Summary 2007 WY 79

Summary of Decision issued May 11, 2007

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Case Name: Chevron, USA v. Dep’t of Revenue, State

Citation: 2007 WY 79

Docket Number: 06-56

W.R.A.P. 12.09(b) Certification from the District Court of Uinta County, the Honorable Dennis L. Sanderson, Judge

Representing Appellant (Petitioner): William J. Thomson II, Randall B. Reed, and Brian J. Hanify of Dray, Thomson & Dyekman, PC, Cheyenne, Wyoming. Argument by Mr. Thomson.

Representing Appellee (Respondent): Patrick J. Crank, Wyoming Attorney General; Michael L. Hubbard, Deputy Attorney General; Martin L. Hardsocg, Senior Assistant Attorney General; and Cathleen D. Parker, Senior Assistant Attorney General. Argument by Ms. Parker.

Issues: Chevron: Whether comparable processing agreements exist for Chevron’s Carter Creek plant that satisfy the statutory elements of Wyo. Stat. Ann. § 39-14-203(b)(vi)(B). Whether the selection of the comparable value method failed to determine the fair market value for Chevron’s Carter Creek production at the “point of valuation.” Whether Chevron was denied its right to equal and uniform tax treatment in violation of the Wyoming Constitution because the DOR allowed other similarly situated taxpayers to use the proportionate profits methodology which yielded a far lower taxable value for those other taxpayers. DOR: Whether the SBOE correctly affirmed the DOR’s selection of the comparable value method as the method which most accurately reflected the taxable fair market value of Chevron’s 2000-02 Carter Creek production. Whether the SBOE correctly affirmed the DOR’s application of a comparable value processing fee of 25% of the product paid in-kind, the maximum fee paid by any producer regardless of any circumstances to value Chevron’s 2000 and 2001 Carter Creek production. Whether the SBOE correctly determined that Chevron failed to carry its burden of proof when it failed to offer any evidence that its application of proportionate profits reflected the most accurate fair market value for taxation purposes as required by Wyo. Stat. Ann. § 39-14-203(b)(viii). Whether the SBOE correctly affirmed the DOR’s rejection of Chevron’s application of proportionate profits which resulted in processing deductions far in excess of the actual costs to process and which bore no relationship to actual processing costs. Whether the SBOE correctly determined that Chevron’s due process rights were not violated.

Facts/Discussion: The Department of Revenue (DOR) used the comparable value method set forth in Wyo. Stat. Ann., § 39-14-203(b)(vi)(B) to establish the value of natural gas produced by Chevron and processed at its Carter Creek processing plant in 2000 and 2001. The district court certified this case to the Court pursuant to W.R.A.P. 12.09(b). When an appellant challenges an agency’s findings of fact and both parties submitted evidence at the contested case hearing, the Court examines the entire record to determine if the agency’s findings are supported by substantial evidence. The Court reviews an agency’s conclusions of law de novo.
Comparable Value: The parties’ disagreement in applying the comparable value method is focused on determining an appropriate deduction for the processing fee. Chevron argues the Court must interpret the statutory term “comparable.” The Court’s rules on statutory construction focus on discerning the legislature’s intent. The Court noted there were many similarities between the instant case and BP America Co. v. Department of Revenue. The intent of the legislature was for the DOR to locate reliable information about processing fees paid by other taxpayers in similar situations and make reasonable inferences from that information to determine a particular taxpayer’s processing costs. The Court recognized that the maximum processing fee charged under any agreement was 25% which was the processing deduction used by the DOR in calculating the fair market value of Chevron’s Carter Creek gas. The record contains substantial evidence to support the DOR’s selection of the comparable value method and the 25% processing fee deduction.
Chevron failed to meet its burden of proving that the DOR’s valuations for production years 2000 and 2001 did not reflect the fair market value of its Carter Creek natural gas production. The Court’s duty was to determine whether substantial evidence existed to support the manner in which it was used. The record was more than sufficient to support the DOR’s choice and application of the comparable value method.
Equality and Uniformity in Taxation: The DOR directed all producers to use the comparable value method to value their production unless there were no comparables. Simply because the DOR was unable to apply the comparable value methods to a few producers does not mean it was inequitable to apply the method to Chevron where there were comparables for the Carter Creek plant.

Holding: Substantial evidence existed in the record to support the SBOE decision that the DOR properly chose the comparable value method for Chevron’s Carter Creek production for 2000 through 2002 and Chevron has not demonstrated any errors in application of the comparable value method for production years 2000 and 2001. Moreover, Chevron failed to demonstrate that it was subjected to inequitable or non-uniform taxation in violation of the equal protection rights guaranteed in the Wyoming and United States constitutions.

Affirmed.

J. Hill delivered the decision.

Link: http://tinyurl.com/ysbud9 .