method did not reach fair market value, we have nonetheless found that for production year 2002, the deduction allowed by the Department was less than the Petitioner’s direct plant operating costs, including depreciation. We will later consider whether this means that we must conclude as a matter of law that the Department has failed to properly apply the comparable value method. Conclusions of Law (Conclusions) infra, ¶¶ 201-230.

Did Petitioner demonstrate that the Department violated prescribed procedures when determining the value of Petitioner’s gas production?

139.    Beginning in 1990, every three years, the Department directed all oil and gas taxpayers to report taxable value using the comparable value method. [Exhibits 928, 930, 939, 912]. These three year intervals correspond to the requirements of Wyo. Stat. Ann. § 39-14-203(b)(vi) and (viii). Each time, the Department’s directive also addressed reporting using an alternative method if the comparable value method could not be applied. [Exhibits 928, 930, 939, 912]. The Department thereby addressed the statutory requirements that the Department’s selected method was to be used for three years or “until changed by mutual agreement between the Department and the taxpayer.” Wyo. Stat. Ann. § 39-14-203(b)(viii).

140.    The Department’s written directions for use of the comparable value method has changed over time. In 1990, the Administrator of the Mineral Tax Division selected the comparable value method for 1991 through 1993, and notified taxpayers who process or transport their own production to “consider the amounts they charge unrelated parties for these services in similar circumstances when determining the processing and/or transportation deductions for their own production.” [Exhibit 928]. In 1992, the Administrator of the Mineral Tax Division issued a formula for determining comparable value. [Exhibit 929]. The approach of that formula was challenged by Amoco and rejected by the Wyoming Supreme Court. Amoco Production Company v. State Board of Equalization, 882 P.2d 866 (Wyo. 1994). The record does not show that the formula in Exhibit 929 was ever successfully used to determine the value of any taxpayer’s oil and gas production, nor does the record show that the formula was ever adopted by rulemaking.

141.    For production years 1994, 1995, and 1996, the Department again selected the comparable value method. [Exhibit 930]. However, on November 30, 1995, the Department issued a Memorandum to all oil and gas producers, entitled “Valuation of Gas for 1995 production year/Severance and Ad Valorem Tax – Non Arms-Length Transactions.” [Exhibit 934]. The Memorandum referred to the Department’s choice of the comparable value method for production years 1991-1993, and 1994-1996. [Exhibit 934, p. 1]. For taxpayers who attested to the fact that no comparable values existed for their production, the Department authorized the use of the proportionate profits method. [Exhibit 934, p. 1]. Chevron responded to the Department’s memorandum, requesting the use of the proportionate profits method, attesting “to the best of its knowledge, no appropriate comparables exist for the listed properties.” [Exhibit 936]. The Department’s response to Chevron’s letter, dated January 31, 1996, underscored the condition that the taxpayer was attesting to the fact that no comparable values existed. [Exhibit 937]. A subsequent letter agreement between the Department and Chevron refers to the Memorandum of November 30, 1995, as “describing how the valuation procedure for the 1995 and 1996 production years would be carried out.” [Exhibit 938].

142.    When the Department notified oil and gas producers of its selection of the comparable value method for production years 1997 through 1999, the Department expressed a similar policy for allowing taxpayers to report using the proportionate profits method. [Exhibit 939]. If the taxpayer attested that no comparable values existed in an “exception letter,” the Department notified the taxpayer that the proportionate profits method was to be used. [Exhibit 939, p. 226]. A letter to Chevron dated December 21, 1996, looking forward to valuing production year 1997 as the first year of a three year valuation cycle, underscored the condition that the taxpayer was attesting to the fact that no comparable values existed. [Exhibit 940].

143.    When the Department notified oil and gas producers of its selection of the comparable value method for production years 2000 through 2002, it did not reiterate the attestation/exception provision that had been in place for the preceding years. [Exhibit 912]. Instead, the Department’s memorandum stated:

In the event the taxpayer has made a determination that a representative Comparable Value does not exist for a specific mineral property the taxpayer shall notify the Department in writing by October 30, 1999. This notification shall include specific justification for that determination. It shall also include the identification, with statutory citation, of the method that the taxpayer proposes to use. The department will respond in writing to the taxpayer on or before December 15, 1999 stating acceptance or rejection of the requested method.

[Exhibit 912, emphasis in original].

144.    Chevron’s tax representative testified that Chevron believed the Memorandum of November 30, 1995, governed reporting beyond 1996. [Exhibit 934; Transcript Vol. II, p. 352]. Chevron’s tax representative complained that the Department never notified it that the November 30, 1995, Memorandum, had been revoked. [Transcript Vol. II, p. 297]. We find Chevron’s characterization of the 1995 Memorandum as a policy of indefinite duration is not supported by the Memorandum itself, by contemporary documents, or by witnesses from the Department.

145.    Chevron’s tax representative further complained that the issuance of the 1995 Memorandum was part of a settlement of pending litigation between the Department and Chevron involving production years 1994 through 1996. [Transcript Vol. II, pp. 297-298]. However, Petitioner’s own exhibit only indicates that there was a settlement agreement with the Department for 1991 through 1993. [Exhibit 223, green bar]. The only documentary evidence of a settlement agreement indicates that the Department agreed to allow Chevron to use the proportionate profits method for 1994 in return for Chevron’s withdrawal of its appeal. [Exhibit 938, p. 2]. In contrast, the Department’s witness, Mr. Bolles, testified that the Department was not aware of any settlement agreement meant to leave the proportionate profits method in place indefinitely. [Transcript Vol. IV, pp. 622-623]. We find Chevron’s characterization of the 1995 Memorandum as a settlement agreement of indefinite duration is not supported by the Memorandum itself, by Chevron’s Exhibit 223, by contemporary documents, or by witnesses from the Department.

146.    We note that the policy expressed in the November 30, 1995, Memorandum was never adopted by rule making. The Department’s policy for each separate statutory three-year valuation method selection cycle was adequately expressed in contemporaneous documents. We find Petitioner’s various complaints to the contrary are groundless.

Did Petitioner demonstrate that there were similarly situated taxpayers who were allowed to report taxable value using the proportionate profits method?

147.    Petitioner bases one or more of its constitutional claims on the premise that it is similarly situated to other mineral taxpayers who (1) sent their gas to processing plants prior to sale, and (2) requested and were granted the right to report on a proportionate profits basis, as an exception to the comparable value method. For production years 2000 through 2002, five taxpayers requested the use of the proportionate profits method: Chevron, BP America, Anadarko, Marathon Oil Company, and Burlington Resources. Two of those taxpayers, Marathon Oil Company and Burlington Resources, were allowed to use the proportionate profits method. [Transcript Vol. III, pp. 558, 563]. Four contracts, related to processing at the Lost Cabin Gas Plant, the Garland Gas Plant, the Oregon Basin Gas Plant, and the JT Separation Facility, were introduced by Chevron in support of its position. [Exhibits 206, 219, 220, 221].

148.    Chevron stated four general points of similarity between and among these mineral taxpayers:

            (1)   They were producers of production that was processed at plants in which they owned an interest;

            (2)   Each charges a fee for processing;

            (3)   The fee charged did not vary on the basis of volume or quality of gas; and

(4)    Several parties, who were not affiliated, signed the contracts.

[Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 164-169]. Petitioner has not carried its burden of demonstrating these four points, for at least three reasons.

149.    Because of Chevron’s ownership interest in the Burlington Resources’ Lost Cabin field and plant, it was the focus of Chevron’s evidence. However, the evidence presented by Chevron was limited to comparisons of expenses and depreciation and of the processing allowances between the Lost Cabin Gas Plant and the Carter Creek Gas Plant. [Transcript Vol. II, pp. 286-289]. Petitioner did not call witnesses with first hand knowledge of the other plants and the operations of those plants, or of the revenues, costs, and tax reporting of producers serviced by the other plants.

150.    In contrast, the Department presented evidence that it made an investigation into the other producers allowed to use the proportionate profits method. [Transcript Vol. III, pp. 458, 460]. The Department has concluded that there are no comparables for the Marathon and Burlington Resources plants, and that the comparable value method cannot be applied. [Transcript Vol. III, pp. 460, 563].

151.    Mr. Bolles, on behalf of the Department, contradicted Petitioner’s second and third points:

Based on a review of the information provided there didn’t appear to be a processing fee charged;

There was no gas other than the gas from the dedicated fields being processed at the plants; and

The gas from the dedicated fields was not being processed at any other plant.

[Transcript Vol. III, pp. 458-461].

152.    While Petitioner refers to the agreements of the other facilities, Petitioner failed to establish the significance of those agreements. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶ 164]. The Lost Cabin C&O Agreement contains a Gas Processing Agreement, but that agreement does not contain a general provision charging a fee to the producer for all production. [Exhibit 206, Exh. H]. A fee is only charged to underprocessed producers whose cumulative balance exceeds their interest in plant capacity. The Garland Agreement provides that the operator shall charge a fee to third parties for processing of non-unitized gas. [Exhibit 219, pp. 4-5]. However, no evidence was provided that it had ever processed third party gas. The JT Gas Separation Agreement does contain a processing fee similar to the Whitney Canyon Exhibit F Gas Processing Agreement. [Exhibit 220, p. 6]. However, no evidence was presented establishing that any gas other than Marathon’s gas was processed through the facility. The Oregon Basin C&O Agreement provides only for a rental-in-lieu charge for over or under utilization based on the participating unit. [Exhibit 221, pp. 8-9]. We find more differences than similarities in these agreements. Because of these differences, we find Petitioner has failed to meet its burden of proof with respect to its second and third points.

153.    The Department’s evidence confirmed our concerns about the differences latent in Petitioner’s first three points, regarding production from processing plants where the Department was unable to use the comparable value method. For example, the construction and operation agreement for the Lost Cabin Plant (associated with Burlington Resources) provides for sharing of plant expenses in proportion to ownership, with no processing fee in the agreement. [Transcript Vol. III, p. 563; Exhibit 206]. The Department found that the Lost Cabin plant processed only gas from the Madden Deep Field. [Transcript Vol. III, pp. 459, 563]. Similarly, for Marathon the Department did not find any transactions for gas being processed from other fields. [Transcript Vol. III, p. 459]. The Department did not find gas from either formation being processed at another gas processing plant. [Transcript Vol. III, p. 459].

154.    The premise of the Petitioner’s fourth point is incorrect. The parties to the Whitney Canyon C&O Agreement are plant owners, while each taxpayer is only a producer with respect to the processing agreement which is Exhibit F to the C&O Agreement. [Exhibit 927]. BP America is Operator of the Whitney Canyon Gas Plant by virtue of its position as majority plant owner, not as a producer. [Exhibit 927]. Similarly, any right to audit the Operator is the right of a plant owner, not a producer. [Exhibit 927]. We find these distinctions to be significant.

155.    By the time of the hearing in this matter, the Department was continuing the process of reviewing the contracts for the other plants to determine whether any of them could be used as a comparable value based on the Board’s ruling in Whitney Canyon 2000, but had not yet completed its analysis. [Transcript Vol. III, pp. 459-460].

156.    In this case, the parties stipulated that the Whitney Canyon Gas Plant and the Carter Creek Gas Plant are the only two plants capable of processing gas with the levels of hydrogen sulfide present in the gas from the Whitney Canyon field. [Stipulations of the Parties, ¶ 96]. We take this to also mean that these two plants are also the only plants capable of processing gas from the Carter Creek field based on the similarities of the gas streams and the fact that the two plants have a mutual back-up agreement. Supra ¶¶ 3,10.

157.    Chevron introduced one letter for the purpose of documenting the similarity of the Lost Cabin Plant. Anthony Fasone, identified as Specialist, Royalty Compliance, was the author of the letters, all of which are on Burlington Resources letterhead. [Exhibit 203]. Petitioner did not list or call Mr. Fasone as a witness.

158.    The letter lists cost information for the Lost Cabin Plant and is limited to a one-page summary. [Exhibit 203]. The letter discloses none of the detail about accounting policies from which a comparison to Chevron’s cost information may be made. Nor does the letter describe the operations of the Lost Cabin Plant, or its age or gas stream. [Exhibit 203]. The cost information is not supplemented by information regarding an un-depreciated asset balance, return on investment, or other information that might enable us to evaluate whether its cost structure truly resembles that of the Carter Creek Gas Plant or other plants. All of the aforementioned information has proven significant for our understanding of the merits of Petitioner’s case. The exhibit is inadequate to support a claim that Lost Cabin expenses are similar to those of Carter Creek. Petitioner failed to provide enough information to show that the expenses of these other plants were similar, and failed to carry its burden of demonstrating that the other plants are similar in any way other than being gas processing plants.

159.    We find Chevron has failed to establish that there were other similarly situated taxpayers who were permitted to use the proportionate profits method.

160.    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

161.    The Wyoming Supreme Court recently addressed the principles of law applicable to this matter, including the construction of the comparable value statute, the need for rule making, the Department’s role in applying the comparable value statute, and substantive and procedural due process. BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶ 5, 112 P.3d 596, 600 (Wyo. 2005).

162.    The Wyoming Constitution requires the gross product of mines to be taxed “in proportion to the value thereof” and “uniformly valued for tax purposes at full value as defined by the legislature.” Wyo. Const. art. 15, §§ 3, 11. Further, “[a]ll taxation shall be equal and uniform within each class of property. The legislature shall prescribe such regulations as shall secure a just valuation for taxation of all property, real and personal.” Wyo. Const. art. 15, § 11(d).

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

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

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

166.    “The production process for natural gas is completed after extracting from the well, gathering, separating, injecting, and any other activity which occurs before the outlet of the initial dehydrator. When no dehydration is performed, other than within a processing facility, the production process is completed at the inlet of the initial transportation related compressor, custody transfer meter or processing facility, whichever occurs first.” Wyo. Stat. Ann. § 39-14-203(b)(iv).

167.    The Department is charged with the responsibility of determining the fair market value for natural gas production for severance tax purposes. Wyo. Stat. Ann. § 39-14-202(a).

168.    If the producer does not sell its natural gas at or prior to the point of valuation “by a bona fide arms-length sale,” the Department must identify the method it intends to apply to determine fair market value, and “notify the taxpayer of that method on or before September 1 of the year preceding the year for which the method shall be employed.” Wyo. Stat. Ann. § 39-14-203(b)(vi).

169.    If the Department determines fair market value using one of the four methods found in Wyo. Stat. Ann. § 39-14-203(b)(vi), it must use the same method “for three (3) years including the year in which it is first applied or until changed by mutual agreement between the department and the taxpayer.” Wyo. Stat. Ann. § 39-14-203(b)(viii).

170.    The Wyoming Legislature “. . . has directed the Department to value natural gas production that is not sold at or prior to the point of valuation by bona-fide arms-length sale pursuant to one of four methods . . ..” BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶ 5, 112 P.3d at 600. The four methods are:

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

(B) Comparable value – The fair market value is the arms-length sales price less processing and transportation fees charged to other parties for minerals of like quantity, taking into consideration the quality, terms and conditions under which the minerals are being processed or transported;

(C) Netback – The fair market value is the sales price minus expenses incurred by the producer for transporting produced minerals to the point of sale and third party processing fees. The netback method shall not be utilized in determining the value of natural gas which is processed by the producer of the natural gas;

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

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

(II) Nonexempt royalties and production taxes.

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

171.    “[T]he object of the comparable value method to determine a processing fee . . . . Once determined, that fee is subtracted by the Department from the value of the actual sale of processes gas, thereby arriving at a fair market value for the gas after production in complete but before processing. It is fair to say that in using this method, the Department is to make reasonable inferences based on reliable information about processing fees paid by other taxpayers in similar situations.” BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶ 6, 112 P.3d at 600-601.

172.    The Department has not issued rules interpreting the comparable value method. However, rulemaking is not required:

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

BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶ 23, 112 P.3d at 607-608.

173.    The Wyoming Supreme Court and this Board have interpreted the words and phrases employed in the definition of the comparable value method. BP America Production Co. v. Department of Revenue, 2005 WY 60, 112 P.3d 596. Whitney Canyon 2000, aff’d 2005 WY 60, 112 P.3d 596.

174.    The phrase “other parties” has been interpreted by the Wyoming Supreme Court. “[T]he legislature did not intend for comparable processing fee contracts to necessarily be arms-length, third-party contracts in order to achieve the ultimate statutory goal of taxation based upon accurate fair market value.” BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶ 22, 112 P.3d at 607. The words “other parties” mean simply an entity separate and distinct from the individual taxpayer as a producer. BP America Production Co. v. Department of Revenue, 2005 WY 60 ¶ 25, 112 P.3d at 608, affirming Whitney Canyon 2000, ¶ 128.

175.    The phrase, “processing fees…charged to other parties for minerals of like quantity” is a broad test which must be used by the Department when it applies the comparable value methodology to determine fair market value. The test requires the Department to exercise its sound discretion to analyze available information of known processing fees in the context of known volumes of gas for which such fees are charged, with the objective of securing reliable information from which reasonable estimates can be made regarding processing fees which would be paid by a specific taxpayer had it been in the position of a third party producer utilizing the services of a gas processing plant. Whitney Canyon 2000, ¶¶ 130-135, aff’d 2005 WY 60, 112 P.3d 596.

176.    The phrase “taking into consideration the quality, terms and conditions under which the minerals are being processed or transported” is likewise a test. Under this test, the Department must reasonably assure itself of the reliability of any comparison upon which it bases inferences regarding processing fees. The Department must consider at least the quality of the minerals, and the terms and conditions under which the minerals are being processed. Whitney Canyon 2000, ¶ 140, aff’d 2005 WY 60, 112 P.3d 596.

177.    The Board previously interpreted a key phrase employed in the proportionate profits method. “Direct cost of producing the minerals” includes production taxes, and includes royalties. Chevron U.S.A., Inc., Docket Nos. 2002-50, et al., June 2, 2004, 2004 WL 1294512 (Wyo. St. Bd. Eq.); Burlington Resources Oil & Gas Co., Docket No. 2002-49 et al., May 10, 2004, 2004 WL 1174649 (Wyo. St. Bd. Eq.); RME Petroleum Company, Docket No. 2002-52, November 20, 2003, 2003 WL 22814612 (Wyo. St. Bd. Eq.); Fremont County, Docket No. 2000-203, April 30, 2003, 2003 WL 21774604 (Wyo. St. Bd. Eq.); See Burlington Resources/LL&E, Docket No. 2004-24, August 5, 2005, 2005 WL 2100264 at ¶ 114, for a complete list of the Board’s decisions on this issue.

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

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

Wyo. Stat. Ann. § 39-14-209(b)(iv). This provision is found in Title 39, Chapter 14, of the Wyoming Statutes, pertaining to Mine Products Taxes on Oil and Gas.

179.    One subsection of Chapter 13 of Title 39 of the Wyoming Statutes addresses ad valorem tax appeals:

Following the determination of the fair market value of property the department shall notify the taxpayer by mail of the assessed value. The person assessed may file written objections to the assessment with the [state] board [of equalization] within thirty (30) days of the date of the postmark and appear before the board at a time specified by the board. The person assessed shall also file a copy of the written objections with the county treasurer of the county in which the property is located, who shall notify the county assessor and the board of county commissioners, with an estimate of the tax amount under appeal based upon the previous year’s tax levy.

Wyo. Stat. Ann. § 39-13-102(n).

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

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

* * *

(iv) Decide all questions that may arise with reference to the construction of any statute affecting the assessment, levy and collection of taxes, in accordance with the rules, regulations, orders and instructions prescribed by the department:

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

* * *

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

Wyo. Stat. Ann. § 39-11-102.1(c).

181.    Among other requirements for contested case procedures, the Wyoming Administrative Procedure Act states, “[o]pportunity shall be afforded all parties to respond and present evidence and argument on all issues involved.” Wyo. Stat. Ann. § 16-3-107(j).

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

183.    When an oil and gas taxpayer challenges the fair market value determined by the Department, the following principles apply:

The Department’s valuations for state-assessed property are presumed valid, accurate, and correct. Chicago, Burlington & Quincy R.R. Co. v. Bruch, 400 P.2d 494, 498-99 (Wyo. 1965). This presumption can only be overcome by credible evidence to the contrary. Id. In the absence of evidence to the contrary, we presume that the officials charged with establishing value exercised honest judgment in accordance with the applicable rules, regulations, and other directives that have passed public scrutiny, either through legislative enactment or agency rule-making, or both. Id.

The petitioner has the initial burden to present sufficient credible evidence to overcome the presumption, and a mere difference of opinion as to value is not sufficient. Teton Valley Ranch v. State Board of Equalization, 735 P.2d 107, 113 (Wyo. 1987); Chicago, Burlington & Quincy R.R., 400 P.2d at 499. If the petitioner successfully overcomes the presumption, then the Board is required to equally weigh the evidence of all parties and measure it against the appropriate burden of proof. Basin [Electric Power Coop. Inc. v. Dep’t of Revenue], 970 P.2d [841] at 851 [(Wyo. 1998)]. Once the presumption is successfully overcome, the burden of going forward shifts to the Department to defend its valuation. Id. The petitioner, however, by challenging the valuation, bears the ultimate burden of persuasion to prove by a preponderance of the evidence that the valuation was not derived in accordance with the required constitutional and statutory requirements for valuing state-assessed property. Id.

BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶ 26, 112 P.3d at 608-609 (Wyo. 2005), quoting Amoco Production Company v. Department of Revenue et al., 2004 WY 89, ¶¶ 7-8, 94 P.3d 430, 435-436 (Wyo. 2004); accord, Airtouch Communications, Inc. v. Department of Revenue, State of Wyoming, 2003 WY 114, ¶ 12, 76 P.3d 342, 348 (Wyo. 2003); Colorado Interstate Gas Company v. Wyoming Department of Revenue, 2001 WY 34, ¶¶ 9-11, 20 P.3d 528, 531 (Wyo. 2001). The presumption that the Department correctly performed the assessment rests in part on the complex nature of taxation. Airtouch Communications, Inc., 2003 WY 114, ¶ 13, 76 P.3d 342, 348 (Wyo. 2003).

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

Except as specifically provided by law or in this section, the Petitioner shall have the burden of going forward and the ultimate burden of persuasion, which burden shall be met by a preponderance of the evidence. If Petitioner provides sufficient evidence to suggest the Department determination is incorrect, the burden shifts to the Department to defend its action....

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

185.    In determining if the language of a statute is ambiguous, the entire statute must be considered.

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)). Only if we determine the language of a statute is ambiguous will we proceed to the next step, which involves applying general principles of statutory construction to the language of the statute in order to construe any ambiguous language to accurately reflect the intent of the legislature. If this Court determines that the language of the statute is not ambiguous, there is no room for further construction. We will apply the language of the statute using its ordinary and obvious meaning.

BP America Production co. v. Department of Revenue, 2005 WY 60 ¶ 15, 112 P.3d at 604.

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

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

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

189.    “All laws of a general nature shall have a uniform operation.” Wyo. Const. art. 1, § 34. (Petitioner misquotes Article 1, §34 in its proposed conclusions of law. Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶ 258.)

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

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

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

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

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

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

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

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

The doctrines of res judicata and collateral estoppel incorporate “‘a universal precept of common-law jurisprudence * * *”’ that a right, question or fact put in issue, and directly determined by a court of competent jurisdiction, cannot be disputed in a subsequent suit by the same parties or their privies . . .. While the interests of finality served by these doctrines are the same, this court has carefully distinguished between the two:

[A]lthough many cases speak of res judicata in the administrative context, they actually apply collateral estoppel. * * * Collateral estoppel . . . bars relitigation of previously litigated issues. * * * Res judicata on the other hand bars relitigation of previously litigated claims or causes of action.

Tenorio v. State ex rel. Wyoming Workers’ Compensation Division, 931 P.2d 234, 238 (Wyo. 1997)(emphasis in original)(citations omitted).

196.    Collateral estoppel bars relitigation of previously litigated issues:

Generally, four factors are considered when determining application of collateral estoppel:

(1) whether the issue decided in the prior adjudication was identical to the issue presented in the present action; (2) whether the prior adjudication resulted in a judgment on the merits; (3) whether the party against whom collateral estoppel is asserted was a party or in privity with a party to the prior adjudication; and (4) whether the party against whom collateral estoppel is asserted had a full and fair opportunity to litigate the issue in a prior proceeding.

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

197.    Res judicata bars relitigation of previously litigated claims. Tenorio, 931 P.2d at 238. Res judicata applies if: (1) the parties were identical; (2) the subject matter was identical; (3) the issues were the same and related to the subject matter; and (4) the capacities of the persons were identical in reference to the subject matter and the issues between them. Livingston v. Vanderdiet, 861 P.2d 549, 551-552 (Wyo. 1993).

198.    “Judicial estoppel is a doctrine which precludes a party from asserting inconsistent positions in different judicial proceedings. Under this doctrine, a party who by his pleadings, statements, and contentions, under oath, has assumed a particular position in a judicial proceeding is estopped to assume an inconsistent position in a subsequent action.” Ottema v. State ex. rel. Workers’ Compensation Division, 968 P.2d 41, 45 (Wyo. 1998). “The principle is that if you prevail in Suit #1 by representing that A is true, you are stuck with A in all later litigation growing out of the same events.” Eagle Foundation, Inc., v. Dole, 813 F.2d 798, 810 (7^th Cir. 1987). However, a party is not bound to maintain a position it unsuccessfully maintained in the original claim. Matter of Cassidy, 892 F.2d 637, 641 (7^th Cir. 1990); 74 Am. Jur. 2d Estoppel and Waiver §73, p. 498.

CONCLUSIONS OF LAW: APPLICATION OF PRINCIPLES OF LAW

199.    The principles of law applicable to this case have been clearly articulated by the Wyoming Supreme Court. BP America Production Co. v. Department of Revenue, 2005 WY 60, 112 P.3d 596. It, therefore, remains for the Board to apply those principles to the facts presented by Chevron in this case. In doing so, we note that the factual bases for Chevron’s legal arguments varies little from those presented to us in prior cases, including Whitney Canyon 2000, aff’d 2005 WY 60, 112 P.3d 596.

200.    Petitioner’s Proposed Conclusions of Law broadly discuss prior interpretations regarding the comparable value statute [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 170-174, 255-256], notice concerning the use of the comparable value method [Petitioner’s Proposed Conclusions of Law, ¶¶ 207-211], and the application of the comparable value method to other taxpayers [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 255-262]. Much of that discussion has been considered by the Board in the Findings of Fact, supra.

Did the Department correctly apply the comparable value method to determine the value of Petitioner’s production?

201.     Chevron brought this appeal under Wyo. Stat. Ann. §§ 39-14-209(b)(iv) and 39-13-102(n). [Notice of Appeal]. Petitioner thereby challenges the Department’s value determination for its 2002 gas production, a value used to levy state severance taxes and county ad valorem taxes. [Notice of Appeal]. As a practical matter, a successful challenge to the valuation used for severance tax purposes also affects ad valorem taxes.

202.    Petitioner, however, attempts to contest the Department’s selection of the comparable value method for 2000-2002. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 207-211]. Wyoming Statutes Annotated section 39-14-203(b)(viii) provides an appeal of the Department’s selection of a method must be filed “within one (1) year from the date the department notified the taxpayer of the method selected.” The one year period for appealing the Department’s selection of a method for production years 2000 through 2002, ended on August 29, 2000, one year after the Department’s selection of a method and over two and one-half years prior to Petitioner’s notice of appeal in this case. [Notice of Appeal, filed June 12, 2003]. Petitioner may not contest the Department’s selection of a method in this case.

203.    Production year 2002, the year at issue in this case, was the third year of the statutory three year cycle during which one valuation method selected by the Department remains in effect. As important, we fully addressed the issue of the selection of the method when it was properly before the Board. See Carter Creek 2000, ¶¶ 108-143.

204.    Since the selection of the method is not at issue, we concern ourselves only with whether the comparable value method was properly applied by the Department, and with Petitioner’s procedural and constitutional claims.

205.    Petitioner has appealed under statutes which do not establish any specific standard to guide the Board’s review. Wyo. Stat. Ann. § 39-14-209(b). The Board must judge the Department’s valuation by the general standard that the valuation must be in accordance with constitutional and statutory requirements for valuing state-assessed property. Amoco Production Company v. Department of Revenue et al, 2004 WY 89, ¶¶ 7-8, 94 P.3d 430, 435-436; Wyo. Stat. Ann. § 39-14-209(b)(vi). The ultimate burden of persuasion rests with Petitioner in this case.

206.    Chevron contends that the contracts used by the Department do not establish fair market value for a variety of reasons. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 218-254]. See Findings, ¶¶ 64-121.

207.    Chevron first argues that we must overlay the statutory definition of “comparable value” contained in Wyo. Stat. Ann. § 39-14-203(b)(vi)(B) with a definition of “comparable.” [Petitioner’s Proposed Findings of Fact and Conclusions of Law ¶¶ 212-217]. The argument takes the name given a defined valuation method, “comparable value;” selects one word from the name, “comparable”; defines “comparable”; and then asks the Board to incorporate the definition into the defined method. The argument is fallacious. The method described by the term “comparable value” is defined by the statute.

208.    Further, the case cited by Petitioner to support its argument, Adams v. State ex rel. Workers Safety and Compensation Division, 975 P.2d 17 (Wyo.1999) is not on point. In Adams, the Court was attempting to define a term, “comparable,” used but not defined in the Wyoming Workers’ Compensation Act. Id. at 19. Here, the term “comparable value” is used to describe a method of valuation which has been defined by the Legislature.

209.    Petitioner next argues the Department erred in not using guidelines which an appraiser would use based on the Department’s concession that it did not use appraisal standards. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶212-217]. See Findings, ¶¶ 128-130. To support its position, Petitioner relies primarily on a “quote” cobbled together from the last sentence of the third paragraph and the last sentence of the fifth paragraph of a concurring opinion issued in conjunction with the Board’s Decision in Amoco Production Company and Amoco Rocmount, Board Docket No. 91-174 (May 26, 1992), 1992 WL 126533 (Wyo. St. Bd. Eq.). The case is factually different than the case before us. In that case, the Board found “. . . there is no evidence as to the actual processing fees or fee arrangements charged to such parties in circumstances similar to those of the natural gas production and processing at issue.” Id. at Findings of Fact ¶ 1. In this case, such evidence has been presented. We have considered the opinion of the Board and both concurring opinions filed in that case and conclude the case has no precedential value.

210.    Chevron called one industry witness, Lisa Adair, who did not claim to be a professional appraiser. Findings, ¶ 129. She merely offered an “industry perspective.” Findings, ¶ 130. In addition to specific points that we have already considered, e.g., Findings, ¶¶ 64-127, she generally criticized the Department’s application of the comparable value method. By these general views, nothing more was offered than a perspective that differed from the perspective of the Department. From our detailed review of the testimony, we are not persuaded that the Department’s approach was invalid, or that the Department had misapplied the comparable value method.

211.    Finally, Petitioner suggested at the hearing that the comparable value could not be used for 2002 because the Department’s processing allowance was less than Petitioner’s direct costs of processing. [Transcript Vol. II, pp. 344, 347]. While this position was not pursued in Petitioner’s Proposed Findings of Fact and Conclusions of Law, we conclude it has no legal basis. The selected method, the comparable value method, does not mention a return on investment. Wyo. Stat. Ann. § 39-14-203(b)(vi)(B). Rather, the focus of the method is on what an “other party” is charged for processing. Whether the fee provides a return on investment to the processor is not material.

212.    While we have dealt with the factual basis of Chevron’s complaints in our Findings above, that discussion must be placed in the context of the meaning of the terms contained in the applicable statute, Wyo. Stat. Ann. § 39-14-203(b)(vi)(B), even though Chevron advanced only limited legal arguments concerning the language of the statute.

Other parties

213.    The phrase “other parties” is significant primarily because of the Department’s use of the Exhibit F Processing Agreement contained within the Whitney Canyon C&O Agreement as one of the comparables used to value Chevron’s production. Findings, ¶¶ 65-78. Chevron makes no argument that Exxon or Anschutz are not “other parties” with respect to their agreements for processing at the Carter Creek Gas Plant, or to their agreements for processing at the Whitney Canyon Gas Plant.

214.    In its argument, Chevron emphasizes our prior characterization of the Whitney Canyon Gas Plant owners as a partnership. See Carter Creek 2000, ¶ 49. Citing Hayes v. State ex rel Workers Compensation Division, 768 P.2d 11 (Wyo. 1989), Chevron argues that since a partnership is not a separate entity from its partners, the owners of the Whitney Canyon Gas Plant are not other parties vis-à-vis Chevron. The argument, however, fails to take into consideration our broader finding that the Whitney Canyon Gas Plant operates as an entity separate and apart for the taxpayers as producers.

215.    Petitioner’s view that “other parties” means “third parties” must be rejected. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶ 220]. The phrase “other parties” has been interpreted by the Wyoming Supreme Court. BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶¶ 19-25, 112 P.3d at 606-608. The Court concluded:

We find no support for Taxpayers' argument on the term "other parties" as used in the statute. We find that the legislature did not intend that an "other party" has to be a "third party engaged in arms-length negotiations." The legislature uses the term "third party" several times within subsection (b), for instance in (b)(v). Most importantly for our current purpose, the legislature uses the term in (b)(vi)(C) in establishing the netback method of valuation. The statutory language specifically states that "third party processing fees" are to be deducted from the sales price in using the netback method. The legislature did not add such a provision to the comparable value method. The legislature's omission of the term "third party" must be given effect. Merrill v. Jansma, 2004 WY 26, ¶ 29, 86 P.3d 270, ¶ 29 (Wyo. 2004) ("[O]mission of words from a statute is considered to be an intentional act by the legislature, and this court will not read words into a statute when the legislature has chosen not to include them."). Construing all parts of the statute in pari materia, paying particular attention to the statutory language used, and more specifically the statutory language not used, we find the legislature did not intend for comparable processing fee contracts to necessarily be arms-length, third-party contracts in order to achieve the ultimate statutory goal of taxation based upon accurate fair market value.

BP America Production Co. v. Department of Revenue, 2005 WY 60 ¶ 22, 112 P.3d at 607. Petitioner raises no arguments which would cause us to reject the applicability of the Supreme Court’s recent decision in this case.

216.    The Petitioner has presented testimony on the motivations behind various contracts, testimony intended to establish that the processing contracts do not reflect an arms-length relationship between third parties. E.g., Findings, ¶¶ 81. However, as the Wyoming Supreme Court concluded, the comparable value statute does not require the Department to concern itself with either an arms-length or a third party standard, despite the fact that both phrases are used elsewhere in Wyo. Stat. Ann. § 39-14-203(b)(vi). BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶¶ 19-25, 112 P.3d at 606-608. There is no reason to read either an arms-length test or a third party test into the comparable value method, let alone a “motivations” test.

Like quantity

217.    The phrase, “processing fees . . . charged to other parties for minerals of like quantity” is a broad test which must be used by the Department when the Department selects the comparable value methodology to determine fair market value. Whitney Canyon 2000, ¶¶ 130-135, aff’d 2005 WY 60, 112 P.3d 596. Chevron disagrees with our conclusion regarding this principle, but has made no arguments that would cause us to reconsider our prior ruling.

218.    Chevron urges us to conclude that the words “like quantity” are not met by the various comparables identified by the Department. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 214, 232, 240, 250]. Chevron’s arguments were considered in our Findings of Fact. E.g. Findings, ¶¶ 85-88.

219.    As a general proposition, we considered and rejected a similar general argument for production years 2000 and 2001. Carter Creek 2000, ¶¶ 119, 120; Carter Creek 2001, ¶¶ 242-245. In this case, we note further that our conclusion regarding the words “like quantity” takes those words in the context of the complete phrase, “processing fees . . . charged to other parties for minerals of like quantity.” Carter Creek 2000, ¶¶ 124-125. There is no merit in reading the words in isolation.

220.    As a proposition of fact, Petitioner has merely presented us an industry perspective through its witness, which we found to be unpersuasive. Findings, ¶ 92. We have specifically rejected the underlying premises of Petitioner’s argument that the aggregate volumes from the Carter Creek field must be used as the basis for comparison. Findings ¶¶ 84-88. Petitioner has failed to carry its burden of persuasion on this point.

Quality, terms and conditions

221.    The phrase “taking into consideration the quality, terms and conditions under which the minerals are being processed or transported” is a test under which the Department must reasonably assure itself of the reliability of any comparison upon which it bases inferences regarding processing fees. Whitney Canyon 2000, ¶ 140, aff’d 2005 WY 60, 112 P.3d 596.

222.    Chevron argues the Department has failed to consider the quality of the gas processed under the various gas processing contracts, and hence has failed to consider “quality” as required by the statute. We conclude that this is a dispute between the parties regarding the significance of those distinctions for applying the comparable value method. As such, we view the resolution of that dispute as a question of fact. We have made various findings in this regard. E.g., Findings, ¶¶ 82, 90. We conclude that the Department has met the requirements of the statute with respect to considering the quality of the gas being processed. Petitioner has failed to carry its burden of persuasion.

223.    Chevron did raise one issue that prompts us to recant the words of a conclusion stated in Whitney Canyon 2000. We concluded the Department considered the terms and conditions under which the minerals were being processed, and went on to conclude that “the terms and conditions to which the taxpayers have directed our attention are not commercially significant.” Whitney Canyon 2000, ¶ 130, aff’d 2005 WY 60, 112 P.3d 596. “Commercially significant” was a poor choice of words, entirely our own. We were then referring to a fact also established in this case: a high processing priority was more desirable than a low processing priority, but contractual priority had no discernible effect on the processing fee. Further, for production from the Road Hollow field, contract priority seemed to have no role in field operation decisions. Findings, ¶ 91.

224.    Chevron argues the Department has failed to consider a large number of distinctions between and among various gas processing contracts, and hence has failed to consider “terms and conditions” as required by the statute. We conclude that this is also a dispute between the parties regarding the significance of those distinctions for applying the comparable value method. As such, we view the resolution of that dispute as a question of fact. We have made various findings in this regard. E.g., Findings, ¶¶ 76, 108-109. We conclude that the Department has met the requirements of the statute with respect to considering the terms and conditions under which the minerals are being processed. Petitioner has failed to carry its burden of persuasion.

225.    For Chevron, the fees charged to other parties include:

•    Processing fees charged by Chevron to Exxon under the Exxon Road Hollow Agreement for processing of gas at the          Carter Creek Gas Plant;

•    Processing fees charged by Chevron to Anschutz under the Carter Creek Anschutz Back-up Agreement for processing of gas at the Carter Creek Gas Plant;

•    Processing fees charged by the Whitney Canyon Gas Plant owners to producers BP, RME (Anadarko), and Forest Oil under the Exhibit F Gas Processing Agreements;

•    Processing fees charged by the Whitney Canyon Gas Plant owners to Anschutz under the Wahsatch Gathering System Agreement;

•    Processing fees charged by the Whitney Canyon Gas Plant owners to Merit under the Merit Agreement.

226.    We conclude that, with respect to the 25% in-kind processing fee charged under all of the agreements referenced in Conclusions of Law, ¶ 225, the Department correctly determined by comparison of processing rates in the context of suitably measured volumes that there was a constant rate applied against any and all volumes processed under the referenced agreements during 2002 regardless of quality, quantity or priority. On behalf of Chevron, Mr. Chambers conceded this point. [Transcript Vol. II, p. 235]. As a further and separate ground for our decision in this regard, we find Petitioner failed to carry its burden of persuasion.

227.    We conclude the Department, in the course of satisfying itself that the inferences being drawn from the agreements referenced above were based on valid comparisons, adequately considered both the quality of the gas being processed, and the terms and conditions under which the gas was being processed. In all instances, similarity of quality was assured by virtue of the fact that all gas was commingled before becoming available at the tailgate of the plant and the fact that the gas from the Whitney Canyon field, Carter Creek field, and Yellow Creek field had been processed at both the Carter Creek Gas Plant and the Whitney Canyon Gas Plant. In all instances, the terms and conditions were sufficiently similar to conclude that the comparison was valid. Findings, ¶¶ 75-76, 91, 100, 109. We conclude the Department used reliable information about processing fees paid by other taxpayers in similar situations to make reasonable inferences as to Petitioner’s processing costs. BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶ 19, 112 P.3d at 606. As a further and separate ground for our decision in this regard, we find Petitioner failed to carry its burden of persuasion.

228.    Petitioner makes an argument that use of the Whitney Canyon C&O Agreement as a comparable is a “netback” methodology, citing the Supreme Court’s discussion of the valuation of Amoco’s production during 1980-1989 processed through the Whitney Canyon Gas Plant. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 255-256]. See Amoco Production Co. v. Wyo. State. Bd. of Equalization, 12 P.3d 668 (Wyo. 2000). The argument, however, is based on the premise that in its 2000 decision the Court was referring to “the twenty-five percent allowance.” However, the Court’s reference to the “initial valuation method,” was to the use of “actual costs.” Id. at 673. We, therefore, find Petitioner’s argument without merit.

229.    We conclude Petitioner did not correctly apply the proportionate profits method when it reported taxable value. Findings, ¶ 26. Chevron U.S.A., Inc., Docket Nos. 2002-50, et al., June 2, 2004, 2004 WL 1294512 (Wyo. St. Bd. Eq.)

230.    Petitioner did not dispute the mathematical calculation performed by the Department and reflected in the 2001 Notice of Valuation. Findings, ¶¶ 28-30.

Did the Department violate prescribed requirements by the procedures it used to determine Petitioner’s production?

231.    Evidence was introduced at the hearing of the Department’s efforts, more than ten years ago, to determine comparable value by an entirely different approach. See Amoco Production Company v. Wyoming State Board of Equalization, 882 P.2d 866 (Wyo. 1994), and this Board’s related opinion, Appeal of Amoco Production Company, Board Docket 91-174, 1992 WL 126533 (Wyo. St. Bd. Eq.). [Exhibits 929, 931, 932, 933, 935]. From that litigation, Petitioner argues either rulemaking was required or it was entitled to continue to use the proportionate profits selected after the Department’s earlier failed efforts to develop a valuation method. [E.g. Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 205,193-195, 210].

232.    The Wyoming Supreme Court addressed the argument that its prior decision required the Department to adopt rules:

[¶17]Taxpayers begin their argument by claiming that this Court has already determined that the language of § 39-14-203(b)(vi)(B) is ambiguous and rulemaking is required before the Department can apply the method. Taxpayers rely upon certain language in Amoco Production v. State Bd. of Equalization, 882 P.2d 866 (Wyo.1994) (Amoco I ), to support their argument. The issue in Amoco I was whether the Department could use confidential processing fee agreements as comparables pursuant to § 39-14-203(b)(vi)(B). The Amoco I court determined the Department could not use facts unavailable to the instant taxpayer to determine the fair market value of that taxpayer's product as such would deprive the taxpayer of due process of law.

[¶ 18]In the process of presenting its opinion in Amoco I, the Amoco I court stated, "We note in passing that some of the statutory factors are amorphous to a degree. The comparable value method is to be used for minerals of 'like quantity,' and it is to take into consideration 'the quality' and 'terms and conditions' under which the minerals are being processed or transported." 882 P.2d at 871. After explaining that rules might help alleviate any existing ambiguity, that court went on to say, "We simply suggest, given the language of the statute, there might be some wisdom in pursuing [rulemaking]." Id. This language in Amoco I, relied upon by Taxpayers in this appeal, is the purest form of dicta. The language of the statute was not at issue in that appeal. The only issue was the Department's use of confidential information in determining fair market value. The Amoco I court qualified the discussion Taxpayers cite from beginning to end. The Amoco I court begins the discussion by stating, "we note in passing" and ended the discussion with "we simply suggest" and "there might be some wisdom." These equivocal statements in the context of dicta have no precedential value.

BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶¶ 17-18, 112 P.3d at 606.

233.    We further conclude that rule making is not required “so long as statutory and constitutional rights to protest and contest are afforded the taxpayer.” Pathfinder Mines v. State Board of Equalization, 766 P.2d 531, 535 (Wyo. 1988); Amoco Production Company v. Wyoming State Board of Equalization, 899 P.2d 855, 860 (Wyo. 1995). We have afforded Petitioner those rights.

234.    We have also rejected the factual premises of Chevron’s complaint about the absence of rule making. On the record made in this case, we found no reason to believe Chevron was in need of guidance regarding the Department’s requirements. Findings, ¶¶ 22-24. Our conclusion is buttressed by the ease and consistency with which Chevron has used the 25% processing fee to report its production under the 1995 Chevron Agreement using the netback method. Findings, ¶ 29.

235.    Petitioner appears to argue the Department’s Memorandum of November 30, 1995, [Exhibit 934] was a result of the prior litigation and obligated the Department to accept its attestations of the absence of sources of comparable value, and to authorize use of the proportionate profits method. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 196-197]. We reject this argument for two main reasons. First, we did not find that the Memorandum was either of indefinite duration, or the basis of the Department’s decision to allow reporting under the proportionate profits method after 1996. The Memorandum was supplanted by memoranda memorializing the Department’s selection of method for the cycles beginning in 1997 and 2000. Findings, ¶¶ 139-146. Second, Petitioner has not referred to any authority which supports its view of the Memorandum. The Memorandum is not a statute; it is not a rule, regulation, or order of the Department. Wyo. Stat. Ann. § 39-11-102.1(c)(iv). At most, the Memorandum was a superceded instruction. Findings, ¶ 139-146.

236.    In substantial measure, the Department’s changing policy was a product of Petitioner’s ill-founded attestations to the absence of comparables. The Department relied on these attestations to accept Petitioner’s proportionate profits reporting. Findings, ¶¶ 141-142. When the Department learned of the doubtful quality of these attestations, it found further support for use of the selected comparable value method in the form of the Exxon Road Hollow Agreement, the Wahsatch Gathering System Agreement, the Merit Agreement, the Carter Creek/Whitney Canyon Mutual Back-up Agreement, the 1995 Chevron Agreement and the Carter Creek Gas Plant/Anschutz Back-up Processing Agreement. Findings, ¶¶ 36-43. With new information in hand, the Department was obliged to change its view of the availability of the comparable value method for Petitioner, and to vigorously pursue enforcement of the tax laws.

Did the Department violate any constitutional standard?

237.    Petitioner makes two different constitutional claims. One claim arises from the Department’s inability to apply the comparable value method to Burlington Resources and Marathon, due to the absence of sources of comparable value. Findings, ¶¶ 147-159. One claim arises from the procedures used by the Department to determine Petitioner’s taxable value. Findings, ¶¶ 139-146; Conclusions, ¶¶ 231-236.

Equal Protection

238.    Petitioner claims the Department deprived it of a right to fair and uniform treatment under the Equal Protection Clauses of the United States and Wyoming Constitutions. U. S. Const. amend. XIV, § 1, second sentence; Wyo. Const. art. 1, § 34. The core of this claim is that other similarly situated taxpayers were allowed to use the proportionate profits method, while the Petitioner was not. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 257-262].

239.    In Carter Creek 2000, we disposed of Petitioner’s constitutional claims without having to reach a broad view of Wyo. Stat. Ann. § 39-14-203(b)(vi). Petitioner’s renewed constitutional claims, coupled with the more extensive record made for production year 2002, make it important to do so now as we did in Carter Creek 2001, ¶¶ 262-283. We intend to accomplish three tasks: to explain why we view the heart of this matter as being the structure of the legislation, not the exercise of administrative discretion; to explain why we consider the legislative structure to be sound; and to facilitate judicial resolution in the event of appeal.

240.    The Wyoming Constitution assigns the role of defining full value, or fair market value, to the Legislature. Wyo. Const. art. 15, § 11. The Legislature has considerable constitutional latitude to prescribe the method by which the Department may determine fair market value. Amoco Production Company, 899 P.2d at 860. For the circumstances of this case, the Legislature has done so through Wyo. Stat. Ann. § 39-14-203(b)(vi), which authorizes the Department to choose among four specified methods to determine the value of natural gas sold away from the point of valuation.

241.    The four statutory methods cannot be used simultaneously to value any producer’s gas; they are mutually exclusive. Whitney Canyon 2000, ¶¶ 173-182, aff’d 2005 WY 60, 112 P.3d 596. The comparable value method, if properly applied, reaches fair market value as do all four methods.

242.    It is also true that all four methods cannot be used for all taxpayers. The Legislature forbade the use of the netback method for gas processed by a producer, thereby generally limiting one of the methods that might be available for producers who do not sell their natural gas production prior to the point of valuation by a bona fide arms-length sale. We note in passing that the parties tend to assume that Wyo. Stat. Ann. § 39-14-203(b)(vi) was enacted to address valuation problems associated with large natural gas processing plants, but this assumption is not supported by the language of the statute. The language of the statute is of broader application.

243.    The Legislature also implicitly recognized that one or more of the methods might not be available to the Department because the information necessary to apply that method was unavailable. In this case, no one disputes that the comparable sales method cannot be applied because there is no information that would enable the Department to do so. The Legislature went further, and recognized that there may be circumstances in which none of the four methods reaches a representative fair market value. For those circumstances, the Legislature authorized the Department and an affected taxpayer to employ a mutually acceptable alternative method. Wyo. Stat. Ann. § 39-14-203(b)(vii); see generally Sublette County Board of County Commissioners, Docket Nos. 2000-142, et al., May 20, 2004, 2004 WL 1174651 (Wyo. St. Bd. Eq.).

244.    The Department has testified that no sources of comparable value were available to determine the value of gas processed for Burlington Resources at the Lost Cabin Plant and Marathon at other facilities. Findings, ¶¶ 150-152. Petitioner has produced no evidence to the contrary. Like the comparable sales method, the Department could not apply the comparable value method to the 2002 production of Burlington Resources and Marathon because, at the time, there was no information which would enable to Department to do so. Findings, ¶¶ 150-152. Faced with this situation, the Department authorized Burlington Resources and Marathon to use the proportionate profits method, subject to audit and to continued review of information based on this Board’s decision in Whitney Canyon 2000. Findings, ¶ 155.

245.    The Department stated its intention to investigate the existence of sources of comparable value when Burlington Resources and Marathon are audited, and if such sources are found, to require a redetermination of value under the comparable value method. Findings,¶ 155. The Department’s intention to apply the comparable value method assures that the Department has done its best to use comparable value to determine the value of production of all taxpayers for which the method is available. This is consistent with what the Department elected to do for all oil and gas taxpayers, including Petitioner. Findings, ¶¶ 13-14.

246.    Under the Wyoming Constitution, if the Department or this Board were to allow this taxpayer the right to select the method of its choice, the proportionate profits method, the result would be constitutionally impermissible. Petitioner would enjoy a lower tax than other operators subject to the comparable value method, due to an “excessive deduction.” Wyodak Resources Development Corporation, 2002 WY 181, ¶ 34, 60 P.3d at142. We conclude that the Department’s designated method is the key to determining whether the Department has complied with the Wyoming Constitution, and to determining which other taxpayers are similarly situated to the Petitioner. The factual enquiry must be directed to whether the Department has applied its designated method to every taxpayer for whom the designated method is available.

247.    In this case the Department selected the comparable value method for all “…instances where oil and gas production is not sold at or prior to the point of valuation pursuant to a bona fide arms-length sale or where the product is used without sale.” [Exhibit 912, (emphasis in original)]. When the taxpayer responded that no comparable was available, the Department requested and reviewed additional information, and concluded that while there were comparables for Chevron’s production, there were no comparables for the production of Burlington Resources or Marathon. Findings ¶¶ 150-152, 155. Because of this clear factual distinction, we conclude that there was no violation of Petitioner’s equal protection rights. See BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶¶ 30, 112 P.3d 609-610.

Procedural and Substantive Due Process

248.    Petitioner generally raised claims that its rights to procedural and substantive due process were violated. [E.g., Petitioner’s Updated Summary of Contentions, p. 3]. While not specifically pursued in its Proposed Findings of Fact and Conclusions of Law, Petitioner’s complaints about the absence of regulations or other guidance warrant further comment. [See Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 203, 205, 207-211]. We have already concluded that those complaints are baseless. Conclusions, ¶¶ 231-236.

249.    Petitioner argues the Department’s valuation has lost its presumption of validity because the valuation was determined without the benefit of clear statutory authority, citing Basin Electric Power Cooperative, Inc., v. Department of Revenue, 970 P.2d 841, 851 (Wyo. 1998). [Petitioner’s Proposed Findings of Fact and Conclusions of Law ¶ 202]. We have concluded, to the contrary, that the Department acted under clear statutory authority. Conclusions, ¶¶ 207,213,217, 221. We also conclude that Basin Electric Power Cooperative does not apply. We have decided this case principally based upon Petitioner’s failure to carry its burden of persuasion, i.e., to demonstrate that the Department has violated constitutional and statutory requirements for valuing state-assessed property. Our decision does not generally rest on the presumption of validity.

250.    In support of its position, Petitioner cites to Kelsey v. Taft, 263 P.2d 125, 136 (Wyo. 1953); Chevron U. S. A., Inc., v. State, 918 P.2d 980, 984-985 (Wyo. 1996), Basin Electric Power Cooperative, 970 P.2d at 857, and Scott Realty Co. v. State Bd. of Equalization, 395 P.2d 289 (Wyo. 1964), in a footnote. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, p. 53 fn. 3]. This appears to raise a somewhat different constitutional claim under Article 15, § 3, based on the principle that the Legislature cannot give the Department the authority to arbitrarily select a valuation method that generates the highest taxable value. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 211, 217, fn. 3]. The cases noted are not directly on point. Kelsey held that Wyoming could not collect inheritance taxes on property transferred in contemplation of death, because the statute failed to say so directly and positively. Chevron U. S. A., Inc., held that the expense of compressing gas was not a taxable production expense, but rather was a deductible processing expense. Scott Realty held that the Board’s adoption of a replacement cost theory was not shown to be contrary to the Wyoming Constitution or applicable statutes. We take Petitioner’s claim to generally relate to the issues that we address in the context of its other constitutional claims. We conclude the claim is baseless.

251.    Chevron presented all of its objections at the contested case hearing and we have thoroughly examined the facts, arguments, rules and law. “The law requires no more to satisfy procedural due process.” BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶ 29, 112 P.3d at 609.

252.    Any substantive due process claim stems from Petitioner’s allegation that the Department’s failure to provide guidance on how the statutory terms are defined was arbitrary. In rejecting an identical claim the Wyoming Supreme Court stated:

We have already stated that it is impossible to draft statutes to anticipate every scenario. We believe that to also be true of regulations. The record shows that the Department has a long history of reviewing contracts because contracts between taxpayers impact determinations of fair market value. We have rejected the notion that the legislature intended such a restrictive definition of the statutory terms that these processing contracts cannot establish a comparable value for taxation purposes. Taxpayers used the processing contracts to establish the processing fee. Their having used the contracts to establish the processing fee market, we do not accept the premise that agency use of those contracts violates Taxpayers' due process rights.

BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶ 29, 112 P.3d at 609. We reject Chevron’s claim for the same reasons.

253.    We conclude Petitioner has not carried its burden of persuasion with respect to any of the constitutional claims.

Was the Department barred from use of the comparable value method by collateral estoppel or judicial estoppel?

254.    While not addressed in its Proposed Findings of Fact and Conclusions of Law, Petitioner’s Updated Summary of Contentions raised an issue regarding the applicability of judicial estoppel and res judicata in this matter. [Board Record, Petitioner’s Updated Summary of Contentions, pp. 6-7]. Petitioner also included a discussion of historical interpretations and decisions regarding the comparable value method in its Proposed Findings of Fact and Conclusions of Law. [Petitioner’s Proposed Findings of Fact and Conclusions of Law, ¶¶ 170-177, 183-201]. From this, we understand the core of Petitioner’s claim to be that the same parties, the same property, and the same issues were previously decided by the Wyoming Supreme Court in Amoco Production Company v. Wyoming State Board of Equalization, 882 P.2d 866 (Wyo. 1994), or by this Board in Appeal of Amoco Production Company, SBOE Docket 91-174, 1992 WL 126533 (Wyo. St. Bd. Eq.). Whitney Canyon 2000, ¶ 193, aff’d 2005 WY 60, 112 P.3d 596. We have concluded to the contrary. Conclusions, ¶ 228, 231-232. To the extent Petitioner’s historical discussion may generally relate to issues collateral estoppel, res judicata, or judicial estoppel, it remains for us to address those issues.

Collateral estoppel

255.    The principal issue in this case is whether the Department’s valuation is in accordance with constitutional and statutory requirements for valuing state-assessed property for production year 2002. Conclusions, ¶ 201-204. This issue was not and could not have been decided in a previous proceeding. Tenorio, supra 931 P.2d at 238-239. Neither this Board nor the Court previously had jurisdiction to rule on anything related to the matter of Carter Creek production in 2002. Production year 2002 valuations were not identified as issues by the parties in the previous proceedings. No such issue was decided by the Board as a fact finder. The Board did not purport in earlier proceedings to determine any questions related to Carter Creek production year 2002. The earlier judgments of the Court and the Board were not dependent upon determination of any issues with regard to production year 2002. On this basis alone, we conclude that the doctrine of collateral estoppel does not apply. We do not deem it necessary to list the many issues that were decided in this case, but were not previously advanced and decided. Any concern for relitigation is groundless.

Res judicata

256.    The subject matter of this case is the Department’s application of the comparable value method to value Petitioner’s Carter Creek gas production for production year 2002, and a variety of specific claims regarding application of that method in 2002. Findings, ¶¶ 31-159. This factor alone is enough for us to conclude that the doctrine of res judicata does not apply, although further analysis would show a general failure to meet the criteria for res judicata. Livingston, supra 861 P.2d at 551-552.

Judicial estoppel

257.    Based upon our rulings in Whitney Canyon 2000, aff’d 2005 WY 60, 112 P.3d 596, and Carter Creek 2000 (we refer to these decisions because Petitioner did not advance specific argument on this issue), we understand taxpayer to argue that, some ten years ago, the Department took a different position with respect to the application of the phrase “other parties” than it does now, directing our attention to Amoco Production Company, 882 P.2d 866 (Wyo. 1994) (Amoco I). Since the Department did not succeed in employing the method advanced in 1992, we conclude that judicial estoppel does not apply. Eagle Foundation, Inc., v. Dole, 813 F.2d at 810; Matter of Cassidy, 892 F.2d at 641; 74 Am. Jr. 2d Estoppel and Waiver § 73, p. 498. As the Wyoming Supreme Court observed “the issue in Amoco I was whether the Department could use confidential processing fee agreements as comparables pursuant to § 39-14-203(b)(vi)(B).” BP America Production Co. v. Department of Revenue, 2005 WY 60, ¶ 29, 112 P.3d at 609. No such issue is presented in this case.

General

258.    There is substantial evidence supporting the Department’s application of the comparable value method to value Petitioner’s 2002 production. Petitioner did not carry its burden of persuasion. It failed to show that the Department’s valuation was not in accordance with constitutional and statutory requirements for valuing state-assessed property, or to show that the Department’s valuation was contrary to its rules, regulations, orders or instructions.

ORDER

           IT IS THEREFORE HEREBY ORDERED: the Department of Revenue application of the comparable value method to value Chevron U.S.A., Inc.’s production for year 2002 is affirmed.

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

           DATED this _____ day of October, 2005.

                                                                        STATE BOARD OF EQUALIZATION

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                                                                               Alan B. Minier, Chairman 

                                                                            _____________________________________

                                                                            Thomas J. Satterfield, Vice-Chairman

                                                                            _____________________________________

                                                                            Thomas D. Roberts, Member

ATTEST:

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Wendy J. Soto, Executive Secretary