Summary 2007 WY 112

Summary of Decision issued July 18, 2007

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Case Name: Wyoming Department of Revenue v. Exxon Mobil Corp.

Board of County Commissioners, County of Sublette v. Exxon Mobil Corp.

Citation: 2007 WY 112

Docket Number: 06-41 & 06-42

Appeal from the District Court of Laramie County, Honorable Dan Spangler, Judge, Retired

Representing Appellant Wyoming Department of Revenue: Patrick J. Crank, Attorney General; Michael L. Hubbard, Deputy Attorney General; Martin L. Hardsocg, Senior Assistant Attorney General; and William F. Russell, Assistant Attorney General.

Representing Appellant Board of County Commissioners of the County of Sublette: John C. McKinley of Davis & Cannon, Cheyenne, Wyoming.

Representing Appellee Exxon Mobil Corporation: Lawrence J. Wolfe, Patrick R. Day, and Walter F. Eggers, III of Holland & Hart LLP, Cheyenne, Wyoming; and Brent R. Kunz of Hathaway & Kunz, P.C., Cheyenne, Wyoming.

Date of Decision: July 16, 2007

Issues: Whether the district court correctly concluded that the doctrines of res judicata and collateral estoppel do not bar Appellee from challenging the imposition of ad valorem or severance tax on helium produced from Appellee’s federal leases. Whether the district court properly concluded that Appellee does not owe ad valorem taxes to Sublette County for helium produced from Appellee’s federal leases. Whether the district court properly concluded that Appellee does not owe severance taxes on helium produced from Appellee’s federal leases

Facts/Discussion: The doctrines of res judicata and collateral estoppel incorporate a universal legal principle of common-law jurisprudence to the effect that a right, question or fact distinctly put in issue and directly determined by a court of competent jurisdiction cannot be disputed in a subsequent suit between the same parties or their privies. The issue in the present action, as to the application of severance and ad valorem taxes to helium produced from Appellee’s federal lease, is not identical nor does it arise from the same transaction or series of transactions as were litigated in the previous action Amoco Prod. Co. v. State, 751 P.2d 379. In that action a declaratory judgment action was filed in which the parties sought a determination as to the severance tax rate to be applied to non-hydrocarbon gases under Wyo. Stat. 9-6-302 (1977). The district court correctly concluded that the doctrines of collateral estoppel and res judicata do not apply to bar Appellee’s declaratory judgment action.
The imposition of an ad valorem property tax on mineral production is authorized pursuant to the Wyoming Constitution [Wyo. Const. art 15, sec. 3]. The Wyoming Legislature holds the exclusive authority to define a taxpayer under Wyoming law. For purposes of ad valorem taxes on natural gas the legislature has defined taxpayer as the lessor, lessee, or the lessee’s assignee. Under the Mineral Leasing Act of 1920, the United States Congress determined that it should reserve the ownership and right to extract helium from all gas produced from federal mineral leases. Consistent with this reservation, the federal leases at issue in this case reserved unto the federal government the ownership and right to extract helium from all gas produced under these federal leases. Due to these restrictions, which were imposed by the federal government without regard to Wyoming severance or ad valorem taxes, Appellee is actually required to purchase the helium from the federal government following its extraction from the natural gas stream. Moreover, the point at which this purchase occurs under the Helium Agreement is in Lincoln County because of engineering requirements and the physical properties of helium. Thus, due to the unique circumstances created by Congress’ reservation of helium in the Mineral Leasing Act of 1920, and the federal leases issued pursuant thereto, Appellee does not fit within any of the definitions of taxpayer for purposes of ad valorem taxes on natural gas. Accordingly, the district court correctly concluded that Appellee does not owe ad valorem taxes to Sublette County for helium produced from Appellee’s federal leases.
The language under the statutes, and the unique reservation under the federal leases, precludes assessment of severance taxes upon Appellee for the helium produced from these federal leases. Under Wyo. Stat. Ann. § 39-14-203(a)(i), a severance tax is imposed “on the value of the gross product extracted for the privilege of severing or extracting . . . natural gas in the state.” Under Appellee’s federal leases, at the time they were issued, the United States reserved “the ownership of and the right to extract helium from all gas produced from lands leased . . . .” 30 U.S.C.181 (2007). This language was also contained in the actual leases which are the subject of this litigation. Appellee does not possess the privilege of removing, extracting, severing or producing the helium. By virtue of Congress’ limitations under the Mineral Leasing Act of 1920, the privilege of severing or extracting helium has not and cannot be assigned or conveyed to Appellee. This legal limitation necessitated the 1985 Helium Agreement, under which the federal government sells the crude helium, following its extraction from the gas stream.
Moreover, there is no evidence that this unique factual and legal situation was manipulated by Appellee for purposes of tax avoidance. The unambiguous language under Wyo. Stat. 39-14-203(a) (2007) supports the district court’s determination that Appellee was not subject to severance taxes for helium purchased from the federal government. Accordingly, the decision of the district court is affirmed.

Holdings: The district court did not err in finding that the doctrines of collateral estoppel and res judicata did not apply to bar Appellee’s declaratory judgment action. Furthermore, the district court did not err in determining that severance and ad valorem taxes do not apply to the helium produced from these federal leases and purchased by Appellee pursuant to the Helium Agreement.

Affirmed.

District Judge Skavdahl, delivered the opinion for the court.

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