Title: CHEVRON U.S.A., INC. V. DEPARTMENT OF REVENUE, STATE OF WYOMING

State: wyoming

Issuer: Wyoming Supreme Court

Document:

CHEVRON U.S.A., Inc. V. DEPARTMENT OF REVENUE, STATE OF WYOMING2007 WY 79158 P.3d 131Case Number: 06-56Decided: 05/11/2007
APRIL 
TERM, A.D. 2007

 
 
CHEVRON 
U.S.A., Inc.,

 
 
Appellant

(Petitioner),

 
 
v.

 
 
DEPARTMENT 
OF REVENUE, STATE OF WYOMING,

 
 
Appellee

(Respondent).

 
 

W.R.A.P. 
12.09(b) Certification from the DistrictCourtofUintaCounty

The 
Honorable Dennis L. Sanderson, Judge

 
 

Representing 
Appellant:

William 
J. Thomson II, Randall B. Reed, and Brian J. Hanify of Dray, Thomson & 
Dyekman, P.C., Cheyenne, 
Wyoming.  Argument by Mr. 
Thomson.

 
 

Representing 
Appellee:

            
Patrick J. Crank, Wyoming Attorney General; Michael L. Hubbard, Deputy 
Attorney General; Martin L. Hardsocg, Senior Assistant Attorney General; and 
Cathleen D. Parker, Senior Assistant Attorney General.  Argument by Ms. 
Parker.

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

 
 
HILL, 
Justice.

 
 
[¶1]      The Department of 
Revenue used the comparable value method set forth in Wyo. Stat. Ann. 
§ 39-14-203(b)(vi)(B) to establish the value of natural gas produced by 
Chevron and processed at its Carter Creek processing plant in 2000 and 
2001.  Chevron claims that there 
were no comparable agreements for use in determining an appropriate processing 
fee and, consequently, the DOR's choice and application of the comparable value 
method was flawed.  We conclude that 
the State Board of Equalization properly ruled: (1) The Department of Revenue 
(DOR) had a reasonable basis for choosing the comparable value method to 
appraise Chevron's CarterCreek production; and (2) the DOR 
appropriately applied the comparable value method to determine the fair market 
value of Chevron's production in 2000 and 2001.   Consequently, we 
affirm.

 
 
ISSUES

 
 
[¶2]      Chevron phrases 
the issues as:

 
 

1.                  
Do 
comparable processing agreements exist for Chevron's CarterCreek plant that satisfy the statutory 
elements of Wyo. Stat. Ann. § 39-14-203(b)(vi)(B)?

 
 

2.                  
Does the 
selection of the comparable value method, Wyo. Stat. Ann. § 39-14-203(b)(vi)(B) 
fail to determine the fair market value for Chevron's  CarterCreek production at the "point of 
valuation?"

 
 

3.                  
Was 
Chevron denied its right to equal and uniform tax treatment in violation [of 
the] Wyoming Constitution because the Department allowed other 
similarly-situated taxpayers to use the proportionate profits methodology which 
yielded a far lower taxable value for those other 
taxpayers?

 
 
[¶3]      The DOR's 
statement of the issues is more detailed:

 
 

I.                    
Did the 
State Board of Equalization correctly affirm the Department of Revenue's 
selection of the comparable value method as the method which most accurately 
reflected the taxable fair market value of [Chevron's] 2000-02 CarterCreek production?

 
 

II.                  
Did the 
State Board of Equalization correctly affirm the Department of Revenue's 
application of a comparable value processing fee of 25% of the product paid 
in-kind, the maximum fee paid by any producer regardless of any circumstances to 
value [Chevron's] 2000 and 2001 CarterCreek production?

 
 

III.                
Did the 
State Board correctly determine that [Chevron] failed to carry its burden of 
proof when it failed to offer any evidence that its application of proportionate 
profits reflected the most accurate fair market value for taxation purposes, as 
required by Wyo. Stat. § 39-14-203(b)(viii)?

 
 

IV.               
Did the 
State Board of Equalization correctly affirm the Department's rejection of 
[Chevron's] application of proportionate profits which resulted in processing 
deductions far in excess of the actual costs to process and which bore no 
relationship to actual processing costs?

 
 

V.                 
Did the 
State Board of Equalization correctly determine that [Chevron's] due process 
rights were not violated?

 
 
FACTS

 
 
[¶4]      Chevron owns 
natural gas production rights in the CarterCreek field which is located in Uinta and 
Lincoln counties.  The field 
produces "sour gas," which has high levels of hydrogen sulfide.  In order to process the sour gas from 
the CarterCreek field, Chevron 
constructed the Carter Creek Gas Processing Plant.  Chevron is the sole owner of the 
CarterCreek plant.  Consequently, there is no Construction 
and Operating Agreement for the CarterCreek plant, and Chevron does not 
charge itself a fee to process its CarterCreek field gas.

 
 
[¶5]      In 1999, the DOR 
sent a letter to all Wyoming oil and gas producers directing them to use the 
comparable value method set out in § 39-14-203(b)(vi)(B), to value their 
production for 2000, 2001, and 2002, when it was sold beyond the point of 
valuation.  Chevron sent an 
"exception letter" to the DOR, claiming that there were no comparable agreements 
for use in appraising its CarterCreek production under the comparable 
value method and requesting to utilize the proportionate profits valuation 
method instead.  The DOR identified 
agreements it considered comparable and refused to allow Chevron to use its 
chosen appraisal method.

 
 
[¶6]      Chevron 
disregarded the DOR's directive and reported the value of its production 
pursuant to the proportionate profits method.  The DOR issued a notice of valuation for 
Chevron's CarterCreek natural gas 
production for 2000 using the comparable value method.  The DOR used a 25% processing fee 
deduction and assigned a much larger taxable value to Chevron's production than 
Chevron had reported.  Chevron 
appealed both the DOR's choice of valuation method and its notice of valuation 
for 2000 to the State Board of Equalization (SBOE), and the SBOE consolidated 
the appeals.  After a contested case 
hearing, the SBOE upheld the DOR's choice of the comparable value method to 
appraise Chevron's CarterCreek natural gas production and its 
valuation of the gas for production year 2000.1

 
 
[¶7]      The DOR also used 
the comparable value method and the 25% processing fee deduction to value 
Chevron's production for the CarterCreek field in 2001.  Chevron objected to DOR's notice of 
valuation and appealed to the SBOE.  
The SBOE held another contested case hearing and upheld the DOR's 
valuation of Chevron's 2001 CarterCreek production.  Chevron filed petitions for review of 
the SBOE decisions in the district court.  
The district court consolidated the appeals and certified them to this 
Court.

 
 
STANDARD 
OF REVIEW

 
 
[¶8]      The district 
court certified this case to us pursuant to W.R.A.P. 12.09(b); consequently, we 
apply the appellate standards applicable to the court of the first 
instance.  State ex rel. Wyo. Dep't of Revenue v. Buggy 
Bath Unlimited, Inc., 2001 WY 27, ¶ 5, 18 P.3d 1182, 1185 (Wyo. 2001); 
see also Union Tel. Co. v. Wyo. Pub. Serv. 
Comm'n, 907 P.2d 340, 341-42 (Wyo. 1995).  Wyo. Stat. Ann. § 16-3-114(c) 
(LexisNexis 2005) governs judicial review of administrative 
decisions.

 
 
[¶9]      When an appellant 
challenges an agency's findings of fact and both parties submitted evidence at 
the contested case hearing, we examine the entire record to determine if the 
agency's findings are supported by substantial evidence.  Colorado Interstate Gas Co. v. Wyoming 
Department of Revenue, 2001 WY 34, 
¶ 8, 20 P.3d 528, 530 (Wyo. 2001); RT Commc'ns, Inc. v. State Bd. of 
Equalization, 11 P.3d 915, 920 (Wyo. 2000).  If the agency's findings of fact are 
supported by substantial evidence, we will not substitute our judgment for that 
of the agency and will uphold the factual findings on appeal.  "Substantial evidence is more than a 
scintilla of evidence; it is evidence that a reasonable mind might accept in 
support of the conclusions of the agency."  
Id.

 
 
[¶10]   This Court reviews an agency's 
conclusions of law de novo.  Wyo. Dep't of Revenue v. Guthrie, 2005 WY 
79, ¶ 13, 115 P.3d 1086, 1091 (Wyo. 2005).  If a conclusion of law is in accord with 
the law, it is affirmed.  Airtouch Commc'ns, Inc. v. Dep't of Revenue, 2003 WY 114, 
¶ 10, 76 P.3d 342, 347.  
"However, when the agency has failed to properly invoke and apply the 
correct rule of law, we correct the agency's error."  Id.   
See also, Powder River Coal Co. v. Wyo. State Bd. of Equalization, 
2002 WY 5, ¶ 6, 38 P.3d 423, 426 (Wyo. 2002); Chevron U.S.A., Inc. v. State, 918 P.2d 980, 983 (Wyo. 1996).

 
 
When an 
agency's determinations contain elements of law and fact, we do not treat them 
with the deference we reserve for findings of basic fact.  When reviewing an "ultimate fact," we 
separate the factual and legal aspects of the finding to determine whether the 
correct rule of law has been properly applied to the facts.  We do not defer to the agency's ultimate 
factual finding if there is an error in either stating or applying the 
law.

 
 

Basin 
Elec. Power Co-op., Inc. v. Dep't of Revenue, State of Wyo., 970 P.2d 841, 850-51 (Wyo.1998) (citations omitted).  See also Colorado Interstate Gas, ¶ 8, 20 P.3d  at 
530-31.

 
 
DISCUSSION

 
 

            
1.         
Comparable Value

 
 
[¶11]   This case originated with the DOR's 
choice of the comparable value method, pursuant to § 39-14-203(b)(vi)(B), 
to determine the value of Chevron's natural gas production for severance tax 
purposes.  The severance tax for 
natural gas is calculated from the "value of the gross product," which is 
defined as the fair market value of the product less any deductions and 
exemptions allowed by Wyoming law.  Wyo. Stat. Ann. §§ 39-14-201 (a)(xxix) 
and 39-14-203(a)(i) (LexisNexis 2005).  
Wyo. Stat. Ann. § 39-14-203(b)(ii) (LexisNexis 2005) states:  "The fair market value for . . . natural 
gas shall be determined after the production process is completed.   [Thus,] expenses incurred by the 
producer prior to the point of valuation are not deductible in determining the 
fair market value of the mineral."  
Wyo. Stat. Ann. § 39-14-203(b)(iv) (LexisNexis 2005) defines when 
production of natural gas is considered complete:  "The production process for natural gas 
is completed after extracting from the well, gathering, separating, injecting 
and any other activity which occurs before the outlet of the initial 
dehydrator."

 
 
[¶12]   Chevron's CarterCreek gas is sold after processing.  Consequently, use of a valuation formula 
is necessary because Chevron's gas is not sold at the point of valuation.  Section 39-14-203(b)(vi) describes the 
options for valuing natural gas sold after it has undergone 
processing.

 
 

§ 
39-14-203.  
Imposition.

            
. . . .

(vi)  In 
the event the crude oil, lease condensate or natural gas production as provided 
by paragraphs (iii) and (iv) of this subsection is not sold at or prior to the 
point of valuation by bona fide arms-length sale, or, except as otherwise 
provided, if the production is used without sale, the department shall identify 
the method it intends to apply under this paragraph to determine the fair market 
value and notify the taxpayer of that method on or before September 1 of the 
year preceding the year for which the method shall be employed.  The department shall determine the fair 
market value by application of one (1) of the following 
methods:

            

            
(A)  Comparable sales--The fair market value is the 
representative arms-length market price for minerals of like quality and 
quantity used or sold at the point of valuation provided in paragraphs (iii) and 
(iv) of this subsection taking into consideration the location, terms and 
conditions under which the minerals are being used or 
sold;

 
 
            
(B)  Comparable value--The fair market value is the arms-length 
sales price less processing and transportation fees charged to other parties for 
minerals of like quantity, taking into consideration the quality, terms and 
conditions under which the minerals are being processed or 
transported;

 
 
            
(C)  Netback--The fair market value is the sales price minus 
expenses incurred by the producer for transporting produced minerals to the 
point of sale and third party processing fees.  The netback method shall not be utilized 
in determining the taxable value of natural gas which is processed by the 
producer of the natural gas;

 
 
            
(D)  Proportionate profits--The fair market value 
is:

 
 
(I)  The 
total amount received from the sale of the minerals minus exempt royalties, 
nonexempt royalties and production taxes times the quotient of the direct cost 
of producing the minerals divided by the direct cost of producing, processing 
and transporting the minerals;  
plus

 
 
            
            
(II)  Nonexempt royalties and production 
taxes.

 
 
[¶13]   The DOR and Chevron agreed that 
neither the comparable sales method, under subsection (A), nor the netback 
valuation method, set forth in subsection (C), was appropriate to value 
Chevron's CarterCreek production.  Chevron advocated for application of the 
proportionate profits method under subsection (D), while the DOR employed the 
comparable value method set out in subsection (B).  Using the comparable value method, the 
DOR must subtract the value of processing and transportation from the actual 
sales price to determine the fair market value of the gas at the point of 
valuation.  See BP America Co. v. Department of Revenue, 
2005 WY 60, ¶ 6, 112 P.3d 596, 600-01 (Wyo. 2005).  In this case, the parties' disagreement 
in applying the comparable value method is focused on determining an appropriate 
deduction for the processing fee and transportation apparently is not at 
issue.

 
 
[¶14]   Chevron argues that, in order to 
decide this case, we must interpret the statutory term "comparable."  It advocates defining "comparable" as 
"substantially equal" or "equivalent," consistent with our interpretation of 
that term in the context of a worker's compensation statute allowing an employee 
permanent partial disability benefits if he was unable to return to work at a 
"comparable" or higher wage after a work-related injury.  See Adams v. State ex rel. Wyoming Workers' Safety and Compensation Division, 975 P.2d 17 (Wyo. 
1999).  Thus, Chevron's argument 
continues:  "Any comparable 
processing fee for Chevron's CarterCreek production must be based on quality, 
quantity, and terms and conditions that are substantially equal or equivalent, 
and the Department's interpretation of the statute failed to consider these 
requirements."

 
 
[¶15]   As we have often stated, our rules 
of statutory construction focus on discerning the legislature's intent.  In doing so, 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).

 
 
[¶16]   We interpreted the relevant 
statutory language in BP, ¶¶ 15-23, 112 P.3d  at 604-08, and concluded that the DOR had properly 
chosen the comparable value method to determine the value of natural gas 
processed at the WhitneyCanyon processing plant.  Because there are many similarities 
between the case at bar and the BP 
case, it is worthwhile for us to review the specifics of BP.  
In that case, four 
producers built the WhitneyCanyon processing plant to process gas 
produced from the WhitneyCanyon field.  They executed a construction and 
operating agreement, which included a standardized processing agreement.  Each of the producers signed a separate 
copy of the processing agreement, agreeing to pay a 25% in-kind processing 
fee.  BP, ¶ 4, 112 P.3d  at 600.  The DOR considered each agreement 
between the producer and the plant as a separate comparable and used the 25% 
processing fee deduction in the comparable value method to determine the fair 
market value of each taxpayer's gas production.

 
 

[¶17]   The Whitney Canyon taxpayers 
claimed that they were not "other parties" with regard to processing agreements 
with the plant and, consequently, the agreements could not be used to establish 
the processing fee under § 39-14-203(b)(vi)(B).  BP, ¶ 7, 112 P.3d  at 601.  They also argued that the processing fee 
agreements did not pertain to gas of "like quantity" and the quality, terms, and 
conditions of the processing fee agreements were not comparable.  Id.  
The SBOE rejected the taxpayers' arguments and we affirmed that 
decision.  Id., ¶¶ 8-9, 112 P.3d  at 601.  Specifically, we upheld the DOR's use of 
the taxpayers' processing agreements with the WhitneyCanyon plant as comparables to determine 
the processing fee deduction for use in the comparable value method.  Id., ¶ 26, 
112 P.3d  at 608-09.

 
 
[¶18]   
BP's discussion of the statutory language is of particular importance 
to the instant case.  The taxpayers 
argued that the statutory terms "other parties," "like quantity," and "quality, 
terms, and conditions" were ambiguous.  
BP, ¶ 19, 112 P.3d  at 606.  We criticized the taxpayers for focusing 
on the individual statutory terms rather than looking at the overall legislative 
intent, reasoning that the taxpayers' argument missed the "forest" for the 
"trees."  Id.  
We stated:

 
 
Looking 
at the context of these words, we find that the objective of the comparable 
value statute is for the Department to find reliable information about 
processing fees paid by other taxpayers in similar situations, from which the 
Department can make reasonable inferences as to a particular taxpayer's 
processing costs.

 
 

BP, ¶ 19, 112 P.3d  at 606.  
Based on that determination, we concluded that it was unnecessary to 
further define the individual terms of the statute.  Id., ¶ 20, 
112 P.3d  at 606-07.

 
 
[¶19]   The same rationale applies with 
equal force here.  Chevron's 
argument that the DOR may only consider agreements which pertain to quantities, 
qualities, terms, and conditions "substantially equal" or equivalent to 
Chevron's CarterCreek processing 
circumstances is not persuasive.  
Like we said in BP, the intent 
of the legislature was for the DOR to locate reliable information about processing fees paid by other 
taxpayers in similar situations and make reasonable inferences from that 
information to determine a particular 
taxpayer's processing costs.  It is 
neither determinative nor helpful to further define the statutory term 
"comparable" as meaning "substantially equal" or 
equivalent.

 
 
[¶20]   With our mission firmly in mind, we 
turn now to Chevron's specific criticisms about the DOR's use of the comparable 
value method, in general, and the 25% processing fee, in particular.  The DOR concluded that several 
agreements provided comparable processing fees to value Chevron's CarterCreek production and that the 25% 
processing fee yielded an accurate deduction for calculation of the fair market 
value of Chevron's gas.  After the 
contested case hearings, the SBOE generally agreed with the DOR's position.2

 
 
[¶21]   On appeal, Chevron continues to 
find fault with some aspect of each agreement, arguing that the quantities, 
qualities, terms, and/or conditions were not sufficiently similar to justify 
using them in the comparable values method. The DOR responds with a compelling 
argument -- the specific differences between Chevron's CarterCreek situation and the other agreements 
are not determinative because, regardless of the differences, the maximum 
processing fee applied to any producer under any agreement was 25%, and the DOR 
gave Chevron a processing deduction of the maximum fee. Chevron claims that, by 
taking this stance, the DOR is ignoring the directive of the statute which 
requires consideration of similarities in quantity, quality, terms, and 
conditions.  The statute does 
reference those factors, but only in the context of finding comparable 
situations to determine the processing fee.  Like the taxpayers in BP, Chevron fails to see the "forest" 
for the "trees."  The whole point of 
the statute is to determine what processing fee deduction should be applied to 
an individual taxpayer's production.  
If the factors do not change the fee, then there is no need to reject any 
particular agreement as a comparable simply because it does not pertain to 
similar quantities, qualities, etc.

 
 
[¶22]   The SBOE identified the 
WhitneyCanyon processing agreement, which we considered in BP, as a comparable agreement to 
establish a processing fee for Chevron's CarterCreek gas.  Under the WhitneyCanyon agreement, the producers paid a 25% 
in-kind fee for processing their gas.  
The WhitneyCanyon plant and the CarterCreek plant have numerous similarities. 
 Of greatest significance, they 
process sour gas from the same reservoir, and each of the plants is capable of, 
and actually has, processed gas that is usually dedicated to the other 
plant.  There are also a few 
differences between the plants which, according to Chevron, preclude the 
WhitneyCanyon processing agreement from being a suitable 
comparable to establish the processing fee for the CarterCreek plant.  The differences emphasized by Chevron on 
appeal are: (1) The Whitney Canyon agreement does not satisfy the "other party" 
requirement of the statute because Chevron is a party to it; and (2) the Whitney 
Canyon gas is not processed under sufficiently similar "terms and conditions" 
because the two plants have "vastly different" operations.  Our BP decision is dispositive of Chevron's 
argument about it not being an "other party" to the WhitneyCanyon agreement.  Chevron and the other appellants in BP operated in different roles as 
producers and processors at WhitneyCanyon.  Thus, they were "other parties" for the 
purposes of BP, ¶¶ 21-25, 112 P.3d  at 607-08, and, for the same reasons, the WhitneyCanyon agreement satisfies the "other 
parties" requirement in this case.

 
 
[¶23]   With regard to the claim that the 
Whitney Canyon agreement is not comparable because the "terms and conditions" of 
processing are different, Chevron points to Carter Creek's initial higher 
capital construction costs and claims that the plant has higher annual operating 
costs.  Chevron contends that the 
higher costs result from additional equipment employed at the CarterCreek plant to satisfy its more stringent 
air quality permit.  There was 
conflicting evidence at the contested case hearings about whether or not the 
operating costs at the CarterCreek plant were actually greater than 
the WhitneyCanyon plant and, if so, whether the 25% processing 
fee adequately covered the additional operating costs and provided Chevron a 
return on its investment in the CarterCreek plant.

 
 
[¶24]   Although Chevron identified 
differences in capital construction costs and the processing system, the SBOE 
accepted the DOR's evidence showing that the average operating costs for both 
plants were very similar.  After 
considering all of the evidence, the SBOE concluded that the 25% processing fee 
allowed Chevron to cover its operating expenses, and, although the 
CarterCreek plant has additional equipment to satisfy its 
more restrictive air quality permit, it still realized a significant return on 
its investment in the CarterCreek plant.  The SBOE stated:

 
 
We find 
the similarities between the Carter Creek Gas Plant and the Whitney Canyon Gas 
Plant to be so great that each offers a reliable reflection of how the other 
would treat a specific taxpayer if it were a third party producer requiring the 
services of a gas processing plant.  
We reach this finding because both plants process the same composition of 
high sulfur gas.   In fact, 
before the gas is produced it would be impossible to predetermine which plant 
would process the gas.  While the 
plants have some slight differences, each serves the same producers from the 
same fields with the same ultimate goal, to process gas for sale of NGLs 
[natural gas liquids] and residue gas.  
Therefore, we find the processing fee charged to producers who have gas 
processed at the Whitney Canyon Gas Plant is a comparable fee with respect to 
producers who process gas at the Carter Creek Gas Plant.

 
 
There is 
substantial evidence in the record to support the SBOE's conclusions.  Consequently, we agree that the 
WhitneyCanyon processing 
agreement, with its 25% processing fee, was an appropriate 
comparable.

 
 
[¶25]   The SBOE also concluded that the 
agreement between Chevron and Exxon to process Exxon's Road Hollow gas at the 
CarterCreek plant was a valid comparable to establish a 
processing fee for Chevron's CarterCreek production.  The Road Hollow agreement included a 
sliding scale processing fee with a maximum in-kind fee of 25%.  The fee decreased as Exxon sent greater 
volumes of Road Hollow gas to the CarterCreek plant for processing, up to the 
contractual maximum of 25 million cubic feet per day.  Chevron argues that the Road Hollow 
agreement is not comparable because the quantities, qualities, and/or terms and 
conditions of processing the Road Hollow gas are not sufficiently similar to 
Chevron's circumstances in processing its CarterCreek gas.

 
 
[¶26]   Considering the differences in 
quantity first, we recognize that the majority of the gas processed at the 
CarterCreek plant is Chevron's 
own gas, and the volumes processed for Exxon are much smaller.  Chevron argues that it processes these 
smaller amounts of gas for other producers in order to maximize the total volume 
of gas processed through its plant.  
In other words, the CarterCreek plant has capacity to process gas 
in addition to Chevron's own gas, and it is beneficial for Chevron to contract 
to process these lesser amounts of gas for other producers in order to increase 
the total amount of gas processed at the CarterCreek plant.  Chevron describes this production as 
"incremental gas" or "incremental loading."  Chevron argues that "[t]he processing 
fee for incremental gas is not representative of the actual expenses a processor 
incurs for processing large amounts of gas."  Chevron's argument about quantity falls 
apart when we recognize that 25% is the maximum fee charged to Exxon under the 
Road Hollow agreement, and the processing fee actually decreases as the volume 
of gas increases.  Thus, Chevron has 
no basis to complain about the 25% fee for processing its larger volumes of gas 
at the Carter Creek plant, when, if the terms of the Road Hollow agreement were 
strictly applied to Chevron, the fee would actually be 
less.

 
 
[¶27]   Chevron also argues that the 
quality of gas processed and other terms and conditions of processing under the 
Road Hollow agreement are different from Chevron's CarterCreek 
production, making it improper to use the Road Hollow agreement to set a 
processing fee for its CarterCreek gas.  With regard to quality, the Road Hollow 
gas is "sweeter," i.e., has smaller 
levels of hydrogen sulfide, than Chevron's CarterCreek gas.  However, the record establishes that the 
Road Hollow gas is intermingled with the CarterCreek gas at the inlet to the plant and 
consequently travels through the same process as the other gas.  In addition, there is no indication that 
the processing fee charged to Exxon depends on the quality of the 
gas.

 
 
[¶28]   Chevron argues that the "terms and 
conditions" under which Exxon's Road Hollow gas is processed differ, making the 
Road Hollow gas incomparable.  
Chevron's argument in this regard concerns the contractual priority of 
the gas.  Priority refers to the 
order used to determine which production will be "shut-in" or not accepted for 
processing if the plant's capacity is insufficient to process all of the gas 
coming into it.  Although there is 
different information in the record 
about whether or not Exxon's Road Hollow gas has third or fourth priority at the 
CarterCreek plant, it is clear 
that Exxon's gas is lower priority than Chevron's first priority gas.  Thus, Exxon's Road Hollow gas will be 
shut in before Chevron's CarterCreek gas.  Chevron suggests that priority makes a 
difference in the fee charged for processing the gas; however, it points to no 
specific credible evidence to support that position.  As we explained above, Chevron's 
complaints about differences in qualities and "terms and conditions" of the 
agreements are unavailing because, regardless of the quality of the gas or the 
terms and conditions of production, the fee charged to any producer was never 
greater than 25%, which was the fee applied by the DOR to Chevron's Carter Creek 
production.

 
 
[¶29]   The SBOE found other agreements, in 
addition to the WhitneyCanyon and Road Hollow agreements, to be 
comparable.  To avoid unnecessarily 
belaboring our analysis, we will not discuss the details of those agreements or 
how they relate to the CarterCreek production.  We simply recognize that the maximum 
processing fee charged under any agreement was 25%, which is the processing 
deduction used by the DOR in calculating the fair market value of Chevron's 
CarterCreek gas.  The record contains substantial evidence 
to support the DOR's selection of the comparable value method and the 25% 
processing fee deduction.

 
 
[¶30]   Chevron has also failed to meet its 
burden of proving that the DOR's valuations for production years 2000 and 2001 
do not reflect the fair market value of its CarterCreek natural gas production.  Because the DOR's valuations are 
presumed valid, accurate, and correct, Chevron had the burden of presenting 
credible evidence to overcome the presumption and a mere difference of opinion 
is not sufficient.  BP, ¶ 26, 112 P.3d  at 608; Thunder Basin Coal Co. v. Campbell County, 
2006 WY 44, ¶ 48, 132 P.3d 801, 816 (Wyo. 2006).  In this case, the DOR appropriately 
chose the comparable value method to evaluate Chevron's production and 
identified suitable comparable processing agreements for use of the method.  As we discussed above, the 25% 
processing fee was the highest fee charged under any of the contracts, and the 
DOR gave Chevron the full deduction based on that fee, even though some 
contracts charged a lower fee for greater volumes of gas (like the volumes 
Chevron processes at the CarterCreek plant).  Simply because application of another 
method, like the proportionate profits method advocated by Chevron in this case, 
would result in a greater processing deduction and, consequently, a lower 
taxable value, does not warrant a finding that the DOR's chosen method did not 
yield a fair market value.  Although 
there was conflicting evidence on the costs attributable to the CarterCreek processing plant, there was 
substantial evidence to support the DOR's valuation of the natural gas 
production.

 
 
[¶31]   Chevron's overriding contention is 
that its chosen valuation method, the proportionate profits method, gives a 
better estimate of fair market value than the comparable value method.  It is not our duty on appeal "to 
determine which of various appraisal methods is best or most accurately 
estimates FMV [fair market value];  
rather, it is to determine whether substantial evidence exists to support 
usage of the [particular] method of appraisal, and, if so, whether substantial 
evidence exists to support the manner in which it was used."  RT 
Communications, Inc., 11 P.3d  at 921, (citations omitted).  See also Thunder Basin Coal Co., ¶ 14, 132 P.3d  at 807.  The record in this 
case is more than sufficient to support the DOR's choice and application of the 
comparable value method for valuing Chevron's CarterCreek production in 2000 and 
2001.

 
 
2.         
Equality and Uniformity in Taxation

 
 
[¶32]   Chevron argues that the DOR treated 
Chevron in an inequitable and non-uniform manner in violation of the equal 
protection clauses of the United 
States and Wyoming 
constitutions when it used the comparable value method, instead of the 
proportionate profits method, to appraise Chevron's CarterCreek production.  Wyo. Const. art. 1, § 34 provides that all 
laws of a general nature shall have uniform operation.  Art. 15, § 11 provides that the gross 
product of minerals shall be valued at its full value and "[a]ll taxation shall 
be equal and uniform within each class of property."  See also U.S. Const. amend. 
XIV.

 
 
[¶33]   Chevron claims it was subject to 
disparate treatment because the DOR denied its request to use the proportionate 
profits method to value its production but allowed other taxpayers, who process 
gas through the Lost Cabin, Garland, JT, and 
OregonBasin plants, to use the 
proportionate profits method to value their production.  Chevron claims that the resulting 
differences in taxation from application of the two methods are so significant 
its constitutional rights were violated.  
For example, Chevron points out that the producer/processors of the Lost 
Cabin plant (which includes Chevron) receive a significantly larger processing 
deduction through application of the proportionate profits valuation method than 
the 25% processing deduction Chevron receives on its CarterCreek production through application of 
the comparable value method.

 
 
[¶34]   Faced with a similar argument in BP, we stated:

 
 
The 
Board's review indicates that the Department has selected the comparable value 
methodology for all taxpayer-producers for sales away from the point valuation 
and all of them responded that no comparable value existed.  The Department investigated and found 
that while that was true for some taxpayer-producers, that was not the case for 
these taxpayers.  The Board 
concluded that the evidence supported distinguishing the operations at 
WhitneyCanyon from the other 
facilities.  Our review shows that 
this finding is supported by substantial evidence, and we agree with the legal 
conclusion that neither the statute nor the constitution has been violated.  We agree with the Board's conclusion 
that uniformly achieving taxation based upon accurate fair market value may well 
require application of different methodologies to similarly situated mineral 
taxpayers if comparable values differ in processing agreements or different cost 
structures exist.

 
 

BP, ¶ 30, 112 P.3d  at 609-10.  As we noted earlier, the BP decision pertained to valuation of 
the natural gas processed at the WhitneyCanyon plant during 2000.  Thus, that case is not only legally 
relevant, but due to the similarities of the CarterCreek 
and WhitneyCanyon plants and the 
production years at issue, it is also factually relevant.

 
 
[¶35]   The DOR directed all producers to 
use the comparable value method to value their production unless there were no 
comparables.  Simply because the DOR 
was unable to apply the comparable value methods to a few producers because of a 
lack of appropriate information does 
not mean it was inequitable to apply the comparative value method to Chevron 
when there were comparables for the CarterCreek plant.  There is no basis for finding Chevron 
was subjected to taxation in violation of its equal protection 
rights.

 
 
CONCLUSION

 
 
[¶36]   Substantial evidence exists in the 
record to support the SBOE decisions that the DOR properly chose the comparable 
value method for Chevron's CarterCreek production for 2000 through 2002, 
and Chevron has not demonstrated any errors in application of the comparable 
value method for production years 2000 and 2001.  Moreover, Chevron has failed to 
demonstrate that it was subjected to inequitable or non-uniform taxation in 
violation of the equal protection rights guaranteed in the Wyoming and United States 
constitutions.

 
 
[¶37]   Affirmed.

 
 
FOOTNOTES

 
 

1The SBOE 
allowed the Uinta County Board of CountyCommissioners to intervene in the 
action.  Chevron requests that, in 
the event this case is remanded to the SBOE, we rule UintaCounty should not be allowed to 
participate.  We addressed this 
issue in BP America Production Co. v. 
Department of Revenue, 2005 WY 60, ¶ 14, 112 P.3d 596, 603-04 (Wyo. 
2005), and concluded that Uinta 
County's intervention was improper.  
The BP ruling controls the 
intervention issue in this case; however, because we affirm the SBOE's decision 
on the merits, the Board's error in allowing UintaCounty to intervene has no bearing on the 
outcome of this case.

 
 

2A 
significant amount of the evidence presented to the SBOE was labeled 
"confidential."  In Amoco Prod. Co. v. Wyoming State Board of 
Equalization, 882 P.2d 866 (Wyo. 1994), we recognized the inherent 
difficulty of applying and discussing an appraisal method which requires the use 
of confidential information.  We have attempted, in this case, to 
follow the lead of the parties and the SBOE by protecting the confidential 
information to the extent we can, 
while still discussing the legal and factual matters necessary to our 
decision.  Thus, some of our 
discussion includes general statements about the evidence presented to the SBOE 
rather than the precise details contained in the 
record.