Case Title: Petroleum Inc. v. State ex rel. State Bd. of Equalization

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1999-07-16T00:00:00Z

Document:
Petroleum Inc. v. State ex rel. State Bd. of Equalization1999 WY 104983 P.2d 1237Case Number: 98-226Decided: 07/16/1999Supreme Court of Wyoming

PETROLEUM INC., Appellant (Petitioner)

 

v.

 

STATE OF WYOMING ex rel. STATE BOARD OF EQUALIZATION, 
Appellee (Respondent).

 

                               
 

 

W.R.A.P. 12.09(b) Certification 
from the District Court of

Laramie County, The Honorable Edward L. Grant, 
Judge.

 

     Thomas F. Reese of 
Brown, Drew, Massey & Sullivan, Casper, Wyoming.

 

Gay V. Woodhouse, Chief 
Deputy Attorney General; Michael L. Hubbard, Deputy Attorney General; and Harry 
D. Ivey, Assistant Attorney General.

 

     Before LEHMAN, 
C.J., and THOMAS, MACY, GOLDEN & HILL, JJ.

 

     MACY, 
Justice.

    
[¶1]     Appellant Petroleum Inc. petitioned the 
district court for a review of the State Board of Equalization's order which 
affirmed the Department of Revenue's assessment of a penalty against it.  The district court certified the case to 
the Wyoming Supreme Court.

 

   [¶2]     We affirm the State Board of 
Equalization's decision.

   

                                
ISSUES

 

   [¶3]     Petroleum Inc. presents two related 
issues for our review:

 

1. Have the Department of Revenue and State Board of 
Equalization acted contrary to law in determining the amount of penalty which 
could be assessed against the Appellant, Petroleum, Inc., pursuant [to] WYO. 
STAT. ANN. § 39-2-201 (Michie 1997) and WYO. STAT. ANN. § 39-5-101 (Michie 
1997)?

 

2. Was the action of the Department of Revenue and 
the State Board of Equalization arbitrary, capricious and an abuse of discretion 
or otherwise not in accordance with the law?

 

                                 
FACTS

 

   [¶4]     Oil and gas producers were required by 
statute to file annual production reports with the Department of Revenue.1 The deadline for filing the reports 
for the 1994 production year was February 27, 1995. Petroleum Inc. produced oil 
and gas in Wyoming during that production year, but it did not file the required 
reports for several of its wells until 
September 7, 1995.

 

   [¶5]     Pursuant to Wyo. Stat. Ann. § 
39-5-101(g) (Michie 1994) (repealed 1998), the Department of Revenue assessed a 
$169,652 penalty against Petroleum Inc. because of its delinquent filings.  The Department of Revenue subsequently 
reviewed the circumstances surrounding Petroleum Inc. `s late filings and 
reduced the penalty assessment by fifty percent to 
$84,826.

 

   [¶6]     Petroleum Inc. appealed to the State 
Board of Equalization, and the board affirmed the Department of Revenue's 
decision.  Petroleum Inc. filed a 
petition for a review of the State Board of Equalization's order with the 
district court, and the district court certified the case to this Court pursuant 
to W.R.A.P. 12.09(b).

 

                          
STANDARD OF REVIEW

 

   [¶7]     When we review cases which have been 
certified to the Wyoming Supreme Court pursuant to W.R.A.P. 12.09(b), we apply 
the appellate standards which are applicable to the court of the first instance. 
Union Telephone Company, Inc. v. Wyoming Public Service Commission, 907 P.2d 340, 341-42 (Wyo. 1995). Wyo. Stat. Ann. § 16-3-114(c) (LEXIS 1999) governs 
judicial review of administrative decisions. W.R.A.P. 12.09(a); Everheart v. S 
& L Industrial, 957 P.2d 847, 851 (Wyo. 1998).

 

   [¶8]     The issues presented in this case 
require us to interpret § 39-5-101(g). Statutory interpretation is a question of 
law.  Newton v. State ex rel. 
Wyoming Workers' Compensation Division, 922 P.2d 863, 864 (Wyo. 1996); Trefren 
v. Lewis, 852 P.2d 323, 325 (Wyo. 1993). We affirm an agency's conclusions of 
law when they are in accordance with the law. Corman v. State ex rel. Wyoming 
Workers' Compensation Division, 909 P.2d 966, 970 (Wyo. 1996). When an agency 
has not invoked and properly applied the correct rule of law, we correct the 
agency's errors. Weaver v. Cost Cutters, 953 P.2d 851, 855 (Wyo. 1998); Gneiting 
v. State ex rel. Wyoming Workers' Compensation Division, 897 P.2d 1306, 1308 
(Wyo. 1995).

 

                              
DISCUSSION

 

   [¶9]     Petroleum Inc. claims that the State 
Board of Equalization misinterpreted § 39-5-101(g) when it affirmed the 
Department of Revenue's penalty assessment against it. The state argues that the 
State Board of Equalization's interpretation of the statute was consistent with 
the plain language of the statute and the legislature's intent. We agree with 
the state.

 

   [¶10]  Our rules of statutory interpretation 
are well established. We first decide whether the statute is clear or ambiguous. 
Lyles v. State ex rel. Division of Workers' Compensation, 957 P.2d 843, 845 
(Wyo. 1998). This Court makes that determination as a matter of law. Parker Land 
and Cattle Company v. Wyoming Game and Fish Commission, 845 P.2d 1040, 1043 
(Wyo. 1993); Allied-Signal, Inc. v. Wyoming State Board of Equalization, 813 P.2d 214, 220 (Wyo. 1991). A "statute is unambiguous if its wording is such that 
reasonable persons are able to agree as to its meaning with consistency and 
predictability." Allied-Signal, Inc., 813 P.2d  at 220. A "statute is ambiguous 
only if it is found to be vague or uncertain and subject to varying 
interpretations." 813 P.2d  at 219-20.

 

   [¶11]  If we determine that a statute is clear 
and unambiguous, we give effect to the plain language of the statute. Lyles, 957 P.2d  at 846; Gunderson v. State, 925 P.2d 1300, 1304 (Wyo. 
1996).

 

We begin by making an "`inquiry respecting the 
ordinary and obvious meaning of the words employed according to their 
arrangement and connection.'" Parker Land and Cattle Company v. Wyoming Game and 
Fish Commission, 845 P.2d 1040, 1042 (Wyo. 1993) (quoting Rasmussen v. Baker, 7 
Wyo. 117, 133, 50 P. 819, 823 (1897)). We construe the statute as a whole, 
giving effect to every word, clause, and sentence, and we construe together all 
parts of the statute in pari materia.

 

State Department of Revenue 
and Taxation v. Pacificorp, 872 P.2d 1163, 1166 (Wyo. 1994). If we determine 
that the statute is ambiguous, we resort to general principles of statutory 
construction to determine the legislature's intent. Parker Land and Cattle 
Company, 845 P.2d  at 1044.

 

"[I]n ascertaining the legislative intent in enacting 
a statute . . . the court . . . must look to the mischief the act was intended 
to cure, the historical setting surrounding its enactment, the public policy of 
the state, the conditions of the law and all other prior and contemporaneous 
facts and circumstances that would enable the court intelligently to determine 
the intention of the lawmaking body."

 

   Id. (quoting Carter v. Thompson 
Realty Co., 58 Wyo. 279, 131 P.2d 297, 299 (1942)).

 

   [¶12]  We generally defer to the construction 
placed on a statute by the agency that is charged with its execution, provided, 
however, that the agency's construction does not conflict with the legislature's 
intent. Laramie County Board of Equalization v. Wyoming State Board of 
Equalization, 915 P.2d 1184, 1190 (Wyo. 1996). In this case, we are also 
cognizant of the principle that statutes which are penal in character are 
generally strictly construed. Meerscheidt v. State, 931 P.2d 220, 224 (Wyo. 
1997); Albany Mut. Bldg. Ass'n v. City of Laramie, 10 Wyo. 54, 65 P. 1011, 1019 
(1901).

 

  [¶13] 
   Section 39-5-101(g) 
stated in pertinent part:

 

(g) If any person fails to file the report required 
by W.S. 39-2-201(b)(i) by the due date or any extension thereof, the department 
may impose a penalty equal to a total of one percent (1%) of the taxable value 
of the production from the well, mine or mining claim but not to exceed five 
thousand dollars ($ 5,000.00) for each calendar month or portion thereof that 
the report or information is late.

 

Petroleum Inc. claims that, 
under § 39-5-101(g), the Department of Revenue had the authority to penalize it 
up to a maximum of $5,000 per month and that the Department of Revenue could not 
assess a separate penalty for each well. The state maintains that § 39-5-101(g) 
allowed the Department of Revenue to assess a penalty of up to $5,000 per month 
on each well for failure to file the required reports.

 

   [¶14]  We look at the arrangement and 
connection of the words in a statute to determine the statute's meaning. "`The 
reader naturally assumes that the parts of a sentence that are placed next to 
each other are logically related to each other.'"  Management Council of Wyoming Legislature 
v. Geringer, 953 P.2d 839, 844 (Wyo. 1998) (quoting John M. Kierzek & Walker 
Gibson, The MacMillian Handbook of English at 414 (6th ed. 1977)). In this case, 
the "production from the well, mine or mining claim" language was directly 
followed by the phrase "but not to exceed five thousand dollars," and the term 
"well" was stated in the singular. Section 39-5-101(g). The language of the 
statute suggested, therefore, that the Department of Revenue was authorized to 
assess a penalty of up to $5,000 per month for each well. Nevertheless, we agree 
that the statutory language is arguably susceptible to the construction asserted 
by Petroleum Inc. We conclude, therefore, that the statute is ambiguous and that 
extrinsic aids of interpretation will be helpful to us in determining the 
legislature's intent.

 

   [¶15]  In ascertaining the legislature's 
intent, we look at the mischief that the statute was intended to cure. In other 
words, we view the statute in the light of the object and purpose that the 
legislature intended to accomplish when it enacted the statute. State Board of 
Equalization v. Tenneco Oil Company, 694 P.2d 97, 100 (Wyo. 1985). The purpose 
of the penalty provision was to encourage mineral producers to comply in a 
timely fashion with the reporting requirement of Wyo. Stat. Ann. § 
39-2-201(b)(i) (Michie 1997) (repealed 1998). The Department of Revenue used the 
reports to determine the fair market value of the gross mineral production for 
taxation purposes. Wyo. Stat. Ann. § 39-2-201(a) (Michie 1994) (repealed 1998). 
The legislature specifically linked the amount of the penalty to the value of 
the mineral production by stating that the amount of the penalty was one percent 
of the taxable value of a well's production but was not to exceed $5,000 per 
month. Section 39-5-101(g). The number of wells obviously affected the total 
value of a taxpayer's mineral production and, accordingly, the amount of taxes 
assessed. If the $5,000 limitation did not apply to each well, a person who had 
not reported on a single well and a person who had not reported on several wells 
would have been subject to the same penalty. If that were true, the amount of 
the penalty would not have corresponded to the value of the mineral production. 
That obviously was not what the legislature intended when it enacted the penalty 
provision.

 

   [¶16]  Taking into consideration the 
arrangement and connection of the words in § 39-5-101(g) and the legislature's 
purpose in enacting the statute, we conclude that the Department of Revenue 
could assess a maximum penalty of $5,000 per month on each well whose report was 
delinquent. The State Board of Equalization's interpretation of the statute was 
consistent with the legislature's intent and is, therefore, entitled to our 
deference. The State Board of Equalization's affirmance of the penalty 
assessment against Petroleum Inc. was not arbitrary, capricious, or otherwise 
contrary to the law.

 

   [¶17]  Affirmed.

 

Footnotes

1 Wyo. 
Stat. Ann. § 39-2-201 (Michie 1994) (repealed 1998) provided in relevant 
part:

 

(a) The 
department shall annually value and assess the following property at its fair 
market value for taxation:

 

       (i) The 
gross product of all mines and mining claims;

 

       . . . 
.

 

(b) 
Annually, on or before the dates hereafter indicated, any person whose property 
is subject to subsection (a) of this section shall sign under oath and submit a 
statement listing the information relative to the property and affairs of the 
company as the department may require to assess the 
property:

 

(i) For mines and mining claims, the 
same date as prescribed by W.S. 39-6-304(a) for December 
production.

 
 

     THOMAS, 
Justice, dissenting, with whom GOLDEN, Justice, 
joins.

    
[¶18]  I am persuaded that 
the Findings of Fact, Conclusions of Law, Decision and Order of the State Board 
of Equalization should be reversed, and I dissent from the resolution of this 
case according to the majority opinion. The parties both contend that the 
statutory scheme is clear and unambiguous, but, in the face of those arguments, 
the majority opinion concludes that Wyo. Stat. Ann. § 39-5-101(g) (Michie 1997) 
is ambiguous. The finding of ambiguity by the majority stretches both the 
doctrine of ambiguity and the language of the statute far beyond the tensile 
strength of either.

 

   [¶19]  The only language of Wyo. Stat. Ann. § 
39-2-201(b) (Michie 1997), which appears to possibly require a report from 
Petroleum, Inc. is:

 

(b) Annually, on or before the dates hereafter 
indicated, any person whose property is subject to subsection (a) of this 
section shall sign under oath and submit a statement listing the 
information relative to the property and affairs of the company as the 
department may require to assess the property:

 

(i) For mines and mining claims, the 
same date as prescribed by W.S. 39-6-304(a) for December production.1
 

   

(Emphasis added.) No one 
appears to question that this is the report alluded to in Wyo. Stat. Ann. § 
39-5-101(g), where it is provided in pertinent part:

 

(g) If any person fails to file the report 
required by W.S. 39-2-201(b)(i) by the due date or any extension thereof, the 
department may impose a penalty equal to a total of one percent (1%) of the 
taxable value of the production from the well, mine or mining claim but not 
to exceed five thousand dollars ($ 5,000) for each calendar month or portion 
thereof that the report or information is late.

 

   (Emphasis 
added.)

 

  [¶20] 
This statute clearly and unequivocally sets forth a limitation of $5,000 
per month for each calendar month that the report or information is late. Only 
one report is required, and that report could encompass as many producing wells 
as the person required to file the report owns or operates. The State Board of 
Equalization obviously failed to consider any limitation contained in the 
statute, instead stating in its Conclusions of Law:

 

14. Petitioner's interpretation of Wyo. Stat. § 
39-5-101(g) suggesting a maximum penalty of only $5,000.00 per month, may be 
assessed against any one company for failure to file reports or required 
information, does not comport with the clear and unambiguous language of the 
statute. The statute clearly provides for "a penalty equal to one percent (1%) 
of the taxable value of the production from the well . . . ." In this 
matter, several wells were assessed.

 

(Emphasis in original.) The 
State Board of Equalization wrote out of the statute a clearly expressed 
limitation, and the majority of this Court is following lockstep in the path of 
the State Board of Equalization.

 

   [¶21]  Perhaps the fallacy in the reasoning of 
the majority is best illustrated in its penultimate paragraph. The majority 
assumes that the penalty relates to each separate well, but the statute does not 
precisely so state, nor does the statute require the filing of a separate report 
for each well. The State Board of Equalization alludes to reports, but any 
requirement of more than one report seems to clearly exceed the statutory 
mandate. The majority opinion justifies its interpretation of the statute by 
noting that:

 

If the $5,000 limitation did not apply to each well, 
a person who had not reported on a single well and a person who had not reported 
on several wells would have been subject to the same penalty. If that were true, 
the amount of the penalty would not have corresponded to the value of the 
mineral production. That obviously was not what the legislature intended when it 
enacted the penalty provision.

 

   [¶22]  Remember that the statutory language 
provides "a penalty equal to a total of one percent (1%) of the taxable value of 
the production from the well, mine or mining claim but not to exceed five 
thousand dollars ($ 5,000) for each calendar month or portion thereof that the 
report or information is late." Wyo. Stat. Ann. § 39-5-101(g). In its order, the 
State Board of Equalization accounted for twenty-two wells. If each well is to 
be considered separately, the maximum monthly penalty for Petroleum, Inc. would 
be $110,000. Under the majority interpretation, the person who owned the largest 
coal mine in the State of Wyoming and failed to file the report would pay a 
maximum penalty of $5,000 per month for each month that the report was late. 
That penalty would not in any way correspond to the value of the mineral 
production. By contrast, the owner of several, say five, gravel pits would have to pay a 
maximum penalty of $25,000 per month for each month that the report was late. 
Even though that penalty would assume a production from the gravel pits of more 
than $2,500,000, that might be far less than the value of the production from a 
single coal mine. This simple example illustrates not only a disparity between 
mineral producers although described in the same statute, but also a disparity 
within mineral producers in the same class. Such a result is a far cry from the 
equality and uniformity demanded by Wyo. Const. art. 15, § 
11(d).

   

   [¶23]  Other categories of taxpayers are 
identified in Wyo. Stat. Ann. § 39-2-201, and they also are required to file "a 
statement listing the information relative to the property and affairs of the 
company as the department may require to assess the property * * *." In our 
endeavor to discern the intent of the legislature with respect to penalties, it 
is useful to consider how these other categories of taxpayers are treated. Rail 
car companies, pipeline companies, electric utilities, telephone and telegraph 
companies, other public utilities and railroad companies are subject to a 
penalty for failing to file the required statement of not more than $500.00 plus 
not more than $100.00 for each day's failure to file the statement, a maximum of 
$3,600.00 for the first month, and not more than $3,100 per month 
thereafter.  Wyo. Stat. Ann. § 
39-5-101(e). No good reason appears for assuming that the legislature intended to impose the 
significantly higher sanction on mineral producers that the majority opinion 
approves.

 

   [¶24]  I am satisfied that this statutory 
scheme clearly and unambiguously provides for a maximum penalty of $5,000 per 
month for failure to file a report, and the State Board of Equalization 
committed an error of law in construing the statute otherwise. I would reverse 
the State Board of Equalization with instruction to enter an order consistent 
with the correct construction of the statute which would provide a maximum 
penalty of $35,000.

         

 

FOOTNOTES 
for the Dissent

 

  1Wyo. Stat. Ann. § 
39-6-304(a) (Michie 1997) provided, in pertinent part: "The monthly tax reports 
and payments are due on or before the twenty-fifth day of the second month 
following the month of production." Because February 25, 1995 was a Saturday, 
the report from Petroleum, Inc. was due on February 27, 
1995.