Case Title: Amoco Production Co. v. State

Citation: 

Docket Number: 87-231

State: wyoming

Court: Wyoming Supreme Court

Date: 1988-03-09T00:00:00Z

Document:
Amoco Production Co. v. State1988 WY 29751 P.2d 379Case Number: 87-231Decided: 03/09/1988Supreme Court of Wyoming
AMOCO PRODUCTION COMPANY, 
A DELAWARE CORPORATION AND EXXON CORPORATION, A NEW JERSEY CORPORATION, AND 
CHEVRON U.S.A. INC., A PENNSYLVANIA CORPORATION, APPELLANTS 
(PLAINTIFFS),

v.

STATE OF WYOMING, STATE 
BOARD OF EQUALIZATION AND ITS MEMBERS TOM TROWBRIDGE, SHIRLEY WHITTLER, AND 
CARROLL ORRISON IN THEIR OFFICIAL CAPACITIES; AND THE DEPARTMENT OF REVENUE AND 
TAXATION, APPELLEES (DEFENDANTS).

Appeal from the District 
Court, LaramieCounty, Nicholas G. Kalokathis, 
J.

Marilyn S. Kite 
(argued) and Lawrence J. Wolfe of Holland & Hart, Cheyenne, for appellants Amoco and Exxon, and William J. 
Thomson, II (argued) of Dray, Madison & Thomson, Cheyenne, for appellant 
Chevron.

Joseph B. Meyer, 
Atty. Gen., and Michael L. Hubbard (argued) Sr. Asst. Atty. Gen., for appellees.

Before BROWN, C.J., and THOMAS, CARDINE, URBIGKIT 
and MACY, JJ.

CARDINE, 
Justice.

[¶1.]     This was a declaratory 
judgment action in which each of the parties moved for summary judgment. The 
summary judgment motion of appellants, Amoco, Exxon and Chevron was denied, and 
the summary judgment motion of appellee, State of Wyoming was granted, the 
court declaring the severance tax upon non-hydrocarbon gases to be six percent 
of the value of the gross product extracted. This appeal is from the summary 
judgment in favor of appellee, State of Wyoming.

[¶2.]     The single issue 
presented for our determination, as stated by appellants, 
is:

"Can the State, by 
interpretation, extend the severance taxes on `natural gas' and `oil and gas' to 
all gaseous minerals?"

and, as stated 
by appellee:

"Did the district court 
properly grant the State's motion for summary judgment in that there were no 
genuine issues of material fact and as a matter of law W.S. § 39-6-302 imposes a 
six percent excise tax upon the privilege of severing or extracting 
non-hydrocarbon gases, such as carbon dioxide, hydrogen sulfide, helium, 
nitrogen, etc.?"

We 
affirm.

[¶3.]     Appellate review of 
summary judgment requires that we examine the judgment in the same light as the 
district court, using the same material and information as was before the 
district court, to determine whether summary judgment is appropriate. Kobielusz 
v. Wilson, Wyo., 701 P.2d 559 (1985). Summary judgment is 
appropriate only if there is no genuine issue of material fact and the movant is 
entitled to judgment as a matter of law. Rule 56, W.R.C.P. The facts in this 
case are not in dispute. The question presented is one of law involving only the 
interpretation of our statute imposing an excise tax upon the privilege of 
severing and extracting valuable deposits.

[¶4.]     Appellants, Amoco, 
Exxon, and Chevron have long been engaged in leasing, exploring for, drilling, 
developing, producing, and marketing oil and gas in the State of Wyoming. The gas stream 
produced from wells in Wyoming generally consists of varying percentages of 
hydrocarbons and one or more of such non-hydrocarbons as carbon dioxide (CO[2]), 
hydrogen sulphide (H[2]S), nitrogen (N) and helium (He). In 1983, the Wyoming 
Oil and Gas Conservation Commission permitted Exxon to vent CO[2] produced in 
the LaBarge project into the atmosphere. That was because prior to 1986, except 
for H[2]S, the non-hydrocarbon gases had no commercial value and were separated 
from the hydrocarbon gases and wasted. Prior to 1986, when H[2]S was separated 
from the produced gas, reduced to raw sulphur, marketed, and sold, an excise tax 
in the amount of six percent was assessed by the State of Wyoming and paid 
without protest. Commencing with the first quarter in 1986, Amoco and Chevron, 
for the first time, paid the six percent severance tax on non-hydrocarbon gas 
under protest, and Exxon filed a statement of opposition to the six percent 
severance tax with the Board of Equalization.

[¶5.]     Also in 1986, Exxon's 
LaBarge project in southwest Wyoming was producing a gas stream consisting 
of approximately 66% CO[2], 22% methane, 4% H[2]S, 8% nitrogen and other inert 
gases. The CO[2] gas now had commercial value and was being marketed and sold to 
Chevron and Amoco for use in tertiary oil recovery in the Rangely Field in 
Colorado and in the Lost Soldier and Wertz fields in Carbon and Sweetwater 
counties, Wyoming. The State of Wyoming contends that the correct excise tax 
upon the privilege of severing or extracting CO[2] gas is six percent. 
Appellants contend that CO[2] is not natural gas, that the correct tax is two 
percent, and that they should have a refund of tax paid of more than 
$615,000.

[¶6.]     Subsections (a), (b), 
and (g) of § 39-6-302, W.S. 1977, provide for this excise tax as 
follows:

"(a) Except as otherwise 
provided in subsection (h) of this section, there is levied an excise tax of two percent 
(2%) of the value of the gross product extracted upon the privilege of 
severing or extracting uranium, trona, coal except underground coal, petroleum, 
natural gas, oil shale or any other 
fossil fuel in the state. * * *

"(b) Except as otherwise 
provided in subsection (h) of this section, in addition to the excise tax imposed by 
subsection (a) of this section there is 
levied an excise tax of two percent (2%) of the value of the gross product 
extracted upon the privilege of severing or extracting any valuable deposit in the state except 
stripper production and underground coal. * * *

* * * * * 
*

"(g) Except as otherwise 
provided in subsection (h) of this section, in addition to other excise taxes 
provided by this section there is levied 
a tax of two percent (2%) of the value of the gross product extracted upon 
the privilege of severing or extracting oil and gas." (Emphasis 
added.)

The parties 
agree that the term "any valuable deposit" as used in subparagraph (b) of the 
statute includes the CO[2] gas being marketed and sold and that the 2% excise 
tax was correctly levied. They disagree upon whether the term "natural gas" in 
subparagraph (a) and "gas" in subparagraph (g) includes CO[2] 
gas.

[¶7.]     Section 39-6-302, 
supra, provides for the levy of an excise tax upon "the value of the gross 
product extracted." The State suggests that "gross product" means anything of 
value produced from the well. We disagree. It is plain that gross product 
clearly refers to the specific minerals subsequently listed as "uranium, trona, 
coal except underground coal, petroleum, [and] natural gas" in subsection (a) 
and "gas" in subsection (g). The effect of the plain language of the statute is 
to tax the value of the total product, which in this case is gas and natural gas 
as used in § 39-6-302.

[¶8.]     We discuss first the 
meaning of the term "gas" as used in subparagraph (g) of § 39-6-302. We 
initially look to determine whether the language of the statute is plain and 
unambiguous or whether it is of doubtful meaning. A statute that 
is

"clear and unambiguous on 
its face, need not and cannot be interpreted by a court and * * * only statutes 
which are of doubtful meaning are subject to the process of statutory 
interpretation." 2A Sutherland Statutory Construction § 45.02 (1984 
Rev'n).

"[T]he meaning of the 
statute must, in the first instance, be sought in the language in which the act 
is framed, and if that is plain, * * * the sole function of the courts is to 
enforce it according to its terms." Caminetti v. United States, 242 U.S. 470, 37 S. Ct. 192, 194, 61 L. Ed. 442 (1917).

[¶9.]     If the language of the 
statute is clear and unambiguous, we do not resort to rules of statutory 
construction, nor search out another meaning for the words used. Amoco 
Production Company v. Hakala, Wyo., 
644 P.2d 785 (1982). Words in a statute will be given their plain and ordinary 
meaning. State Board of Equalization v. Tenneco Oil Company, Wyo., 694 P.2d 97 (1985). 
A statute is ambiguous if its meaning is uncertain, doubtful, or if a single 
term can fairly be said to mean different things. 73 Am.Jur.2d Statutes § 195 at 
392 (1974).

[¶10.]  It was claimed in Northern Natural Gas 
Company v. Grounds, 441 F.2d 704 (10th Cir. 1971), that because "gas" followed 
"oil" in the document leasing "oil and gas," the rule of ejusdem generis 
applied, the meaning of "gas" was restricted by the word "oil" and included, 
therefore, only hydrocarbons. The argument was rejected, the court holding the 
word gas was effective to grant to lessee hydrocarbons and helium, a 
non-hydrocarbon. By analogy, we might conjecture that if this were litigation 
over whether the word gas in appellants' lease included just hydrocarbons, 
appellants surely would be taking an opposite position urging that the word gas 
included both hydrocarbons and non-hydrocarbons such as CO[2] - otherwise they 
would have no title or right to produce and market CO[2]. The State suggests 
that appellants, by taking inconsistent positions, are hunting with the hounds 
and running with the foxes; but we think the correct statement of the proverb is 
to "hold with the hare and run with the hounds."

[¶11.]  Appellants in their brief acknowledge 
that

"while standing alone, 
the term `gas' can encompass non-hydrocarbon gas, hydrocarbon gas or a mixture 
of both (Cf., 30 U.S.C. § 181); the same is not true for `natural gas' which has 
always meant gaseous hydrocarbons."

We agree and 
construe the word gas in the statute as standing alone, identifying no 
particular gas but encompassing all gas. By definition, included 
are:

Carbon dioxide: "a heavy 
colorless gas CO[2] that does not support combustion, dissolves in water to form 
carbonic acid * * *." Webster's Ninth New Collegiate Dictionary 
(1987).

Hydrogen sulfide: "a 
flammable poisonous gas H[2]S that has an odor suggestive of `rotten eggs and is 
found esp. in many mineral waters and in putrefying matter." Id.

Helium: "a light 
colorless non-flammable gaseous element found esp. in natural gases and used 
chiefly for inflating airships and balloons, for filling incandescent lamps, and 
for cryogenic research." Id.

Nitrogen: "a colorless 
tasteless odorless gaseous element that constitutes 78 percent of the atmosphere 
by volume and occurs as a constituent of all living tissues in combined form." 
Id.

Methane: "a colorless 
odorless flammable gaseous hydrocarbon CH[4] that is * * * used as a fuel and 
raw material in chemical synthesis." Id.

Propane: "a heavy 
flammable gaseous paraffin hydrocarbon C[3]H[8] found in crude petroleum and 
natural gas and used esp. as fuel and in chemical synthesis." Id.

[¶12.]  There is no ambiguity in the meaning of 
the term "gas." It is a common word in general usage. Gas is defined as "a fluid 
(as air) that has neither independent shape nor volume but tends to expand 
indefinitely." Id. All of the above are gases and, as such, 
are subject to the two percent excise tax upon the value of the gross product 
extracted.

[¶13.]  The primary thrust of appellants' 
argument in this case is that the word "natural gas," used in subparagraph (a) 
of § 39-6-302, identifying the gross product extracted, refers to the 
combustible hydrocarbon gases only. Thus appellants, in their brief, 
state:

"Ask people on the street 
to say what natural gas means, and they will tell you it is the gas that they 
use to heat their water, fire their furnace, or cook their food. Words such as 
gas furnace, gas stove, gas heater, natural gas pipeline, natural gas industry, 
are ordinary uses of the term that connotes a hydrocarbon fuel used for heat and 
energy."

Appellee State of Wyoming says:

"The term `natural gas' 
simply refers to the naturally occurring mixture of hydrocarbon and 
non-hydrocarbon gases issuing from the earth's crust through natural openings or 
bored wells. As used in its plain, ordinary and everyday sense the term `natural 
gas' refers to the total mixture of hydrocarbon and non-hydrocarbon gases 
produced at the well."

[¶14.]  It is said that the term "natural gas" 
fairly and reasonably has more than one meaning, that therefore it is ambiguous, 
and we must ascertain which gases the legislature intended to be the subject of 
levy of excise or severance tax. Appellants contend that the legislature 
intended to tax what is commonly understood by average persons to be natural 
gas, i.e., fuel used to heat, cook, and provide energy. The State, contending 
that the legislature used the term natural gas in its technical sense, defined 
it as

"[a] gas issuing from the 
earth's crust through natural openings or bored wells and frequently accompanied 
by petroleum. It occurs especially in the Palezoic rocks of the 
United 
States, and is of industrial importance in more 
than a dozen states. When combustible it consists of methane with small and 
variable amounts of ethane, propane, butane, hydrogen, oxides of carbon, 
nitrogen, helium, hydrogen sulfide, etc." Webster's New International Dictionary 
of the English Language, Unabridged (2d ed. 1956).

[¶15.]  The great weight of authority compels us 
to the conclusion that the legislature used the word natural gas in its 
technical sense, and that the most sensible and appropriate resolution of this 
question is that the legislature intended natural gas to include all gases that 
occur naturally in gas produced from drilled wells.

[¶16.]  If a word in a statute has a usual 
meaning and a technical meaning, the technical meaning is preferred as stated in 
§ 8-1-103 W.S. 1977, Cum.Supp. 1987, which provides:

"(a) The construction of 
all statutes of this state shall be by the following rules, unless that 
construction is plainly contrary to the intent of the legislature: "(i) Words 
and phrases shall be taken in their ordinary and usual sense, but technical words and phrases having a 
peculiar and appropriate meaning in law shall be understood according to their 
technical import." (Emphasis added.)

[¶17.]  Some of the technical publications define 
natural gas as follows:

"Natural gas is defined 
as a naturally occurring mixture of hydrocarbon and nonhydrocarbon gases found 
in the porous geologic formations beneath the earth's surface, often in 
association with petroleum. To obtain a marketable product, the raw natural gas 
flowing from gas or oil wells must be processed to remove water vapor, inert or 
poisonous constituents, and condensible hydrocarbons. The processed gas is 
principally methane, with small amounts of ethane, propane, butane, pentane, 
carbon dioxide, and nitrogen * * *." 11 Kirk-Othmer Encyclopedia of Chemical 
Technology 630 (3rd ed. 1980).

"Natural gas is defined 
as a mixture of hydrocarbon compounds and small quantities of various 
nonhydrocarbons existing in the gaseous phase or in solution with oil in natural 
underground reservoirs at reservoir conditions * * *." Standard Definitions for 
Petroleum Statistics, Technical Report No. 1, (3rd ed.) (published by the 
American Petroleum Institute).

Appellant 
Exxon's LaBarge project manager, testifying before the Wyoming Industrial Siting 
Council, stated:

"Q. I wonder, could you 
define for me in a textbook fashion, if you could, natural 
gas?

"A. Sure. Natural gas is 
any gas that's naturally produced from a well."

The technical 
meaning of natural gas includes both hydrocarbons and 
non-hydrocarbons.

[¶18.]  Decided cases are in accord with applying 
the technical meaning. In Lone Star Gas Company v. Stine, Tex.Com.App., 41 S.W.2d 48, 49, 82 A.L.R. 1299 (1931), the Texas Commission of Appeals, in 
considering whether gasoline produced from natural gas from a well was included 
in the natural gas, stated:

"The term `all natural 
gas' would include all the substances that come from the well as gas, and that 
regardless of whether such gas be wet or dry. It is undisputed in the evidence 
that the term `natural gas' includes numerous elements or component parts, but 
the very language of the conveyance is such as to include therein all these 
component parts which were in gaseous form when they came from the 
wells."

[¶19.]  In Navajo Tribe of Indians v. 
United 
States, 364 F.2d 320, 326 (1966), the Court of 
Claims, in considering whether helium was part of the gas deposit that passed to 
the lessee, stated:

"Although the parties to 
the lease may have been thinking mainly of fuel-type gases, it is still more 
realistic to presume that the grant included not only hydrocarbons but the other 
gaseous elements as well. It follows that, whether its percentage was high or 
low, the helium component was part of the `gas deposit' which passed to the 
lessee. This conclusion is consistent with what we have determined to be the 
general intent of the original lessor and lessee."

[¶20.]  Northern Natural Gas Company v. Grounds, 
supra, 441 F.2d 704, resolved the question whether helium was included in the 
lease of gas by applying the general intent of the parties to the lease rather 
than their specific intent. The trial court concluded that

"in view of the 
circumstances of lease execution, the definition and usage of terms within the 
industry, and the intentions of the parties as disclosed by their actions, the 
leases extend to the entire gas stream absent an express reservation, and helium 
passes thereunder unless expressly reserved." Id. at 714.

The appellate 
court agreed, stating:

"We believe that the 
issue is whether general or specific intent controls. The claimed general intent 
is lease coverage of all components of the gas produced by the wells. The 
specific intent is said to be lease coverage only of combustible gas. General 
intent includes helium and specific intent excludes it.

* * * * * 
*

"In our opinion general 
intent is closer to original intent than is specific intent which blossoms when 
a component previously regarded as an impurity becomes valuable." Id. at 
714-15.

[¶21.]  The above cases concern construction of 
leases of gas and natural gas and the intent of the parties to those leases. We 
are concerned with legislative intent in enacting a statute using the words 
natural gas rather than intent of parties to a lease agreement. The cases, 
nevertheless, are of substantial value as indicating the reasonable intent of 
the drafter of a statute or document who uses the words gas and natural 
gas.

[¶22.]  Finally, when construing an ambiguous 
term in a statute, it is helpful to consider the historical setting at the time 
of enactment, public policy of the State, the purpose of the statute, and the 
mischief to be cured. Legislative intent is the primary and foremost 
consideration. State Board of Equalization v. Tenneco Oil Company, supra, 694 P.2d  at 100. The purpose of the excise or severance tax was to tax depletable 
resources one time to provide funds to soften the impact of boom and bust which 
occurs with some frequency in energy states. During the boom, drilling rigs and 
mining equipment arrive, followed by a migration of drillers, pushers, rig 
hands, supervisors, construction workers, and service and support personnel. 
Trailer courts are full. New schools are built. New subdivisions are platted 
with streets, curbs, gutters and sewers, and new housing constructed. The strain 
on state and local government is enormous. Then the boom is over. Whatever is 
done to keep the energy companies in Wyoming is useless. They leave and, after a 
long painful period of time, the state again becomes an uncrowded, unspoiled, 
relaxed place to live with excellent fishing, hunting and recreation. The 
purpose of the severance tax is to provide funds to deal with the burdens placed 
upon the state during the boom and for readjustment when the boom is over. The 
reason to tax all valuable minerals could not be more clear, and surely no 
legislator would agree that there was an intent to exclude from tax all valuable 
gas except hydrocarbons. If that was the intent of the legislature, it could 
have easily restricted the words natural gas to hydrocarbons by use of express 
language in the statute.

[¶23.]  Appellants rely heavily upon former 
Governor Hathaway's message in his 1974 "State of the State" address urging the 
legislature to enact a tax upon "energy fuels." It is claimed that these taxes 
were the direct result of the governor's request. Although relevant as 
historical setting at the time, the governor's request is not conclusive. We 
view it as a request to tax valuable resources. We observe also that often what 
comes from the legislature is something different than requested. That is as it 
should be, for no branch of government is a rubber stamp for the 
other.

[¶24.]  The judgment of the district court 
is

[¶25.]  Affirmed.