Certification from the District Court of Sublette County The Honorable Marvin L. Tyler, Judge
The opinion of the court was delivered by: Cranfill, District Judge.
Representing Exxon Mobil Corporation:
Before GOLDEN, HILL, VOIGT, and BURKE, JJ., and CRANFILL, D.J.
NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third. Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building, Cheyenne, Wyoming 82002, of typographical or other formal errors so correction may be made before final publication in the permanent volume.
[¶1] This case arrives before the Court once again from a decision rendered by the State Board of Equalization ("Board") concerning the valuation point for tax purposes of the natural gas production from the LaBarge Field in Sublette County. Previously, in Exxon Mobil Corp. v. State of Wyo., Dep't of Revenue, 2009 WY 139, 219 P.3d 128 (Wyo. 2009), this Court interpreted the terms "initial dehydrator" and "processing facility" and analyzed the proportionate profits valuation method. The Court, however, remanded one issue to the Board: specifically, whether the meters located at the LaBarge Field well sites were "custody transfer meters" as defined by Wyo. Stat. Ann. § 39-14-203(b)(iv)*fn1 or volume meters for Exxon's share of gas production. The Board held that the meters were not custody transfer meters for Exxon's share of gas production because Exxon did not actually transfer its gas to another entity at the meters. The Board further held that the same meters were custody transfer meters for the gas produced by two other working interest owners, Howell Petroleum Company ("Howell") and Yates Petroleum Corporation ("Yates"). Howell and Yates were not parties to the action.
[¶2] Both Exxon and the State of Wyoming, Department of Revenue ("Department") appealed the Board's decision to the district court, Exxon appealing in S-11-0047 and the Department appealing in S-11-0048. Pursuant to W.R.A.P. 12.09(b), the district court certified the cases directly to us for review. The Court consolidated the two appeals for decision. We will affirm the Board's determination that the meters were not custody transfer meters for Exxon's gas, but reverse the Board's determination that the meters were custody transfer meters for Howell's and Yates' gas.
[¶3] Exxon states the issues as follows:
1. Did the State Board of Equalization err in its application of the statutory term "custody transfer meter" to value ExxonMobil's natural gas production?
2. Did the State Board of Equalization err when it held that working interest owners Howell and Yates deliver their LaBarge natural gas stream to ExxonMobil through "custody transfer meters" at the wells, as that term is used in Wyo. Stat. § 39-14-203(b)(iv)?
The Department identifies similar issues, albeit phrased differently:
1. Did the State Board have authority to rule on the point of valuation for natural gas owned by two entities, not parties to the State Board's proceedings - Howell Petroleum Corporation and Yates Petroleum Corporation (and their successors)?
2. If so, did the State Board correctly determine that the allocation meters were "custody transfer meters" for Howell Petroleum Corporation's and Yates Petroleum Corporation's 2005 gas production?
3. Did the State Board of Equalization correctly determine that because Exxon Mobil Corporation did not transfer custody or control of its LaBarge gas production at well site meters, the meters were not "custody transfer meters" for determining the taxable point of valuation for Exxon's gas production in accordance with WYO. STAT. ANN. § 39-14-203(b)(iv)?
4. Because it was admitted that Exxon Mobil Corporation did not transfer its LaBarge gas at the meters in question, did the State Board of Equalization correctly reject Exxon's attempt to adopt, for its own gas, the point of valuation it imputed to another taxpayer's gas interest?
[¶4] The facts in this case are essentially undisputed. This Court will therefore rely largely on paraphrases of and quotations from the Board's Findings of Fact. The Court commends the Board for providing a comprehensive and detailed factual background.
[¶5] Exxon operates three federal natural gas units, Fogarty Creek Unit, Lake Ridge Unit and Graphite Unit. These units constitute the LaBarge Field in the Bridger-Teton National Forest in Sublette County, Wyoming. Exxon is the sole lessee of the federal leases in the Lake Ridge and Graphite Units and therefore owns all of the unitized substances in these units. There are, however, other leaseholders in the Fogarty Creek Unit. Specifically, Howell and Yates, or their successors in interest,*fn2 own seven percent (7%) of all unitized substances in the Fogarty Creek Unit. Howell's and Yates' seven percent (7%) interest in the Fogarty Creek Unit accounts for five percent (5%) of total production from all three units combined.
[¶6] Exxon produces LaBarge sour gas from eighteen (18) wells. Each well site has a "well building" that contains equipment to assist in production and movement of the gas from the wellhead downstream. ...