Title: POWDER RIVER COAL COMPANY v. WYOMING STATE BOARD OF EQUALIZATION AND WYOMING DEPT. OF REVENUE

State: wyoming

Issuer: Wyoming Supreme Court

Document:

POWDER RIVER COAL COMPANY v. WYOMING STATE BOARD OF EQUALIZATION AND WYOMING DEPT. OF REVENUE2002 WY 538 P.3d 423Case Number: 00-282Decided: 01/17/2002
 OCTOBER TERM, A.D. 2001

 

                                                                                                
     

 

POWDER 
RIVER COAL COMPANY, 

Appellant(Petitioner),

 

v.

 

WYOMING 
STATE BOARD OF

EQUALIZATION 
and WYOMING

DEPARTMENT 
OF REVENUE, 

Appellees(Respondents).

 

 

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

The 
Honorable Dan R. Price II, Judge

 

Representing 
Appellant:

Lawrence 
J. Wolfe, P.C.; Patrick R. Day, P.C.; and Melissa L. Hughes of Holland & 
Hart LLP, Cheyenne, Wyoming  

 Representing 
Appellee Wyoming Department of Revenue:

Gay 
Woodhouse, Attorney General; Rowena L. Heckert, Deputy Attorney General; and 
Karl D. Anderson, Assistant Attorney General  

 

 

Before 
LEHMAN, C.J., and GOLDEN, HILL, KITE, and VOIGT, JJ.

 

            
KITE, Justice. 

[¶1]      Powder River Coal 
Company (taxpayer) challenges the Wyoming Department of Revenue's (Department) 
valuation of its coal production for ad valorem and severance tax purposes, as 
affirmed by the Wyoming State Board of Equalization (Board).  The taxpayer contends the bonus it paid 
to the federal government when it purchased the federal coal lease was the same 
as a royalty and should have been treated as such in the application of the 
proportionate profits calculation required by the statute and regulations.  In the alternative, the taxpayer argues 
the bonus is an indirect, rather than a direct, mining cost under the 
statute.  We agree with the 
Department that a lease bonus is not a royalty.  However, we also agree with the taxpayer 
that the bonus is not a direct mining cost as contemplated by the statute and 
regulations.  Therefore, we affirm 
in part, reverse in part, and remand.

 

 

ISSUES

 

[¶2]      The taxpayer 
frames these issues: 

 

            
A.  Is the taxation of lease 
bonus payments which Powder River Coal Company, as lessee, made to the United 
States, as lessor, in order to acquire a federal coal lease, a violation of 
Article 15 § 12 of the Wyoming Constitution which prohibits taxation of federal 
interests in property?

 

            
B.  Are lease bonus payments 
properly classified as royalties to avoid an unconstitutional tax for purposes 
of determining the severance and ad valorem taxes payable on coal mined from a 
federal coal lease?

 

            
C.  Are lease bonus payments 
properly classified as royalties rather than direct mining costs for purposes of 
determining the severance and ad valorem taxes payable on coal 
mined?

 

The 
Department restates the issues:

 

[A].  For Wyoming coal tax valuation purposes, 
are federal coal lease bonus payments analogous with exempt federal 
royalties?

 

            
[B].  Are federal coal lease 
bonus payments properly treated as direct mining costs under Wyo. Stat. § 
39-2-209(d) currently recodified at Wyo. Stat. § 
39-14-103(b)(vii)?

 

In its 
reply brief, the taxpayer reiterates the following 
question:

 

            
Since 
the Department argues that the costs for FLBPs [federal lease bonus payments] 
are not related to production, the FLBPs cannot be direct mining costs.  FLBPs are royalties or should be treated 
as indirect costs.

 

 

 

[¶3]      In 1992, the 
taxpayer successfully bid on a federal coal lease by offering $86,987,765 in 
bonus payments.  The lease also 
required payment of a 12½ percent royalty on any production.  The Mineral Leasing Act of 1920 
authorizes the Secretary of the Interior to dispose of coal reserved by the 
federal government through a complicated and competitive bidding process.  Historically, the bonus bid was viewed 
as a token payment, often in the range of $1 to $10 per acre, and the remainder 
of the value of the coal was realized through the royalty payments.  In 1976, Congress passed the Federal 
Coal Leasing Amendments Act which mandated no federal coal lease could be sold 
for less than fair market value as determined by the Secretary of the 
Interior.  Fair market value is 
defined as "that amount in cash, or on terms reasonably equivalent to cash, for 
which in all probability the coal deposit would be sold or leased by a 
knowledgeable owner willing but not obligated to sell or lease to a 
knowledgeable purchaser who desires but is not obligated to buy or lease."  43 C.F.R. § 3400.0-5(n) (2000).  The current bidding system requires a 
fixed cash bonus and acceptance of the statutory minimum fixed royalty of 12½ 
percent.  43 C.F.R. §§ 3422, 
3473.3-2(a)(1) (2000).  The federal 
regulations define bonus as "that value in excess of the rentals and royalties 
that accrues to the United States because of coal resource ownership that is 
paid as part of the consideration for receiving a lease."  43 C.F.R. § 3400.0-5(c) 
(2000).

 

[¶4]      In all years 
prior to 1996, the taxpayer filed its Annual Gross Products Report for Coal for 
its Rochelle Mine treating the amortized bonus payment as a direct mining cost 
in the statutory formula used to determine the value of the gross product 
mined.  In 1996, the taxpayer 
changed its reporting procedure and amortized the bonus payment treating it as 
an exempt federal royalty payment.  
The Department promptly reclassified the amortized bonus payment as a 
direct mining cost and issued a Notice of Valuation on June 19, 1997.  The taxpayer appealed its Notice of 
Valuation to the Board which considered the matter based on briefs and 
supporting documents.  The taxpayer 
contended the bonus payments were royalty payments exempt under the Wyoming 
statutes and the constitution.  The 
Department disagreed and contended the taxpayer had not met its burden of proof 
to show that treatment of the bonus payments as a direct mining cost was 
arbitrary, capricious, or an abuse of discretion.  On appeal, the Board affirmed the 
Department's valuation.  The 
taxpayer filed a petition for review which the district court certified to this 
court.  

  

 

[¶5]      When we review 
cases certified pursuant to W.R.A.P. 12.09(b), we apply the appellate standards 
which are applicable to the court of the first instance.  State by and through Wyoming 
Department of Revenue v. Buggy Bath Unlimited, Inc., 2001 WY 27, ¶5, 18 P.3d 1182, ¶5 (Wyo. 2001); see also Union Telephone Company, Inc. v. Wyoming 
Public Service Commission, 907 P.2d 340, 341-42 (Wyo. 1995).  Judicial review of administrative 
decisions is governed by Wyo. Stat. Ann. § 16-3-114(c) (LexisNexis 2001).  Buggy Bath Unlimited, Inc., ¶5; 
W.R.A.P. 12.09(a); Everheart v. S & L Industrial, 957 P.2d 847, 851 
(Wyo. 1998).

 

[¶6]      The issues in 
this casewhether a bonus payment should be treated as an exempt royalty and, if 
not, whether it constitutes a direct or indirect cost of mining for mineral 
valuation and taxation purposespresent pure questions of law.  Their resolution requires interpretation 
of the applicable statutes and Department rules.  Statutory interpretation is a question 
of law which we review de novo.  
Chevron U.S.A., Inc. v. State, 918 P.2d 980, 983 (Wyo. 1996).  We affirm an agency's conclusions of law 
when they are in accordance with the law.  
Buggy Bath Unlimited, Inc., ¶6.  However, when the agency has failed to 
properly invoke and apply the correct rule of law, we correct the agency's 
error.  Id.  The rules of statutory interpretation 
also apply to the interpretation of administrative rules and regulations.  Id.  These rules are often cited and are well 
recognized:

 

We first 
decide whether the statute is clear or ambiguous.  This Court makes that determination as a 
matter of law.  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. [v. 
Wyoming State Board of Equalization], 813 P.2d [214,] 220 [(Wyo. 
1991)].  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.

 

If we 
determine that a statute is clear and unambiguous, we give effect to the plain 
language of the statute.

 

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.

 

State v. 
Bannon Energy Corporation, 999 P.2d 1306, 1308-09  (Wyo. 2000) 
(some citations omitted).

 

            

 

[¶7]      The genesis of 
this dispute lies in the constitutional and statutory construct for the taxation 
of minerals in Wyoming.  The Wyoming 
Constitution provides that all mines "shall be taxed . . . in lieu of taxes on 
the lands[] on the gross product thereof . . .; provided, that the product of 
all mines shall be taxed in proportion to the value thereof."  Wyo. Const. art. 15, § 3.  The statutes then impose ad valorem and 
severance taxes upon the value of the gross product mined.  Wyo. Stat. Ann. §§ 39-13-103, 39-14-103 
(LexisNexis 2001).  "The value of 
the gross product shall be the fair market value of the product at the mouth of 
the mine where produced, after the mining or production process is 
completed."  Section 
39-14-103(b)(ii).  The mining or 
production process is deemed complete when the mineral product reaches the mouth 
of the mine, and "[i]n no event shall the value of the mineral product include 
any processing functions or operations regardless of where the processing is 
performed."  Section 
39-14-103(b)(iii).  The mouth of the 
mine is defined as "the point at which a mineral is brought to the surface of 
the ground and is taken out of the pit . . . . For a surface mine, this point 
shall be the top of the ramp where the road or conveying system leaves the 
pit."  Wyo. Stat. Ann. § 
39-14-101(a)(vi) (LexisNexis 2001).  
Processing is defined as crushing, storing, loading for shipment, 
transportation from the mouth of the mine to the loadout, and similar activities 
including any other function "after severance that changes the physical . . . 
characteristics or enhances the marketability of the mineral." Wyo. Stat. Ann. § 
39-14-101(a)(vii) (LexisNexis 2001).

  

[¶8]      For coal sold 
away from the mouth of the mine pursuant to a bona fide arms-length sale, the 
statute mandates applying a formula to determine what portion of the sales value 
is attributable to the value of the gross product at the mouth of the mine, the 
point at which the product is valued for tax purposes under this constitutional 
and statutory scheme.  This formula 
is a modification of the proportionate profit method of valuation utilized by 
the Internal Revenue Service (I.R.S.) in determining the value of the product 
mined for purposes of calculating depletion allowances under the Internal 
Revenue Code and corresponding regulations.  "The objective of the proportionate 
profits method of computation is to ascertain gross income from mining by 
applying the principle that each dollar of the total costs paid or incurred to 
produce, sell, and transport the first marketable product . . . earns the same 
percentage of profit."  26 C.F.R. § 
1.613-4(d)(4) (2001).  The federal 
formula multiplies the gross sales by the ratio of mining costs to total 
costs.  Wyoming's formula differs 
slightly by using a ratio of direct mining costs to total direct 
costs.  Section 
39-14-103(b)(vii).  

 

[¶9]      Critical to this 
analysis, the statute specifies direct mining costs 
include

 

mining 
labor including mine foremen and supervisory personnel whose primary 
responsibility is extraction of coal, supplies used for mining, mining equipment 
depreciation, fuel, power and other utilities used for mining, maintenance of 
mining equipment, coal transportation from the point of severance to the mouth 
of the mine, and any other direct costs incurred prior to the mouth of the mine 
that are specifically attributable to the mining 
operation[.]

 

Section 
39-14-103(b)(vii)(B).  Total direct 
costs are likewise defined to include a similar list of costs "attributable to 
the mining, processing or transportation of coal up to the point of loading for 
shipment to market."  Section 
39-14-103(b)(vii)(C).  Indirect 
costs are differentiated from direct costs and allocated by the same ratio.  Those costs are characterized as 
including, but are not limited to, "allocations of corporate overhead, data 
processing costs, accounting, legal and clerical costs, and other general and 
administrative costs which cannot be specifically attributed to an 
operational function without allocation."  Section 39-14-103(b)(vii)(D) (emphasis 
added).

 

[¶10]   Also important to the taxpayer's 
argument in this case are the provisions establishing exemptions from taxation 
for "[p]roperty owned by the United States the majority of which is used 
primarily for a governmental purpose."  
Wyo. Stat. Ann. § 39-11-105(a)(i) (LexisNexis 2001).  The statutory formula for determining 
the portion of the sales value considered the value of the gross product (the 
modified proportionate profits formula) deducts an exempt royalty defined by the 
Department's regulations as "royalty expense . . . for interests owned by the 
United States, the State of Wyoming, or an Indian tribe."  Department of Revenue Rules ch. 6, § 
4(o) (Aug. 14, 2001).

 

A.        Is a 
Federal Lease Bonus Payment  a  Federal 
Royalty?

 

[¶11]   Given this constitutional and 
statutory framework for the valuation of coal for taxation purposes, the 
taxpayer first argues the bonus payment should be amortized and deducted from 
the sales value because it constitutes a royalty payment for an interest owned 
by the United States.  In support of 
its argument, the taxpayer suggests that the statutory term "royalty" should be 
interpreted to include all payments to the federal government for the privilege 
of mining because those payments are somehow federal property. The taxpayer 
argues such an interpretation would avoid the constitutional prohibition against 
taxation of property owned by the United States.  Wyo. Const. art. 15, § 
12.

 

[¶12]   Although a royalty interest and the 
right to receive a bonus are both incidents of ownership of the mineral 
interest, they are not synonymous.  
The bonus is a payment to the federal government as consideration for the 
purchase of the coal lease.  43 
C.F.R. § 3400.0-5(c) (2000).  
Whereas, a royalty reserved by the landowner is an interest in property 
that belongs to the owner of the reversionary interest in the mineral estatein 
this case the federal government.  3 
Am. L. of Mining § 85.02 (2d ed. 1986).  
A review of the literature reveals a consistent differentiation between 
these terms and a recognition of their different meanings.  The term royalty is used to describe a 
payment "reserved by the grantor of a . . . mining lease . . . and payable 
proportionately to the use made of such right," 3 Bouvier's Law Dictionary 2975 
(8th ed. 1914), and is "distinguished from other payments that are made pursuant 
to the provisions of the lease, such as bonus and delay rentals."  Robert E. Sullivan, All About 
Royalties, 16 Rocky Mtn. Min. L. Inst. 227, 235 (1971).  Royalties are also universally 
recognized as real property rights.  
Id. at 237.  Bonuses, 
which are paid up front irrespective of production, "are not royalties in a 
technical sense" but are instead "a payment given to the lessor as consideration 
for executing the lease." 3 Am. L. of Mining, supra at 
§ 85.03[4].

 

[¶13]   This court has considered the 
different meanings of the terms mineral interest, royalty, bonus, and 
nonparticipating royalty interest.  
Picard v. Richards, 366 P.2d 119 (Wyo. 1961).  In Picard, Chief Justice Blume 
provided a detailed and thoughtful discussion of the use of those terms which 
clearly demonstrates each has a separate and distinct meaning and the interests 
conveyed depend on the terms employed.  
Specifically, the court recognized the term royalty was used to designate 
an interest carved out of the mineral estate and reserved to the owner of the 
mineral interest for permitting another to use the property and included the 
right to "receive, either in kind or its equivalent in money, a stipulated 
fraction of the oil and gas.'"  366 P.2d  at 123 (quoting Hardwicke, Royalty Clauses, 29 Tex. L. Rev. 
790).  In contrast, the court 
recognized, "Bonus and delay rentals, or a portion thereof, go with such [a 
mineral] estate, as shown by the foregoing cases."  Id.

 

[¶14]   The taxpayer argues that, simply 
because both federal lease bonuses and royalties on federal leases are payments 
to the federal government required to obtain the right to mine the federal coal, 
the legislature must have intended to include both payments when it chose to 
exempt royalties.  This argument 
finds no support in persuasive authority and is inconsistent with the particular 
meaning with which those terms have been attributed over the course of mineral 
development.  To bolster the argument, the taxpayer suggests that failure to 
interpret the statute in such a fashion risks creating an unconstitutional 
taxation of a federal property interest.  
Certainly, if federal royalties, which are reserved property interests of 
the federal government, were subject to tax, such a constitutional infirmity 
might exist.  However, a bonus 
payment is not in and of itself a property interest but instead reflects the 
sale price for the sale of certain governmental property to a private 
entity.  After execution of the 
lease, the only property remaining in federal ownership is the reserved royalty 
interest and the corresponding reversionary interest in the leased property that 
would come into play upon termination of the lease.

 

[¶15]   The taxpayer further suggests the 
federal government's treatment of both bonuses and royalties as ordinary income 
for income tax purposes supports its position.  Likewise, this argument does not survive 
scrutiny.  Both types of payments 
may be income to the recipient.  
However, even the I.R.S. recognizes that all payments required by a 
governmental entity do not automatically constitute governmental property 
interests.  In Revenue Ruling 85-16, 
the I.R.S. distinguished royalty payments from other governmental taxes and 
required payments and recognized royalty payments arise out of an economic 
interest in property in place.  
Percentage Depletion; Gross Income from the Property in the Case of 
Minerals Other Than Oil and Gas, 1985-1 C.B. 180, 1985-8 I.R.B. 7, Rev. Rul. 
85-16, 1985 WL 286714 (IRS RRU Feb. 25, 1985).

 

[¶16]   It is true the royalty and bonus 
are both compensation to the mineral owner for the value of the mineral 
produced.  In general, they bear an 
inverse relationship to each other in terms of value.  A mineral owner may accept a lower bonus 
in exchange for a higher royalty and vice versa.  Keith J. Brewer et al., Economic 
Approaches to Nonrenewable Resource Taxation, 11 J. of Nat. Resources & 
Envtl. L. 175 (1996).  
The federal government understood that relationship and determined 
that higher royalties might negatively affect certain federal policies.  Therefore, it chose instead to obtain 
the fair market value of its coal by imposing the statutory minimum 12½ percent 
royalty and an appropriate minimum bonus to capture the remaining fair market 
value calculated using either comparable sales or a discounted cash flow 
analysis of the value of coal sales over the life of the mine.  Simply because both a bonus and a 
royalty are intended to compensate the mineral owner does not mandate the 
conclusion they are identical types of interests.  In the case of a bonus, the mineral 
owner demands a cash payment up front in order to sell its rights to produce the 
mineral.  However, the same owner 
will likely retain a small interest free of the cost of productiona 
royaltyusually reflected as a percentage of the value of the produced 
mineral.  Picard, 366 P.2d 119; 4 Am. L. of Mining § 131.06 (2d ed. 1984).  These well accepted concepts have been 
consistently applied, and we can find no persuasive authority for concluding a 
bonus is a royalty as a matter of law.

 

[¶17]   In determining what meaning the 
legislature intended by the use of the term royalty, we apply our well 
established rules of statutory construction.  Bannon Energy Corporation, 999 P.2d  at 1308-09.  We assume the 
legislature was well aware of the accepted legal definition and usage of the 
term royalty and cannot conclude it intended anything other than the well 
accepted meaning of the term royalty when it provided for federal royalties to 
be deducted as exempt royalties from the sales value of coal mined within this 
state.  Id.; see also 
Parker Land and Cattle Company v. Wyoming Game and Fish Commission, 845 P.2d 1040, 1042 (Wyo. 1993); Rasmussen v. Baker, 7 Wyo. 117, 133, 50 P. 819, 
823 (1897).

 

B.        Is a 
Bonus a Direct Mining Cost as Provided by Statute?

 

[¶18]   We find the logic of the taxpayer's 
second argumentthat bonuses are indirect costs under the statutory 
definitionmore persuasive.  The 
proportionate profits method adopted by the legislature recognizes that indirect 
costs occur proportionately over all functions, production, processing, and 
transportation, in the same ratio as direct costs.  Costs which "cannot be specifically 
attributed to an operational function without allocation" are considered 
indirect costs.  Section 
39-14-103(b)(vii)(D).  To determine 
whether a bonus paid for the purchase of a coal lease is a direct mining cost or 
an indirect cost, we must again employ the rules of statutory construction in an 
attempt to glean the legislative intent. 

 

[¶19]   The legislature defined mining or 
production as "drilling, blasting, loading, roadwork, overburden removal, 
pre-mouth of the mine reclamation, transportation from the point of severance to 
the mouth of the mine, and maintenance of facilities and equipment directly 
relating to any of the functions."  
Wyo. Stat. Ann. § 39-14-101(a)(v) (LexisNexis 2001).  In the category of direct mining costs, 
the legislature specified mining labor including mine foremen and supervisory 
personnel whose primary responsibility is the extraction of coal, fuel power, 
mining equipment, and maintenance of mining equipment and then included the 
catch-all phrase "any other direct costs . . . specifically attributable to the 
mining operation."  Section 
39-14-103(b)(vii)(B).  Obviously, a 
bonus is not explicitly listed as a direct mining cost, and we must determine 
whether it falls into the catch-all phrase "any other direct costs 
. . . specifically attributable to the mining operation."  Such general words, following an 
enumeration of words with specific meanings, should be construed to apply to the 
same general kind or class as those specifically listed.  Reliance Insurance Company v. Chevron 
U.S.A. Inc., 713 P.2d 766, 770 (Wyo. 1986); Green River Development 
Company v. FMC Corporation, 660 P.2d 339, 353 (Wyo. 1983).  Applying this doctrine of ejusdem 
generis requires the conclusion that the phrase direct mining costs was not 
intended to include such expenses as a bonus payment required for the purchase 
of the coal lease.  Had the 
legislature intended to include costs not associated with the actual act of 
mining, we must presume it would have done so expressly and not by the use of a 
catch-all phrase that follows a very detailed list of costs incurred in the 
physical act of mining.

 

[¶20]   This court considered the meaning 
of direct mining costs in Wyodak Resources Development Corp. v. State Board 
of Equalization, 9 P.3d 987 (Wyo. 2000).  There, a coal company was required to 
relocate a state highway in order to remove the coal from underneath the road.  The expenses of that effort were 
consistent with the type of costs listed in the statute and were, therefore, 
determined to be properly classified as direct mining costs.  Costs like federal bonus payments, which 
are necessary and beneficial to the entire operation, bear no resemblance to 
such hard mining costs as the excavation costs of moving a state 
highway.

 

[¶21]   In addition to the difference in 
kind of a bonus payment from hard mining costs, bonus payments are not 
specifically attributed to an operational function without allocation.  A similar result was reached in 
General Portland Cement Co. v. United States, 438 F. Supp. 27 (N.D. Tex. 
1977), affirmed in part, reversed in part by General Portland Cement Co. v. 
United States, 628 F.2d 321 (5th Cir. 1980), when the court 
determined that, in applying the proportionate profit method, interest payments 
on loans not traceable to either mining or processing functions must be indirect 
costs.  Not only is a bonus payment 
not traceable to the mining function of the operation, but the amount of the 
bonus is actually based upon the sales value of the coal after mining, 
processing, and transportation to the point of sale.  To determine whether a bonus bid 
reflects the fair market value of the federal coal, the Secretary of the 
Interior uses either comparable sales or a discounted cash flow analysis, both 
of which rely upon the sales price of the coal measured at the point of 
sale.  Therefore, by its very 
nature, the bonus reflects the total value of the coal sold and not simply the 
value of the coal at the mouth of the mine, the point at which taxable value is 
determined.  As such, a bonus can 
only be fairly allocated as an indirect cost to both the mining and the 
processing/transportation functions of the taxpayer's 
operation.

 

[¶22]   The Department argues that, since 
the bonus is necessary to acquire a coal lease which allows the mining of coal, 
it is a direct cost of mining.  This 
argument ignores the fact the coal lease authorizes not only the mining of coal 
but the construction and operation of processing and transportation 
facilities.  The coal lease grants 
the right to "mine, extract, remove, or otherwise process and dispose of 
the coal . . . together with the right to construct such works, 
buildings, plants, structures, equipment and appliances and the right to use 
such on lease rights-of-way which may be necessary and convenient in the 
exercise of the rights and privileges granted."  (Emphasis added.)  The Department's argument that, "but 
for" the coal lease being issued, no mining could take place ignores the fact 
that many undeniably indirect costs are necessary before mining can occur 
including the cost of mining permits, environmental impact statements, planning, 
and engineering.  However, since the 
benefits of those costs cannot be allocated solely to either the mining or the 
processing function of the operation, they must be considered indirect.  In Amax Coal Company v. Wyoming State 
Board of Equalization, 819 P.2d 825 (Wyo. 1991), we found, under a different 
valuation method, reclamation costs attributable to the processing and 
transportation areas of the mine operation were not mining costs even though a 
mine could not have been built without commitment to those costs.

 

[¶23]   The parties did not identify a 
method to allocate the bonus payment over all the operations.  Given the character of the bonus payment 
and the statutory definition of the applicable terms, we conclude the 
legislature must have intended for a bonus payment to be treated as an indirect 
cost benefiting the entire operation.

 

[¶24]   Affirmed in part, reversed in part, 
and remanded.