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. 2005-66

PURPOSES BY THE MINERAL TAX DIVISION     )

OF THE DEPARTMENT OF REVENUE                    )

(Production Year 2004, Carter Creek)                        ) 

FINDINGS OF FACT, CONCLUSIONS OF LAW, DECISION AND ORDER

APPEARANCES

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 2005, Chevron filed annual gross products returns with the Department related to its 2004 natural gas production processed through the Carter Creek Gas Plant. Chevron reported its taxable value using a variant of the proportionate profits method. The Department did not accept Chevron’s reported values. Rather, the Department valued Chevron’s 2004 production using the comparable value method, and so notified Chevron. On June 1, 2005, 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 February 6 through February 9, 2006, before the Board, consisting of Chairman Alan B. Minier, Vice Chairman Thomas R. Satterfield, and Board Member Thomas D. Roberts.

STATEMENT OF THE CASE

On May 31, 2005, the Wyoming Supreme Court issued its decision in BP America Production Co. et al. v. Department of Revenue, 2005 WY 60, 112 P.3d 596 (Wyo. 2005)(hereinafter BP America Production Company) affirming this Board’s 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). This 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. The facts in this case are similar. The gas processing plants in that case and this case are designed to process sour gas and have processed gas from the same sources. Most of the legal and factual issues raised in Whitney Canyon 2000 have again been raised in this case.

In prior litigation, this Board affirmed the Department’s selection and application of the comparable value method for production years 2000, 2001, and 2002. Chevron USA, Inc., Docket No. 2003-64, October 28, 2005, 2005 WL 2905656 (Wyo. St. Bd. Eq.) (hereinafter Carter Creek 2002); 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, Chevron called the Board’s attention to calculations of a processing deduction based on prices Chevron has paid to process sweet gas at a plant in Opal, Wyoming. Chevron’s other factual claims are similar to, and in some instances the same as, the claims it made for production years 2000 through 2002. However, Chevron does not contend that the processing allowance granted by the Department for production year 2004 is less than actual costs of operating the Carter Creek plant, which actual costs include depreciation.

We affirm the Department’s determination of value. To support its application of the comparable value method, the Department found reliable information about processing fees paid by other taxpayers in similar situations, and made reasonable inferences as to Chevron’s processing costs for its 2004 production.

CONTENTIONS AND ISSUES

In prehearing pleadings, Chevron identified eight contested issues of fact and seven contested issues of law pertaining to natural gas production processed at its Carter Creek Gas Processing Plant. Chevron stated the issues of fact as:

1.    Do any valid comparables exist for Chevron’s Carter Creek production?

2.    Has the Department developed the quality and quantity of data needed to determine a typical market processing fee or a processing fee that is statistically valid?

3.    Has the Department applied the comparable value method uniformly and equally to all similarly situated taxpayers?

4.    Has the Department been consistent in its application of the comparable value method?

5.    Should the Department choose a processing fee that is charged by a completely unrelated party that is a third-party merchant plant?

6.    Should the Department utilize appraisal principles in the application of the comparable value method?

7.    Should the Department adjust alleged comparable processing fees based on the terms and conditions of the alleged comparable processing agreements?

8.    Does the Department’s letter of September 1, 2002, choosing the comparable value method for 2004 apply to Chevron’s Carter Creek production?

[Petitioner’s Issues of Fact and Law and Exhibit Indices, pp. 1-2].

Chevron stated its issues of law as follows:

1. Is the comparable value method clear on its face and not subject to varying interpretations?

2. Should any doubt in this tax statute be construed most strongly against the government and in favor of the citizen?

3. Should the comparable value method be applied in accordance with recognized appraisal practices?

4. Should the Department utilize processing fees utilized by unrelated third-party merchant gas processing plants?

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

6. Does the Department have the obligation to prove that the processing fee chosen by the Department accurately reflects fair market value under W. S. § 39-14-203?

7. Does the proportionate profits method yield fair market value?

[Petitioner’s Issues of Fact and Law and Exhibit Indices, p. 2].

The Department identified a single mixed question of fact and 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 produced by Petitioner for Production Year 2004?

[Wyoming Department of Revenue’s Updated Issues of Fact, Issue of Law and Exhibit Index, p. 2].

Following BP America Production Company, 2005 WY 60, 112 P.3d 596, we restate the issues to a single mixed question of fact and law:

When the Department applied the comparable value method of valuation, as set forth in Wyo. Stat. § 39-14-203(b)(vi)(B), to value natural gas produced by Chevron for production year 2004, did it find reliable information about processing fees paid by other taxpayers in similar situations, and make reasonable inferences as to Chevron’s processing costs for its 2004 production?

FINDINGS OF FACT

A. Background on the Carter Creek Plant and this dispute

1.        Chevron owns and operates the Carter Creek Gas Processing Plant (“Carter Creek”). [Stipulations, ¶ 3]. The Plant removes hydrogen sulfide which comprises 16% to 17% of Carter Creek field gas. [Stipulations, ¶ 1].

2.        Chevron also owns an interest in the Whitney Canyon Gas Processing Plant (“Whitney Canyon”), located about eight miles south of the Carter Creek plant. [Stipulations, ¶ 18; Transcript Vol. V, p. 38; Exhibit 906, p. 4]. BP America operates the Whitney Canyon plant. [Stipulations, ¶ 15]. While each plant processes natural gas from a dedicated field [Stipulations, ¶¶ 4,13], the two fields are physically linked [Exhibit 907, p. 14], and the Plants have a standing arrangement for processing one another’s gas when one plant or the other is not in operation. [Transcript Vol. I, pp. 39-40]. Both plants process gas from sources other than their respective dedicated fields. [Stipulations, ¶ 43; Transcript Vol. I, p. 34; Confidential Exhibit 100].

3.        The design capacity of Carter Creek is 165 million standard cubic feet per day (mmcfd). [Transcript Vol. I, p. 26]. In 2004, Carter Creek processed an average of 78.7 mmcfd. [Exhibit 116].

4.        Since production year 2000, the Department has employed the comparable value method to determine the fair market value of gas produced by Chevron and processed at the Whitney Canyon and Carter Creek plants. Under that method, “[t]he 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 and transported.” Wyo. Stat. Ann. § 39-14-203(b)(vi)(B). The Department has consistently concluded the processing allowance for gas processed at both plants should be 25%. The Department relied on contractual processing fees to reach this conclusion.

5.        Beginning with production year 2000, Chevron has appealed the Department’s annual determinations of value for production processed at both plants. Each year, this Board has upheld the Department’s determination. Whitney Canyon 2000; Chevron U.S.A., Inc. et al., Docket No. 2002-54, January 25, 2005, 2005 WL 221595 (Wyo. St. Bd. Eq.)(hereafter Whitney Canyon 2001); BP America Production Company et al., Docket No. 2003-63, April 20, 2005, 2005 WL 959688 (Wyo. St. Bd. Eq.)(hereafter Whitney Canyon 2002); Carter Creek 2002; Carter Creek 2001; Carter Creek 2000.

6.        On May 31, 2005, the Wyoming Supreme Court affirmed this Board’s ruling in Whitney Canyon 2000. BP America Production Company et al. v. Department of Revenue, 2005 WY 60, 112 P.3d 596 (Wyo. 2005).

7.        The Wyoming Supreme Court held that a standard gas processing contract incorporated as Exhibit F in the Whitney Canyon Construction and Operating (“C&O”) Agreement provided an adequate foundation for the Department’s comparable value determination for gas processed at Whitney Canyon. BP America Production Company, 2005 WY 60, ¶ 20, and n. 3, 112 P.3d 596, 606-607, and n. 3 (Wyo. 2005). The Department rests its determination in this case on this same contract [Exhibit 511; Transcript Vol. IV, pp. 396-404], and five others. [Transcript Vol. IV, p. 534]. The Board’s decisions have consistently viewed the Exhibit F gas processing agreement incorporated in the Whitney Canyon C&O Agreement as a source of comparable value for production processed at Carter Creek. Carter Creek 2000, ¶ 59; Carter Creek 2001, ¶¶ 86-100, 144; Carter Creek 2002, ¶¶ 65-78, 124.

8.        Chevron accordingly labored under the burden of proceeding with similar, and in many respects the same, evidence as presented in prior appeals. Chevron’s difficulty was compounded by the fact that no Whitney Canyon plant owner has prosecuted an appeal of the Department’s 2004 value determination for Whitney Canyon production [see BP American Production Company, SBOE Docket 2005-65; Chevron USA, Inc., SBOE Docket 2005-104], leaving Chevron without a related record for Whitney Canyon production, which was common for appeals regarding prior production years. In light of the complex and somewhat repetitive litigation which has preceded this appeal, the Board finds it useful to orient its findings to features of this proceeding which distinguish it from prior years. We begin with the cost and revenue information which varies from year to year.

9.        In production year 2004, the 25% processing allowance granted by the Department exceeded Chevron’s actual 2004 costs of operating the Carter Creek plant by 56%. The Department granted a processing allowance equal to 25% of the gross revenue associated with Chevron’s Carter Creek production. [Transcript Vol. III, pp. 536, 544]. That confidential gross revenue amount appears on line “a” of the Department’s demonstrative exhibit pertaining to the 2004 taxable value calculation. [Confidential Exhibit 512, p. 000164]. The Board multiplied the gross revenue on line “a” by 25% to calculate the Department’s processing allowance. The Board then compared the processing allowance with Chevron’s reported figures for direct plant operating costs and plant depreciation, found on line “h” of the same exhibit. [Confidential Exhibit 512, p. 000164]. We find the actual processing allowance for production year 2004 was 56% greater than actual direct plant operating costs and depreciation. [By calculation].

10.      This 56% margin over operating costs and depreciation compares favorably to Carter Creek’s undepreciated asset balance, or the amount of plant investment currently remaining after accumulated depreciation. This amount was not produced during discovery, so the Department used an amount for production year 2002, reduced by two years of the depreciation claimed by Chevron. [Exhibit 512, p. 0164, line n; Transcript Vol. III, p. 330]. Chevron’s counsel alluded to a higher undepreciated asset balance, but produced no evidence to support his alternative figure. [Transcript Vol. III, pp. 331-332, 336-337]. The 56% margin equals 53% of the undepreciated asset balance calculated by the Department, and 37% of the undepreciated asset balance claimed by Chevron’s counsel. [By calculation]. Either way, the 56% margin suggests a handsome return on remaining plant capital during production year 2004. The Department’s calculation of implied return on investment on the value determined by the Department, which accounted for royalties, allowed taxable value, and adjustments elicited under cross-examination by Chevron’s counsel, was 91.35%. [Exhibit 512, p. 0164, line b1; Transcript Vol. III, pp. 336-337].

B. Chevron’s merchant plant calculation

11.      Although the Department’s processing allowance substantially exceeded Chevron’s actual operating costs, Chevron presented a new argument, with new evidence, to argue the 25% fee allowed by the Department was unduly low. Chevron concluded that its processing allowance should be at least 35.7%. [Exhibit 123]. To reach this conclusion, Chevron compared (1) its known costs at Carter Creek with (2) its known payments for sweet gas processing at another plant. [Exhibit 123].

12.      Chevron’s attempt to determine an “accurate processing fee” for sour gas based on a sweet gas plant was prompted in part by its view the sweet gas plant used for comparison was a merchant plant. [Exhibit 122; Transcript Vol. I, pp. 51-52]. In this context, Chevron defines a merchant plant as one whose purpose is to process gas for third parties and to make a return on investment for the processing facility. [Exhibit 122; Transcript Vol. I, p. 52].

13.      The Williams-Opal sweet gas processing plant is located approximately fourteen miles east of Kemmerer, Wyoming. [Transcript Vol. I, p. 52]. The Carter Creek plant is located south and west of Kemmerer, just south of the Lincoln and Uinta county line. [Exhibit 906, p. 4]. As a sweet gas plant, Williams-Opal cannot process the sour gas processed at Carter Creek. [Transcript Vol. I, p. 99].

14.      From his review of Williams’ statements to Chevron, Craig Tysse of Chevron calculated Williams’ average sweet gas processing fee to be 15%. [Exhibit 122; Transcript Vol. I, p. 70]. The Opal plant separates Natural Gas Liquids and some inert gases from its inlet stream for the purpose of meeting gas pipeline tariff specifications. [Exhibit 122; Transcript Vol. I, p. 53]. Generally speaking, Williams took its processing fees in the form of natural gas liquids extracted from the natural gas stream. [Transcript Vol. I, p. 67; Exhibit 124].

15.      Tysse then relied on Steve Schmidt of Chevron to segregate the current operating costs of the Carter Creek plant into (1) costs incurred to remove sulfur from the Carter Creek gas stream, and (2) costs unrelated to sulfur processes. [Exhibit 122, pp. 970-971; Exhibit 125; Trans. Vol. I, pp. 55-56, 59, 61]. Schmidt and Tysse concluded 58% of Carter Creek’s Total Non-Tax Operating Expense was related to sulfur, and the remaining 42% was not. [Exhibit 122; Transcript Vol. I, p. 58]. Chevron introduced a confidential one-page Exhibit summarizing Schmidt’s allocation. [Exhibit 125]. The allocation is calculated from the figures found in the second line of the one-page summary, designated “Total Non-Tax Opex,” which is divided into sulfur-related and non-sulfur-related columns. [Exhibit 125; Transcript Vol. I, p. 56].

16.      Tysse reasoned that the Williams-Opal processing fee of 15%, which cannot be related to sulfur because Williams-Opal is a sweet gas plant, corresponds to 42% of the Carter Creek operating costs. Tysse then reasoned that a proportional processing fee could be calculated to cover the 58% of sulfur-related Carter Creek operating costs. [Exhibit 122; Board Exhibit 1; Transcript Vol. IV, p. 582]. Specifically, he concluded that 20.7% bears the same relationship to Carter Creek’s 58% sulfur related costs as 15% does to the 42% of Carter Creek costs not related to sulfur. [Exhibit 122; Board Exhibit 1; Transcript Vol. IV, p. 582].

17.      Tysse then added 15% to 20.7% to reach 35.7%, which he deems an accurate total processing cost percentage for sulfurous gas at Carter Creek. [Exhibit 122; Board Exhibit 1; Transcript Vol. IV, p. 582]. Tysse also testified that if he further adjusted for the more valuable natural gas liquids taken by Williams as its processing fee, the sweet gas fee should be 19%, which he calculated to imply a 42% total processing fee. [Transcript Vol. I, pp. 73-74; however, the correct calculation under Tysse’s logic appears to be in excess 45%, i.e. 2.38 times 19].

18.      Chevron’s industry expert, Lesa Adair, commended Tysse’s calculations as a “solid job.” [Transcript Vol. II, p. 236].

19.      The Board finds Chevron’s analysis unpersuasive, for four principal reasons.

20.      First, Schmidt’s allocation of between sulfur and non-sulfur operating costs included the allocation of millions of dollars of costs unrelated to processing, an amount large enough to skew the entire result. [Transcript Vol. II, pp. 195-196]. This error became evident when Schmidt presented the detailed content of his calculations. [Exhibit 136. The Board notes that Chevron had not initially intended to present these details, and did so only after prompting by the Board, Transcript Vol. I, pp. 59-64]. The detailed calculation demonstrated that a large portion of Schmidt’s total non-sulfur related costs were in fact gathering expenses that should not, by statute, be included in processing expense. [Exhibit 136, pp. 1030-1031 showing field operations component (in blue) of total non-sulfur related operating expense (in green); Transcript Vol. II, pp. 180, 202].

21.      The Board removed field operations from Schmidt’s listing of non-sulfur related operating expense and total operating expense, then recalculated the ratio of sulfur to non-sulfur costs, as Tysse had done. The result is a ratio of 28 to 72, rather than 42 to 58. [By calculation]. Using this ratio, the resulting implied processing deduction is 53.6%. [By calculation as in supra, ¶¶ 16-17].

22.      The Board finds this to be an absurd result, by simple reference to the fact that the Department’s 25% processing allowance already exceeded actual 2004 costs of processing, including depreciation, by 56%. Supra, ¶¶ 9-10. If the Department applied the 53.6% allowance against gross value [Confidential Exhibit 512, p. 2, line “a”], the result would exceed Carter Creek’s actual costs of processing and related depreciation by 234%. [By calculation; see supra, ¶ 9]. Tysse acknowledged this practical effect of a substantial increase in the non-sulfur portion of the allocation, and was not prepared to defend the effect as reasonable. [Trans. Vol. IV, p. 587].

23.      Second, the Board rejects the assumption that a comparison with a merchant plant is a necessary starting point for use of the comparable value method, and rejects the related assumption that one may be blind to the economics of a specific merchant plant and still draw a valid comparison. We considered and rejected the general “merchant plant” argument in the first comparable value case involving Whitney Canyon, Whitney Canyon 2000, ¶¶ 156, 159, and did so in related Carter Creek cases. E.g., Carter Creek 2002, ¶ 92. The Wyoming Supreme Court affirmed the Board’s Whitney Canyon 2000 decision on grounds that are inconsistent with the merchant plant premise, because Exhibit F to the Whitney Canyon C&O Agreement is unrelated to a merchant plant as defined by Chevron. Supra, ¶ 12.

24.      Moreover, Chevron could not provide any information regarding the operating costs, depreciation, or current investment in the Opal plant. [Transcript Vol. II, pp. 131-133]. We know only that the sweet gas plant’s capital account may be complicated, because the Opal plant started in the 1950s, technology has changed since then, and the plant has been expanded to handle additional volumes from the Jonah field. [Transcript Vol. II, pp. 131-132].

25.      Knowledge of the investment cost component of the Opal plant is essential, particularly when the merchant plant comparison has been undertaken on the premise that a third party processor must achieve a return on investment. A plant’s undepreciated asset balance can have a dramatic effect on what a plant owner’s required return on investment must be. This was demonstrated in the record of this case. The Department testified to a netback analysis premised on a 10.25% return on investment. [Exhibit 512, p. 000164]. If one applied a 10.25% rate of return against Carter Creek’s gross investment, i.e. investment equivalent to a new plant with no depreciation, rather than its undepreciated asset balance, the result was a nominal return on investment roughly twenty times higher. [Transcript Vol. III, pp. 347-350]. Chevron did not persuade us that a comparison with a merchant plant, just because it is a merchant plant, gives rise to any reliable inferences.

26.      Third, the Board rejects the assumption that a reliable comparison can be made using only operating costs, as Chevron has done here. [Transcript Vol. I, p. 133]. The Board finds no merit in willful ignorance of such undisputed elements of plant cost as depreciation and return on investment. See supra, ¶ 9.

27.      Fourth, the premise of the comparison between a sweet and sour gas plant is generally flawed. Schmidt conceded that the comparison “is trying to compare apples and oranges, in my opinion. The logic one would apply to most sweet gas facilities will just not apply here.” [Transcript Vol. II, p. 197]. The Board accepts Schmidt’s testimony that ninety percent of the materials in a sour gas plant must be of a higher design quality than a sweet gas plant [Transcript Vol. II, pp. 176, 197], and labor cost is roughly doubled due to the hazards presented by hydrogen sulfide. [Transcript Vol. II, p. 177]. The Board further accepts his concession that, in the end, a plant must be designed around the gas it processes. [Transcript Vol. II, p. 198].

28.      These four reasons do not exhaust the Board’s concerns with the analysis. For example, the Board notes that Schmidt allocated all categories on either a 100%/0% basis or a 75%/25% basis [Exhibit 136; Transcript Vol. II, pp. 190-191], casting doubt on the rigor of his analysis. [Transcript Vol. II, pp. 204-205, 207]. Nor did Chevron attempt to address the mismatch between the cost figures supporting Tysse’s analysis, Exhibits 125 and 136, and the processing cost figures reported to the Department. [Exhibit 512].

C. Chevron’s lay and expert testimony

29.      To present the balance of its case, Chevron relied on three witnesses. Craig Tysse and David Matthews highlighted the differences between the Carter Creek and Whitney Canyon processing plants, and the differences between gas from the Carter Creek field, and gas from Exxon Road Hollow. [E.g., Transcript Vol. I, pp. 28-49; Transcript Vol. V, pp. 37-57]. Lisa Adair presented Chevron’s explanation for why the Department was mistaken when it identified various contracts as comparables, as well as other aspects of Chevron’s position. [E.g., Transcript Vol. III, pp. 222-247]. Chevron identified Adair as an expert with respect to gas processing contracts and related features of the gas processing industry. [Transcript Vol. II, pp. 210-215; 263-264].

30.      Adair made an unsatisfactory cornerstone for the balance of Chevron’s case. She disagreed with the Wyoming Supreme Court’s decision in BP America Production Company, supra, specifically including the Supreme Court’s conclusion that Exhibit F to the Whitney Canyon C&O Agreement was a valid source of comparable value – even for the Whitney Canyon plant. [Transcript Vol. II, pp. 249, 268-270]. By refusing to accept the cornerstone principles now governing comparable value cases, Adair cast general doubt on whether her testimony is “the type of evidence commonly relied upon by reasonably prudent men in the conduct of their serious affairs.” Wyo. Stat. Ann. § 16-3-108(a). Taking her defiance in its most favorable light, she has left this Board to find what harmony it can between her testimony and the Wyoming Supreme Court’s decision in BP America Production Company. Neither Chevron nor Adair offered any reason why the Board should trouble itself to do so.

31.      Adair’s disagreement with the Supreme Court is not the result of fresh insight, but rather a reflection of Adair’s long-standing commitment to views repeatedly articulated to this Board. Adair testified in the Board’s production year 2000 proceeding, which gave rise to BP America Production Company; and the Board weighed her testimony in some detail. Whitney Canyon 2000, ¶¶ 38, 39, 64, 65, 67, 71, 72, 75, 152, 154, 177. She once again relies on a report originally prepared for Whitney Canyon 2000. [Exhibit 121; Transcript Vol. II, p. 248]. She professed familiarity with the issues in this case based, inter alia, on her review of Board rulings and testimony in other proceedings, including the testimony of witnesses with personal knowledge concerning the contracts and their administration. [Transcript Vol. II, pp. 216-217, 225-233.

32.      The Board has no need for the assistance of an expert who merely selects and characterizes features of the Board’s prior proceedings in a way that comports with her opinions, while shielding Chevron from the Department’s opportunity to examine the live witnesses whose testimony was closely considered in the Board’s prior opinions. As important, we cannot presume that those witnesses would choose to ignore BP America Production Company as Adair does. Adair concedes that her characterization of the evidence in prior cases is of value to this Board only to provide the basis for her opinions. [Transcript Vol. II, p. 279]. At the same time, she plainly wishes to have the Board weigh the evidence from prior proceedings as she does. [Transcript Vol. II, p. 279]. The Board declines to do so.

33.      We stop short of dismissing Adair’s testimony in its entirety. Instead, the Board views Adair as a witness produced by Chevron principally to explain its position in this litigation. See Whitney Canyon 2000, ¶¶ 34-36. As such, we treat her as an advocate, and nothing more. As the Board has previously observed, “where witnesses are plainly advocates for the cause of their employers, testimony can more easily fall short of ‘the type of evidence commonly relied upon by reasonably prudent men in the conduct of their serious affairs.’ Wyo. Stat. Ann. §16-3-108(a).” Whitney Canyon 2000, ¶ 35. Our approach in this case will be essentially the same as in Whitney Canyon 2000. The Board will take “pains to evaluate the testimony of all witnesses in a way that offers some assurance of reliability. For example, first hand involvement tends to be more reliable. Testimony about a company’s position may be helpful even when the position itself may be a subject of dispute. We have looked for admissions against interest. We have looked for supporting documentary evidence.” Whitney Canyon 2000, ¶ 36.

34.      In reaching this view of Adair’s testimony, the Board specifically finds her conclusions concerning Carter Creek Plant costs unpersuasive. This finding is due in part to her wholesale endorsement of the comparison between the Opal sweet gas plant and Carter Creek, supra, ¶ 18, a comparison which we have found unpersuasive. Supra, ¶¶ 19-28. Yet the Board more generally finds that Adair’s approach to cost data offers no assistance in weighing the value of the evidence presented.

35.      In this regard, the Board first notes Adair has relied on undocumented cost comparisons between Carter Creek and Whitney Canyon. [Transcript Vol. II, pp. 219-220; Exhibit 121, p, 00529]. Schmidt’s testimony in this case is an object lesson in the pitfalls of accepting undocumented operating cost information at face value. Supra, ¶ 20. Adair has done nothing to win the Board’s confidence in the integrity of the limited universe of costs upon which she has chosen to rely.

36.      The Board also rejects Adair’s decision to disregard such significant costs as depreciation [Exhibit 121, p. 00529, nn. 6 and 7], and to limit the years she considered. [Transcript Vol. II, pp. 219-220, 278]. Contrary to Adair [Transcript Vol. II, pp. 279-280], the Board favors attention to turnaround costs as part of a complete comparison of Whitney Canyon and Carter Creek. Since Carter Creek was initially built to higher standards [Transcript Vol. I, p. 32], after twenty years of operation it may be incurring less turnaround and capital repair cost than Whitney Canyon. Chevron’s own evidence supports the virtue of looking to the larger picture: Dave Matthews of Chevron testified to an exhibit showing that broader measures of cost show rough parity between Whitney Canyon and Carter Creek for the seven year period from 1997 through 2003. [Transcript Vol. V, pp. 49-50; Exhibit 129]. The Board accordingly rejects as unfounded Adair’s claim that Carter Creek’s “direct costs” are “about double” those of Whitney Canyon. [E.g., Transcript Vol. II, p. 289].

D. The Department’s rationale for comparable value

37.      This Carter Creek case differs from others in that Chevron did not call a witness from the Department in its own case. One result is that Chevron failed to present evidence to support various constitutional claims premised on the allegation that the Department did not treat other similarly situated taxpayers as it treated Chevron. [Transcript Vol. IV, pp. 505-510]. Another is that Chevron attacked the Department’s comparable value determination without first establishing how that determination was made.

38.      We find it useful to consider the main points of the Department’s explanation of how it applied the comparable value method, in order to provide points of reference for Chevron’s contrary views. We find the Department’s explanation to be credible, and not seriously in dispute. Chevron attacks the validity of the Department’s approach and conclusions, rather than the explanation itself.

39.      Although directed to report its taxes using the comparable value method, Chevron reported its Carter Creek production using the proportionate profits method. [Transcript Vol. II, p. 299; Stipulations, ¶¶ 58, 59]. The Department recalculated Chevron’s tax reports with a 25% processing allowance under the comparable value method. [Transcript Vol. II, p. 299; Stipulations, ¶ 60]. Although Chevron claims that it objected to the Department’s selection of method in 2002 [Exhibits 900, 901], Chevron’s objection is clearly couched in terms of maintaining the “status quo” of litigation then underway, and had no effect on the Department’s selection of method.

40.      The Department relied upon a variety of Whitney Canyon and Carter Creek contracts to determine the 25% processing allowance. [Transcript Vol. II, p. 374]. Specifically, the Department’s sources of comparable value for production processed at Carter Creek were:

Whitney Construction and Operating Agreement between Whitney Canyon plant owners Amoco Production Company, Champlin Petroleum Company, Apache Petroleum Company, and Gulf Oil Corporation (and their successors in interest), dated March 3, 1980, with its attached Exhibit F gas processing agreement [Exhibit 511], known as the Whitney Canyon C&O Agreement;

Carter Creek Gas Processing agreement between Chevron U. S. A. Production Company, owner of the Carter Creek plant, and Exxon Company U. S. A., as producer [Exhibit 100], known as the Exxon Road Hollow agreement based on the field from which Exxon produces;

Whitney Canyon/Carter Creek Mutual Back-up Processing Agreement between the Whitney Canyon facility Operator, Amoco Production Company, and Chevron Production Company, owner of the Carter Creek gas processing facility, dated March 17, 1993 [Exhibit 925];

Gas Processing Agreement between the Whitney Canyon plant owners and Union Pacific Resources Company as a producer, dated 1994 [Exhibit 915], known as the Wahsatch Gathering System Agreement or the Anschutz Agreement, once Anschutz acceded to the interest of Union Pacific Resources Corporation;

Gas Processing Agreement between the Whitney Canyon plant owners and Texaco Exploration and Production, Inc., dated March 1, 1994, [Exhibit 917] known as the Merit Agreement after Merit acceded to Texaco’s interest;

Carter Creek Gas Plant/Anschutz Back-up Processing Agreement between Chevron U. S. A. Production Company and Anschutz Marketing and Transportation, Inc., producer, dated May 22, 2001 [Exhibit 101], to provide alternative processing for Anschutz’s Wahsatch Gathering System gas when the Whitney Canyon plant was unavailable.

[Transcript Vol. IV, pp. 459-460]. In our consideration of these comparables, the Board disregards Chevron’s own Exhibit F Processing Agreement with the Whitney Canyon plant owners, since Chevron cannot be an “other party” with respect to itself. Wyo. Stat. Ann. § 39-14-203(b)(vi)(B).

41.      The Department originally chose to apply the comparable value method to Carter Creek production because it knew of the provisions of the Whitney Canyon C&O processing agreements, and knew Whitney Canyon and Carter Creek processed gas from “basically one reservoir.” [Transcript Vol. III, p. 374]. The Department also saw there was production from another field processed at Carter Creek, and the related Exxon Road Hollow processing agreement was consistent with a pattern of processing fees no greater than 25% for hydrogen sulfide removal. [Transcript Vol. III, p. 374]. As the Department learned of more processing contracts for the Whitney Canyon and Carter Creek plants, it never “saw more than 25% being to charged to any other party going through either one of the two plants.” [Transcript Vol. III, pp. 375, 462].

42.      From the Board’s review of the contracts, we find that the Department’s conclusion regarding the maximum in-kind processing fee of 25% is correct. In making this finding, we have taken into account the services actually provided by Carter Creek. For example, while the Carter Creek Gas Plant/Anschutz Back-up Processing Agreement provides a base processing fee of 25% with an additional 5% if inlet compression is required [Exhibit 101, p. 2, ¶ 7], the record shows that Anschutz provided its own compression. Infra, ¶ 70.

43.      The fact that Chevron did not charge itself a fee for processing gas at Carter Creek was, in the Department’s estimation, a reason for using the comparable value approach. The comparable value approach involves looking at “processing fees charged to other parties for minerals of like quantity, taking into consideration quality, terms and conditions under which the minerals are being processed or transported.” [Transcript Vol. III, pp. 494-495]. This is, of course, a paraphrase of the statutory requirements. [Transcript Vol. III, pp. 466-467, 514]; supra, ¶ 4.

44.      The Department determined on a case by case basis whether a specific contract was a comparable, by reference to whether the contract met the requirements of the statute. [Transcript Vol. III, pp. 467, 514]. In this regard, the Department had determined for previous cases that where volumes under different contracts might vary, if the fee remained constant at 25%, then there was no statutory distinction to be made among the contracts with respect to quantity. [Transcript Vol. III, p. 466].

45.      For purposes of determining a comparable value, the Department ignored differences in operating costs between Carter Creek and other plants. [Transcript Vol. III, p. 484]. The Department focused instead on fees charged to producers who were “other parties” within the meaning of the statute. [Transcript Vol. III, p. 490]. In the Department’s view, the statute did not require express attention to these costs; for example, passing plant operating costs on to a producer was not a term or condition of any of the contracts. [Transcript Vol. III, p. 484]. The processing fees did not change based on the operating costs incurred by the plant owners. [Transcript Vol. III, pp. 485, 495]. The use of comparable value is consistent with the Department’s preference for relying on market indicators of value, as reflected in contracts made by arms length transactions. [Transcript Vol. III, p. 368].

46.      The Department noted that gas entering the Carter Creek plant is commingled with all other gas to be processed. [Transcript Vol. III, pp. 389-390, 392]. We accept this testimony.

47.      The Department acknowledged the Supreme Court’s exclusive reliance on the Whitney Canyon C&O Agreement in BP America Production Company, but preferred to rely on all six contracts with supporting information from others. [Transcript Vol. III, pp. 532-534]. When all of the contracts are taken into account, the common element is a fee that never exceeds 25%. [Transcript Vol. III, p. 534]. From the Department’s perspective, too much attention to the detail of the contracts leads to a thicket of possibilities for adjustment, not all of which favor the taxpayer or are feasible. For example, the gas processing agreement in the Whitney Canyon C&O Agreement includes some gathering services, which means that the some portion of the 25% fee is more properly associated with production costs that should not, based on the statutory distinction between production and processing, be treated as deductible. [Transcript Vol. III, pp. 532-533]. This fact indicates the processing fee should be adjusted below 25% [Transcript Vol. III, p. 533], thereby reducing Chevron’s processing deduction. At the same time, the record did not demonstrate that either the Department or the taxpayer has or had access to accurate Whitney Canyon cost information which would enable the Department to adjust the processing fee by eliminating gathering costs. [Transcript Vol. III, pp. 532-533].

E. Why Chevron rejects the comparison with Whitney Canyon

48.      We now turn to Chevron’s attack on the Department’s position. Chevron urged us to consider evidence of the cost differences between the Whitney Canyon and Carter Creek plants. The Board considered such evidence to be relevant, since our ultimate task is to determine whether the Department found “reliable information about processing fees paid by other taxpayers in similar situations, from which the Department can make reasonable inferences as to a particular taxpayer’s processing costs.” BP America Production Company, 2005 WY 60, ¶ 19, 112 P.3d 596, 606 (Wyo. 2005). While there does not seem to be any doubt that the contracts are reliable sources of information, Chevron takes the view that the Department has not drawn reasonable inferences about processing costs. Chevron relies heavily on an argument that the cost structures, revenue structures, and operating features of the Whitney Canyon and Carter Creek plants are too different for comparisons with Whitney Canyon to be reasonable.

49.      We have already considered and rejected Adair’s analysis of the relative operating costs of Whitney Canyon and Carter Creek. Supra, ¶ 35. We accept instead evidence that the operating costs of the two plants, including depreciation, were nearly equal for the seven representative years from 1997 through 2003. Supra, ¶ 36.

50.      Chevron stresses aspects of its capital investment in Carter Creek. Chevron constructed Carter Creek for $440 million compared to $340 million for Whitney Canyon. [Transcript Vol. I, p. 28; stated as $442 million in Stipulations, ¶ 5]. The Carter Creek plant was built with higher quality metallurgy than Whitney Canyon, which was essentially designed for a twenty year life and began operations in 1983. [Transcript Vol. I, p. 32; Stipulations, ¶ 14]. We know little about the details of subsequent capital investment in the two plants, except as reflected in depreciation. However, Carter Creek was designed to meet more stringent air emissions. [Transcript Vol. I, p. 30]. Carter Creek’s originally constructed a Stretford unit to meet this standard; in 2002, Chevron invested $17 million to replace the Stretford unit with a Flexsorb unit. [Transcript Vol. I, p. 29].

51.      We find that any capital differences between the two plants are not independently significant for determining whether the Department’s inferences were reasonable. Chevron has established internal policies to account for the return of its capital investment in Carter Creek over the life of the plant, expressed in the form of annual depreciation. We have previously determined that, for production year 2004, the Department’s processing allowance exceeds the total of this depreciation and Chevron’s operating costs by 56%. Supra, ¶ 9. We find this 56% differential to be a sound indicator that the Department’s comparable value inferences were reasonable even if the capital costs of Whitney Canyon and Carter Creek differed.

52.      For essentially the same reason, the Board is not persuaded by arguments related to the contractual history of Whitney Canyon. For example, Chevron argues that an agreement unchanged since 1982 cannot reflect today’s market conditions. Chevron’s Proposed Findings and Conclusions, pp. 41-42, ¶ 8. The 56% differential indicates that the processing fee negotiated in 1982 continues to bear a viable relationship to actual processing costs. Similarly, Chevron argues that a contract between Chevron and the Whitney Canyon plant owners, before Chevron itself became an owner, demonstrates that a 50% processing fee is more reliable. Chevron’s Proposed Findings and Conclusions, p. 40, ¶ 3. The record in this proceeding does not include evidence that establishes the reasons for the reduction in the processing fee to the 25% in place since April 1, 1995 [Exhibit 924]; we refuse to draw the inference proposed by Chevron. However, the 56% differential again indicates the production year 2004 fee of 25% continues to bear a viable relationship to actual processing costs.

53.      In addition to the Flexsorb unit, Chevron points to other operational differences between the two plants:

Whitney Canyon operates two trains for removing sulfur, but Carter Creek operates just one.

Carter Creek has two inlet compression facilities, but Whitney Canyon has just one.

Whitney Canyon is equipped with a turbo expander which enables it to remove more natural gas liquids (NGLs) than Carter Creek. Chevron points out that NGLs are normally worth more on a BTU basis than residue gas.

Carter Creek transports its sulfur by pipeline to a railroad terminal, but Whitney Canyon uses trucks.

[Transcript Vol. I, pp. 28-32; Stipulations, ¶¶ 23-25].

54.      We find these distinctions to be of little significance compared to the main points of similarity identified by the Department. Supra, ¶¶ 41-46. To the Department’s points of similarity, we add that the two plants were constructed and went into operation within a year of one another. [Transcript Vol. V, p. 36; Stipulations, ¶¶ 3, 14]. Chevron’s Mathews of Carter Creek also explained the basis his familiarity with Whitney Canyon’s equipment in words that indicate further commonalities in operations:

Because the facilities are so close, we consider it – we consider them neighbors. We spend quite a deal of time working between the two facilities. During turnarounds, we – we share our warehouse inventories to get one another out of a bind. And we work together – I work with their operations supervisor on day-to-day issues common to both facilities. And we share a lot of commonalities as well.

[Transcript Vol. V, pp. 37-38]. We find Mathews’ testimony on this point credible, and contrary to the position articulated by Adair and Tysse.

55.      A final blow to any credibility of Chevron’s distinctions between Whitney Canyon and Carter Creek is Chevron’s warm embrace of inferences drawn from the Opal-Williams sweet gas processing plant. We will not repeat the faults we have already found in Chevron’s analysis. Supra, ¶¶ 19-28. The most revealing aspect of Chevron’s Opal-Williams analysis is Chevron’s willingness to make such a strained argument.

56.      Adair advanced Chevron’s final argument against reliance on the Whitney Canyon C&O Agreement. Chevron pays a 25% processing fee to the Whitney plant owners – as a producer – and also pays its pro rata share of plant operating expense – as a Whitney Canyon plant owner. [Transcript Vol. II, p. 222]. Adair argues that Chevron also receives plant revenues in the same pro rata share of approximately 15%. [Transcript Vol. II, p. 223]. In her view, the effect of pro rata sharing is merely to offset the out-of-pocket costs of a plant owner. [Transcript Vol. II, p. 223]. In its proposed Conclusions of Law, Chevron raised the related argument that increasing the processing fee charged at Whitney Canyon by two or three times would have no real effect. [Chevron’s Proposed Findings and Conclusions, p. 41, ¶ 7].

57.      This argument ignores the effect of revenues flowing to Whitney Canyon plant owners from the Wahsatch Gathering System Agreement, and ignores the redistribution that occurs when a producer who is also a plant owner either over-produces or under-produces with respect to its ownership share. [Exhibit 511, p. 0119]. Revenues to a plant owner are therefore not a wash with respective to fees it pays as a producer. The Department draws a reasonable inference that the Whitney Canyon C&O Agreement was never meant to provide plant owners with revenue streams equal to their respective shares of plant costs. Instead, the plant owners intended to assure a revenue stream adequate to cover plant expenses, even when the wells in which a plant owner had an interest might be under-producing in relative terms. [Transcript Vol. III, pp. 396-398].

58.      Based on the more extensive records made in previous Whitney Canyon proceedings, the Board has consistently rejected the argument that a Whitney Canyon plant owner’s revenues always equaled its costs. Whitney Canyon 2000, ¶¶ 7, 70; Whitney Canyon 2001, ¶¶ 51-161; Whitney Canyon 2002, ¶¶ 50-132. We also find and conclude the Wyoming Supreme Court implicitly affirmed this aspect of Whitney Canyon 2000 when it upheld the distinction between plant owners and producers. Infra, ¶ 79.

59.      In sum, Chevron generally objects to the Department’s reliance, for the Carter Creek value determination, on contracts between the Whitney Canyon plant owners and a producer. Based on the foregoing findings, we find this general objection to be unpersuasive. Our finding extends to the Department’s reliance Wahsatch Gathering System Agreement and the Merit Agreement, as well as the Whitney Canyon C&O Agreement.

F. The remaining sources of comparable value

60.      Exxon’s Road Hollow gas is only about one-tenth percent hydrogen sulfide, as opposed to approximately sixteen per cent in gas from Carter Creek’s dedicated field. [Transcript Vol. I, pp. 34-35]. Road Hollow gas is nonetheless sour by pipeline standards and must be processed. [Transcript Vol. I, p. 88]. Exxon Road Hollow production amounted to 3.94% of Carter Creek’s total 2004 inlet volume. [Exhibit 116; Transcript Vol. I, p. 27; Transcript Vol. V, p. 53]. Although nominally third priority gas [Transcript Vol. I, p.34], it is normally the last gas shut down and the first brought online during Carter Creek turnarounds. [Transcript Vol. I, p. 89].

61.      Chevron proposed that the Board make findings on six issues: quantity; priority; quality; ancillary benefits of the Exxon Road Hollow contract; incremental loading; and the effective processing fee rate. [Chevron’s Proposed Findings and Conclusions, p. 14 et. seq., ¶¶ 19-28]. In each instance, Chevron asks that we characterize the facts in a way that would preclude the Department’s reliance on the Exxon Road Hollow Agreement. In each instance, we find to the contrary.

62.      Adair argued that the total volume, or quantity, of Exxon Road Hollow gas is too small to provide a valid comparable. [Chevron’s Proposed Findings and Conclusions, pp. 14-15, ¶¶ 19, 28]. The Department notes that the Exxon Road Hollow agreement provides a sliding scale processing fee which increases as volume decreases, from a low fee of 15% for 15 million cubic feet a day to a high fee of 25% for the lower volumes actually processed in 2004. [Transcript Vol. III, p. 389]. The maximum fee under the Exxon Road Hollow agreement is consistent with the Department’s selection of a 25% processing fee, and plainly provides that for greater volumes, the processing fee should be even less. [Exhibit 100, Article XI, contract pp. 11-12]. There is nothing to indicate that the Department’s inference is unsound.

63.      In addition, the volumes of Exxon Road Hollow gas are not substantially different from those in Chevron’s individual mineral groups processed at Carter Creek. [Exhibit 514]. Chevron offers no compelling reason for its tacit assumption that these mineral groups should be aggregated for the sake of comparison with Exxon Road Hollow.

64.      Perhaps most important, the Wyoming Supreme Court approved of reliance upon the Exhibit F processing agreements in the Whitney Canyon C&O Agreement. BP America Production Company, supra. One of the Whitney Canyon plant owners held only 3.016% of the gas dedicated to Whitney Canyon processing [Exhibit 511, p. 0119], with an even smaller share of total gas processed at Whitney Canyon when Wahsatch Gathering System gas is taken into account. Exxon Road Hollow’s share of gas processed at Carter Creek indisputably exceeds 3.016%. Supra, ¶ 60. We find and conclude that BP America Production Company supports this Board in finding that a reliable inference may be drawn based on volumes of gas that are relatively small in terms of all gas processed at a plant, where the processing terms of the pertinent agreement are consistent with the terms of contracts affecting other gas. We expressly reject Chevron’s related argument that the Exxon Road Hollow Agreement cannot serve as a reliable source of information because Carter Creek would not have been built to process only the Exxon Road Hollow gas. [Chevron’s Proposed Findings and Conclusions, p. 45, ¶ 23].

65.      Chevron argues that we should reject the Exxon Road Hollow agreement as a comparable based on its contractual priority; on the ancillary operations benefits the Road Hollow gas provides Chevron at Carter Creek; and on Chevron’s view that the Road Hollow gas is incremental to the base load of the plant. [Chevron’s Proposed Findings and Conclusions, p. 15, ¶¶ 20, 21, 23]. We find instead that priority is insignificant in the context of the practical operations of the plant, supra, ¶ 60, and in light of the fact that the plant was operating well below capacity. Supra, ¶ 3. We find no evidence that any ancillary benefits of Road Hollow gas to the plant affected the processing fee. Nor do we find any documentary evidence to support Chevron’s contention that the Road Hollow gas was treated in any meaningful way as incremental, including any related variation in processing fee. On these three points, Chevron has merely expressed a position that we do not find persuasive.

66.      Although Exxon Road Hollow gas contains less hydrogen sulfide than other gas processed at Carter Creek, the quality of Exxon Road Hollow gas is indistinguishable from the standpoint of requiring processing. Moreover, Chevron did not show that quality of Exxon Road Hollow gas affected the selection of a processing fee.

67.      Adair testified that because the Exxon Road Hollow gas contains less hydrogen sulfide, it cannot be a comparable because hydrogen sulfide gas content has a practical effect on the actual processing fee paid. Road Hollow gas contains more hydrocarbons in any given volume than other Carter Creek gas, which contains a higher portion of hydrogen sulfide. Adair argued that because more of the Exxon Road Hollow gas is valuable for its hydrocarbons, the fee on a given inlet volume of Exxon Road Hollow gas must be higher than a comparable volume of gas from Carter Creek’s dedicated field. [Transcript Vol. II, pp. 240-247; Exhibit 137]. State another way, if the standard for comparability is identical processing fees on two identical volumes of Exxon Road Hollow gas and other Carter Creek gas, the processing fee on the Exxon Road Hollow gas must be higher. [Transcript Vol. II, p. 246; Exhibit 137]. The principal flaw in this analysis is that the Department applies the 25% fee against the plant products recovered after processing, just as the other contracts require, and not against the total inlet volume. [E.g., Whitney Canyon C&O Agreement, Exhibit 511, p. 0149]. Adair therefore asks us to assume a different fee structure than the one that actually exists, and conclude that this alternative fee structure cannot be comparable. We decline to accept her initial assumption, and reject her conclusion.

68.      Chevron argues we should disregard the Whitney Canyon-Carter Creek Mutual Back-up Agreement. [Exhibit 925; Chevron’s Proposed Findings and Conclusions, p. 17, ¶¶ 29-31]. While we find this Agreement generally supports the Department’s position, we do not find it to be a comparable. The agreement is between plant operators, and the Board is unable to determine precisely how transactions are processed with respect to producers. See Carter Creek 2001, ¶¶ 110-115; Carter Creek 2002, ¶ 96. The Department was unable to address this concern of the Board. [Transcript Vol. III, pp. 534-536].

69.      Chevron objects to reliance on the Wahsatch Gathering System Agreement on two grounds, neither of which we accept. First, Chevron asserts that the relationship of the parties involved in its original negotiation argue against the reliability of inferences drawn from the terms of the contract. [Chevron’s Proposed Findings and Conclusions, pp. 18-19, ¶¶ 38-40; pp. 46-47, ¶¶ 31-32]. This history was no longer of any significance in 2004, by which time Anschutz had succeeded to the interest of the original producer, Union Pacific Resources Company. Any inference that the terms were unduly favorable to the producer is contradicted by Chevron’s second argument.

70.      Second, Chevron argues that Anschutz provides its own compression and separation to get the gas to the Whitney Canyon plant inlet, so that Whitney Canyon in fact supplies less service to the Wahsatch Gathering System than it does to other producers, at a negligible incremental cost. [Chevron’s Proposed Findings and Conclusions, p. 19, ¶ 40]. This argument ignores the fact that Anschutz must compress and separate its gas in order to reliably transport it by pipeline to the Whitney Canyon plant. [Transcript Vol. III, p. 529]. Failure to do so could ruin the pipeline which transports gas to Whitney Canyon for processing. [Transcript Vol. III, p. 529]. In this regard, Anschutz is in a different position than producers in the Whitney Canyon field. [Transcript Vol. III, p. 530]. However, its processing fee is the same.

71.      Chevron objects to the Merit Agreement as a comparable principally due to the relatively small volume of production that Merit produces for processing at Whitney Canyon. [Chevron’s Proposed Findings and Conclusions, p. 20, ¶¶ 44, 46]. We have already rejected this volumetric argument. Supra, ¶ 64. Chevron’s only other objection concerns the history of negotiations of the Merit Agreement, but this objection is not supported by evidence introduced in this case. [Chevron’s Proposed Findings and Conclusions, p. 20, ¶ 45].

72.      Chevron objects to the Carter Creek Gas Plant/Anschutz Back-up Processing Agreement for reasons closely related to its objections to the Wahsatch Gathering System Agreement. [Chevron’s Proposed Findings and Conclusions, p. 18, ¶¶ 34-37]. We have already found the argument pertaining to Anschutz’s compression and separation of gas before the plant inlet to be unpersuasive. Supra, ¶ 70. We have likewise rejected the argument based on total quantities of gas processed, supra, ¶ 64, and an argument based on Chevron’s view that the gas is merely an incremental addition to the plant’s base load. Supra, ¶ 65. Chevron has produced no evidence concerning the Carter Creek Gas Plant/Anschutz Back-up Processing Agreement that persuades us we should reach a different result in this context.

73.      Chevron objects to the Carter Creek Gas Plant/Anschutz Back-up Processing Agreement because any processing under the Agreement was temporary in nature in production year 2004, coming into play only when Anschutz sent its gas to Carter Creek because it was unable to send gas to Whitney Canyon. [Chevron’s Proposed Findings and Conclusions, pp. 17-18, ¶ 33; p. 45, ¶ 25]. We reject this argument because the temporary nature of the arrangement for processing at Carter Creek did not affect the processing fee provision of the Agreement, which is consistent with the pattern on which the Department relies.

74.      Chevron’s remaining argument is that the Carter Creek Gas Plant/Anschutz Back-up Processing Agreement requires a release from the Whitney Canyon plant owners before Carter Creek can process Anschutz gas. [Chevron’s Proposed Findings and Conclusions, p. 18, ¶ 35]. Chevron produced no evidence to show that this requirement for a release affected the processing fee provision of the Agreement, which is otherwise consistent with the pattern on which the Department relies.

75.      Due to the holding of BP America Production Company, we find it unnecessary to address other agreements on which the Department has not expressly relied for its determination of comparable value.

76.      Any portion of the Conclusions of Law: Principles of Law or the Conclusions of Law: Application of Principles of law set forth below which includes a finding of fact may also be considered a finding of fact and, therefore, is incorporated herein by reference. In addition, the extensive history of this litigation has prompted us to address, as Findings of Fact, some matters that might also be characterized as Conclusions of Law, and accordingly incorporate any such Conclusions of Law by reference into our discussion of Conclusions of Law.

CONCLUSIONS OF LAW: PRINCIPLES OF LAW

77.      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 Company v. Department of Revenue, 2005 WY 60, ¶ 5, 112 P.3d at 600. The four methods are comparable sales, comparable value, netback, and proportionate profits. Id. The method at issue in this case, comparable value, is defined as follows:

(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;

Wyo. Stat. Ann. § 39-14-203(b)(vi)(B).

78.      “...[T]he objective of the comparable value statute is for the Department to find reliable information about processing fees paid by other taxpayers in similar situations, from which the Department can make reasonable inferences as to a particular taxpayer’s processing costs.” BP America Production Company v. Department of Revenue, 2005 WY 60, ¶ 19, 112 P.3d 596, 606 (Wyo. 2005).

79.      “Given this context, and the particular facts of this case, this Court finds no necessity to construe the statutory terms Taxpayers wish to put at issue. The statute requires the Department find processing fee agreements from similarly situated taxpayers. Taxpayers [BP America Production Company, Chevron, U. S. A., Inc., and Anadarko E&P Company, LP] are clearly similarly situated producers. They produce gas from the same field and process the gas at the same Plant pursuant to identical processing agreements. Given four identical processing fee agreements, there is no need to further define the terms ‘quantity’ or ‘quality, terms and conditions.’ There is no difference in the agreements as to how the processing fee is determined. When looking at comparable processing fee contracts, one simply cannot get more comparable than four identical contracts. Since finding comparable processing fees is the ultimate goal, that goal is reached if these agreements are truly four separate agreements.” BP America Production Company v. Department of Revenue, 2005 WY 60, ¶ 20, 112 P.3d 596, 606-607 (Wyo. 2005).

80.      “…The statute does not qualify how many processing fee contracts the Department needs to analyze. Determining what number of processing fee contracts the Department must analyze for comparison is a fact driven decision to be made on a case-by-case basis…. This Court finds that four identical agreements between four separate producers and the Plant present adequate comparables to enable the Department to fairly estimate Taxpayers’ processing costs. In making this finding under these particular facts, we expressly reject Taxpayers’ contention that the processing fee agreement pool is too small to allow for comparison between the different agreements. Further, because the determination of this case does not require use of any other agreements beyond the base four, we expressly decline, at this time, to analyze the other processing fee agreements used by the Department for their comparability under the statute.” BP America Production Company v. Department of Revenue, 2005 WY 60, n. 3, 112 P.3d 596, 606 n. 3 (Wyo. 2005).

81.      “Finding that the language of the statute is not ambiguous as applied to the instant facts, we must reject Taxpayers’ general argument that the terms of the comparable value statute are so ambiguous as to make the component parts of the method incomprehensible in the absence of departmental rules providing more precise definitions. 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. In the instant case, Taxpayers were advised of the processing fee agreements the Department intended to use as comparables and had no difficulty presenting argument against the application of the comparable value method under the circumstances.” BP America Production Company v. Department of Revenue, 2005 WY 60, ¶ 23, 112 P.3d 596, 607-608 (Wyo. 2005).

82.      “In the process of presenting its opinion in Amoco I [Amoco Production v. State Board of Equalization, 882 P.2d 866 (Wyo. 1994)] , the Amoco I court stated, ‘We note in passing that some of the statutory factors are amorphous to a degree.’ …After explaining that rules might help alleviate an 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…. These equivocal statements in the context of dicta have no precedential value.” BP America Production Company v. Department of Revenue, 2005 WY 60, ¶ 18, 112 P.3d 596, 606 (Wyo. 2005).

83.      “…[T]he 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.

CONCLUSIONS OF LAW: APPLICATION OF PRINCIPLES OF LAW

84.      Chevron brought this appeal pursuant to Wyo. Stat. Ann. § 39-14-209(b) and § 39-13-102(n). [Notice of Appeal]. We 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 burden of going forward and the burden of ultimate persuasion rested with Chevron. Rules, Wyoming State Board of Equalization, Chapter 2, § 20.

85.      Chevron claims the Department must demonstrate the processing fee chosen by the Department accurately reflects fair market value under Wyo. Stat. Ann. § 39-14-203. [Petitioner’s Issues of Fact and Law and Exhibit Indices, p. 2, Issue 6]. On its face, Wyo. Stat. Ann. § 39-14-203(b)(viii) governs of appeals of the Department’s selection of method, not its application. That selection did not occur in production year 2004, but rather occurred in 2002 for the three production years 2003 through 2005 [Exhibit 900], so that the one-year statute of limitations for appeal of the method of selection expired in 2003, long before this appeal was filed. Wyo. Stat. Ann. § 39-14-203(b)(viii). Chevron understandably did not purport to invoke Wyo. Stat. Ann. § 39-14-203(b)(viii) when it filed this appeal. [Notice of Appeal]. In any event, Chevron bears a petitioner’s burdens, Conclusions, ¶ 83, and the favorable economic climate of production year 2004 obviated any serious contention that the comparable value method failed to reflect fair market value. Findings of Fact in this Decision, hereafter “Findings,” ¶¶ 9-10.

86.      As we have already explained, this appeal is the most recent in a series involving the application of the comparable value method to natural gas processed at Whitney Canyon and Carter Creek. Findings, ¶ 5. Until the Wyoming Supreme Court decided BP America Production Company v. Department of Revenue, 2005 WY 60, 112 P.3d 596 (Wyo. 2005), the Petitioners in those appeals continued to present evidence and argument which raised and preserved a broad range of factual and legal issues. BP America Production Company disposed of many of these recurring issues.

87.      Chevron acknowledges BP America Production Company, but insists that the decision was strictly limited to the facts before the Supreme Court, on the record made in Whitney Canyon 2000. [Chevron’s Proposed Findings and Conclusions, pp. 32-34, ¶¶ 11-15]. We disagree. Though the decision is ultimately fact driven, the Supreme Court has nonetheless provided a principled focus for consideration of those facts: whether the Department has found “reliable information about processing fees paid by other taxpayers in similar situations, from which the Department can make reasonable inferences as to a particular taxpayer’s processing costs.” Conclusions, ¶ 78.

88.      Chevron’s characterization of BP America Production Company ignores the very close relationship between the facts which decided that case, and the facts which must decide this one. The Wyoming Supreme Court expressly approved use, for comparable value purposes, of the very same Whitney Canyon C&O Agreement that is at issue in this case. Adair’s opinions notwithstanding, Findings, ¶ 30, Chevron cannot seriously argue that the Exhibit F processing agreements incorporated in the Whitney Canyon C&O Agreement are unsuitable sources of information for a comparable value determination. At most, Chevron can argue that the Whitney Canyon C&O processing agreements are not suitable for application to Carter Creek.

89.      Instead of accepting and adapting to the fundamental change wrought by BP America Production Company, Chevron repeats arguments now discredited.

90.      Chevron argues, as in prior cases, that the Department was obliged to undertake rulemaking before it could apply the comparable value method. [Chevron’s Proposed Findings and Conclusions, pp. 35-36, ¶¶ 2-4]. BP America Production Company holds the contrary. Conclusions, ¶ 81. The rulemaking argument ties to Chevron’s view of actions of the Department in the early 1990s, none of which were addressed in the record in this case. [Chevron’s Proposed Findings and Conclusions, pp. 29-31, ¶¶ 3-8]. This Board first rejected the rulemaking argument in Whitney Canyon 2000, ¶¶ 161-168, 183-184, and has consistently done so since. BP America Production Company expressly supports the Board’s view that an earlier statement by the Wyoming Supreme Court in this context was mere dicta. BP America Production Company v. Department of Revenue, 2005 WY 60, ¶¶ 17-18, 112 P.3d at 606.

91.      Chevron argues, as in prior cases, that a Workers’ Compensation case, Adams v. State ex. rel. Wyoming Workers’s Safety and Compensation Division, 975 P.2d 17 (Wyo. 1999), controls the interpretation of “comparable” in the comparable value definition of the tax statutes. [Chevron’s Proposed Findings and Conclusions, pp. 37-38, ¶¶ 2-3]. BP America Production Company has unequivocally settled the meaning of the comparable value statute, and in doing so rejected Chevron’s arguments that the comparable value statute requires strained or piecemeal interpretation. BP America Production Company, 2005 WY 60, ¶¶ 17-19, 112 P.3d at 606. In addition, this Board has previously rejected the argument based on Adams. E.g., Carter Creek 2002, ¶ 208.

92.      By settling the meaning of the comparable value statute, we further conclude that BP America Production Company disposed of two contested issues of law raised in Chevron’s prehearing pleadings: (1) Is the comparable value method statute clear on its face and not subject to varying interpretations? (2) Should any doubt in this tax statute be construed most strongly against the government and in favor of the citizen? [Petitioner’s Issues of Fact and Law and Exhibit Indices, p. 2]. The answer to the first question is yes; the answer to the second is there is no such doubt.

93.      Chevron argues, as in prior cases, that the Department failed to apply recognized appraisal principles when it applied the comparable value method to Carter Creek production. [Chevron’s Proposed Findings and Conclusions, pp. 38-39, ¶¶ 4-7; Petitioner’s Issues of Fact and Law and Exhibit Indices, p. 2, Issue 3]. This Board first rejected this argument in Whitney Canyon 2000, ¶¶ 173-182, and has consistently done so since. While the Wyoming Supreme Court did not expressly address the recognized appraisal principles argument in BP America Production Company, we conclude the Supreme Court’s straightforward treatment of the four statutory valuation methods is inconsistent with Chevron’s demand for a discretionary overlay of recognized appraisal principles. BP America Production Company, 2005 WY 60, ¶¶ 5-6, 112 P.3d at 600. For the same reason, we reject Chevron’s claim that the Department was obliged to develop a processing fee in some way other than that approved in BP America Production Company. [Petitioner’s Issues of Fact and Law and Exhibit Indices, p. 1, Issue 2].

94.      Having addressed Chevron’s standard threshold objections, we now turn to the central question: did the Department find reliable information about processing fees paid by other taxpayers in similar situations, from which it made reasonable inferences as to a Chevron’s processing costs? Conclusions, ¶ 78. Based on our Findings of Fact, we must answer the question in the affirmative. Findings, ¶¶ 37-74. In so doing, we conclude the Department has properly relied on the Whitney Canyon C&O Agreement, the Wahsatch Gathering System Agreement, the Exxon Road Hollow Agreement, the Merit Agreement, and the Carter Creek Gas Plant/Anschutz Back-up Processing Agreement. We further conclude it was appropriate for the Department to rely on more agreements than were necessary to decide BP America Production Company. The processing fees in the Exxon Road Hollow Agreement and the Carter Creek Gas Plant/Anschutz Back-up Processing Agreement demonstrate how the processing fee pattern of agreements with the Whitney Canyon plant owners carried over to the Carter Creek agreements.

95.      Chevron identified three additional contested issues of law in its prehearing pleadings. First, Chevron asked, “[s]hould the DOR utilize processing fees utilized by unrelated third-party merchant gas processing plants?” To the extent this question was premised on evidence concerning the Williams-Opal sweet gas processing plant, the answer on factual grounds alone must be no. Findings, ¶¶ 11-28. As a matter of law, the test articulated by the Wyoming Supreme Court includes no requirement for the Department to rely on fees of merchant gas processing plants. Conclusions, ¶ 78.

96.      Second, Chevron asked, “[h]as DOR violated the requirement of uniform and equal taxation by treating similarly situated taxpayers differently in the valuation process?” [Petitioner’s Issues of Fact and Law and Exhibit Indices, p. 2, Issue 5]. Chevron produced no evidence in support of this issue, and we conclude Chevron failed to carry its burdens of going forward and ultimate persuasion. We note that similar claims were advanced and rejected in Whitney Canyon 2000. Whitney Canyon 2000, ¶¶ 52-53. The Wyoming Supreme Court also rejected a similar articulation of the claim. BP America Production Company, 2005 WY 60, ¶ 30, 112 P.3d at 609-610. The Board has rejected more elaborate versions of the claim in litigation concerning production years 2001 and 2002. E.g., Carter Creek 2002, ¶¶ 147-159, 238-247.

97.      Since Chevron did not present evidence to support its claim regarding uniform and equal taxation, Findings, ¶ 37, we conclude that Chevron did not carry its burdens of going forward or ultimate persuasion with respect to that claim.

98.      Third, Chevron asked, “[d]oes the proportionate profits method yield fair market value?” We do not reach this question. A fair market standard is not at issue in this appeal. Conclusions, ¶ 85. Chevron made no effort to develop a record or cogent argument to support such an argument. Moreover, we conclude that the focus provided by BP America Production Company directed us to a different question, Conclusions, ¶ 87, with an answer contrary to Chevron’s position.

99.      We generally conclude that Chevron did not carry its burden of persuasion.

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 2004 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 June, 2006.

                                                                  STATE BOARD OF EQUALIZATION

                                                                        _____________________________________

                                                                        Alan B. Minier, Chairman

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                                                                        Thomas R. Satterfield, Vice-Chairman

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                                                                        Thomas D. Roberts, Member