Title: Kerr-McGee Corp. v. Wyoming Oil and Gas Conservation Com'n

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Kerr-McGee Corp. v. Wyoming Oil and Gas Conservation Com'n1995 WY 168903 P.2d 53Case Number: 94-292Decided: 09/27/1995Supreme Court of Wyoming
 

Kerr-McGee 
Corporation, 

Appellant 
(Defendant),

v.

Wyoming Oil 
and Gas Conservation Commision, 

Appellee 
(Plaintiff).

Appeal 
from the District Court, Natrona County, Dan Spangler, J.

Craig 
Newman, Casper, for Kerr-McGee Corporation.

Joseph 
B. Meyer, Attorney General; Roberta Rinegar, Assistant Attorney General, Casper, 
for Wyoming Oil and Gas Conservation Commission.

Before 
GOLDEN, C.J., and THOMAS, MACY, TAYLOR and LEHMAN, JJ.

THOMAS, 
Justice.

[¶1.]     The primary issue we 
address in this case is the limits of the authority of an administrative agency, 
a creature of the legislature. The question presented is whether the Wyoming Oil 
and Gas Conservation Commission (Commission) has the authority to deny a 
statutory two percent excise tax exemption in certifying a tertiary recovery 
project. The Commission, using ambiguous language, apparently certified the 
project, which was to be conducted in a production unit that previously had been 
certified for a tertiary recovery project and had received the benefit of the 
exemption, but the Commission purported to deny the tax exemption. The new 
application for certification was based upon the utilization of a different 
recovery process. In its Report of the Commission, the Commission, responding to 
an objection lodged by the Department of Revenue (Department), concluded the 
newly certified project should not receive the benefit of the exemption. We hold 
that, under the statute assigning administrative authority to the Commission, 
there is no power afforded it to adjudicate revenue or taxation issues. We 
perceive the Commission endeavored to combine oil and water. We reverse and 
remand the matter to the Commission because its order was without statutory 
authority and contrary to law.

[¶2.]     In Kerr-McGee 
Corporation's Brief of Appellant, the issue is stated as:

Whether 
the decision below is contrary to law, lacking in statutory right and 
unsupported by substantial evidence in concluding that Appellant's new tertiary 
production project is not entitled to the 2% severance tax exemption afforded by 
Wyo. Stat. § 39-6-302(j).

The 
Appellee, Wyoming Oil and Gas Conservation Commission, states the issue to 
be:

Whether 
the Wyoming Oil and Gas Conservation Commission's denial of Kerr-McGee 
Corporation's application for an order certifying the proposed tertiary recovery 
project for the North Buck Draw Dakota Unit is in conformity with law and 
supported by substantial evidence.

[¶3.]     The Commission first 
certified a high-pressure miscible gas injection project in the North Buck Draw 
Dakota Unit (Unit) of Campbell County, Wyoming, as a qualified tertiary enhanced 
recovery project on March 18, 1988. That certification was ordered in response 
to an application by Kerr-McGee, and made the project eligible for a two percent 
excise tax exemption for five years on the project's production, pursuant to 
statute and the Department's rules and regulations.1 The first tertiary production from 
the Unit commenced in 1988, and the five years for the tax exemption was 
terminated by the Department on December 31, 1993.

[¶4.]     On June 22, 1994, 
Kerr-McGee filed a new application for the Unit seeking certification from the 
Commission of a different tertiary enhanced recovery technique. The proposed 
technique involves the alternate injection of water and gas, which is known as a 
WAG process. The Commission found this recovery technique would extend the 
economic life of the Unit for approximately two to four years and would result 
in the recovery of an additional 1.8 million barrels of oil. Kerr-McGee 
estimated the State of Wyoming would receive an additional $4 million in revenue 
from the additional oil recovery.

[¶5.]     The Department filed an 
objection to Kerr-McGee's application for certification of the second project 
for the Unit. The Department contended the proposed second project for the Unit 
did not qualify for the five-year tax exemption because using the WAG process 
constituted only a change in recovery technique, rather than the initiation of a 
new project, under the definition found in WYO. STAT. § 39-6-301(a)(vi).2 In the Department of Revenue 
Objection to Application for New Tertiary Recovery Project, the Commission was 
requested to "deny the Applicant's [Kerr-McGee's] request for an additional five 
(5) year severance tax exemption certification of its North Buck Draw Unit." The 
hearing before the Commission was held on July 14, 1994.

[¶6.]     The record discloses 
all four of the Commissioners present at the hearing voted in favor of approving 
the second proposed project for the Unit as "meeting all the qualifications of a 
tertiary project based on the incremental oil and the initiation of new 
procedures." It appears that this motion was made subject to approval from the 
Attorney General. The transcript demonstrates:

COMMISSIONER 
DOW: * * * I guess the real question goes right to intent. Did the legislature 
intend that you would be able to qualify for multiple five-year 
exemptions?

MR. 
BASKO: Well, whether they intended it or not, I think that every time that 
you implement a project that will squeeze additional oil out of the reservoir 
above the baseline in incremental oil, you ought to be entitled to a 2 percent, 
whether you do it twice or three times or four times.

COMMISSIONER 
DOW: Well, I would agree, but I don't know that - I guess that's what the 
internal - the Attorney General will have to figure out, whether the state 
legislature had that in mind or not. (Emphasis added.)

Following 
this dialogue, a motion to approve the second tertiary recovery project for the 
Unit was made:

COMMISSIONER 
CROUCH: Well, I move that we consider this a tertiary two project and grant the 
severance tax break according to the rules that we have governing the start-up, 
however you want to phrase that.

ACTING 
CHAIRMAN SCHRINAR: Are you saying, Mr. Crouch, to approve it subject to a final 
ruling from the Attorney General -

COMMISSIONER 
CROUCH: Right, as to -

ACTING 
CHAIRMAN SCHRINAR: - whether or not it can legally be granted?

COMMISSIONER 
CROUCH: From our standpoint, I would move that we consider this to be qualified 
for the tax break. Whether they will get it or not, that's -

ACTING 
CHAIRMAN SCHRINAR: Okay. As part of the motion, could we simply indicate that we 
would expect Ms. Rinegar to work with Mr. Basom or whoever from the Department 
of Revenue in seeking an Attorney General's opinion?

COMMISSIONER 
CROUCH: Right.

[¶7.]     On July 29, 1994, the 
Attorney General very appropriately declined to issue an opinion. The Attorney 
General explained to the Commission that advice from his office to 
administrative agencies could be sought only prior to the holding of a hearing 
in a contested case. He pointed out Wyoming law "clearly and unambiguously 
places the duty of certification squarely and solely upon the Commission." This 
advice from the Attorney General was sound and avoided the potential of a 
violation of the doctrine of separation of powers. Although the Commissioners 
present unanimously voted to certify Kerr-McGee's WAG project for the Unit at 
the hearing on July 14, the Commission issued a contrary order on August 25, 
1994. In the Report of the Commission, the severance tax exemption provided by 
WYO. STAT. § 39-6-302(j) was denied for Kerr-McGee's proposed WAG recovery 
project.

[¶8.]     In the Findings of Fact 
in the Report of the Commission filed on August 25, 1994, the Commission 
stated:

9. 
The injection of six to seven thousand barrels of water a day would increase the 
sweep efficiency by forcing the gas to contact previously noncontacted oil in 
the tighter areas of the reservoir (as shown by Kerr-McGee's Exhibit No. 2) 
thereby substantially increasing the volume of oil to be recovered from the 
unit. It is estimated that the proposed project would result in the recovery of 
an additional 1.8 million barrels of incremental oil thereby extending the 
economic life of the unit by an additional two to four years. (Emphasis 
added.)

Then, 
after quoting WYO. STAT. § 39-6-302(j) (1994), which authorizes the two percent 
tax exemption for tertiary projects certified by the Commission, the Commission 
stated in its Conclusions of Law:

5. 
The five year limitation on the exemption does not attach to any one particular 
project: it attaches to the tertiary production from a petroleum reservoir 
recovery area and allows the exemption for five years from the date of the first 
crude oil recovered from that reservoir or recovery area by means of a tertiary 
enhanced recovery project or projects to which one or more recovery techniques, 
which meet the Commission's certification requirements as stated in Rule 341, 
are being applied.

6. 
The recovery of crude oil from the North Buck Draw Dakota Unit by means of a 
tertiary enhanced recovery project certified by this Commission was first 
obtained in 1988: more than five years has elapsed since the first tertiary 
production from the reservoir.

7. 
Any tertiary production from Kerr-McGee's proposed WAG project does not 
qualify for the two percent (2%) severance tax exemption provided by W.S. § 
39-6-302(j). (Emphasis added.)

The 
Report of Commission then ordered, somewhat ambiguously:

[T]hat 
Kerr-McGee's application for an order certifying a new tertiary recovery project 
for the North Buck Draw Dakota Unit as being entitled to the severance tax 
exemption provided by W.S. § 39-6-302(j) be, and the same hereby is, denied. 
(Emphasis added.)

[¶9.]     Kerr-McGee filed a 
Petition for Review of the Commission's "Decision" to the district court and 
followed that by a motion to certify the case to the Wyoming Supreme Court. The 
Commission stipulated to the granting of that motion, and the district court 
certified the case for our consideration by an order entered October 20, 
1994.

[¶10.]  We begin with a discussion of the theory 
of providing for administrative agencies in government. The basic justification 
for creating administrative agencies is to accomplish details of governmental 
activities that the legislature is not able to accomplish. The reason for the 
development of administrative agencies at the federal level has been articulated 
as:

Experience 
early proved the inability of Congress to prescribe detailed schedules of rates 
for railroads, or to keep abreast of changing needs concerning the levels of 
import duties. Gradually our legislative bodies developed the system of 
legislating only the main outlines of programs requiring constant attention, and 
leaving to administrative agencies the tasks of working out subsidiary 
policies. This system facilitated not merely the promulgation of law through 
rules and regulations but the correlation of rulemaking with such other 
necessary activities as adjudication, investigating, prosecuting, and 
supervising.

KENNETH 
CULP DAVIS, ADMINISTRATIVE LAW TEXT § 1.05 (3d ed. 1972). Another author has 
distinguished the role of the agency from that of the legislature in this 
way:

The 
legislature is established by the Constitution and endowed by it with the power 
to vote laws as the elected representatives of the people. The administrative 
agency is a creature of the legislature; it bears the same relationship to its 
enabling statute that a corporation does to its charter. The agency may possess 
the power to lay down prescriptions that have the force of law, but it does so 
solely because of delegation from the legislature.

BERNARD 
SCHWARTZ, ADMINISTRATIVE LAW § 1.6 (2d ed. 1984).

It 
is important to note that the authority of any particular agency "to lay down 
prescriptions that have the force of law" is limited:

Coupled 
with the power to delegate are limitations thereon, e.g., legislative, i.e., 
only certain powers are granted and the agency cannot go outside these and act 
ultra vires, judicial, i.e., in the actual delegation (the basic 
statute) there exists a method of control over the delegation itself. This 
latter control is enforced through the constitutional-judicial requirement that 
power so delegated be confined by the erection of walls, these being termed 
standards. Every delegation must therefore contain appropriate standards, 
appropriateness (reasonableness) being a judicial question.

MORRIS 
D. FORKOSCH, A TREATISE ON ADMINISTRATIVE LAW § 68 (1956) (footnotes 
omitted).

[¶11.]  The thrust of these treatise explanations 
was acknowledged by our court in Union Pacific Resources Co. v. State, 839 P.2d 356, 370 (Wyo. 1992), where we said in discussing the limits of a specific 
legislative delegation of authority to an agency:

An 
administrative agency is limited in authority to powers legislatively delegated. 
Hupp v. Employment Sec. Com'n of Wyoming, 715 P.2d 223 (Wyo. 1986); Continental 
Pipe Line Co. v. Belle Fourche Pipeline Co., 372 F. Supp. 1333 (D.Wyo. 1974). 
"Administrative agencies are creatures of statute and their power is dependent 
upon statutes, so that they must find within the statute warrant for the 
exercise of any authority which they claim." 1 Am.Jur.2d Administrative Law § 
70, at 866 (1962) (footnotes omitted).

[¶12.]  We turn then to an examination of the 
authority delegated to the Commission by the legislature and compare that to the 
statutory assignment of the Department. The act creating the Wyoming Oil and Gas 
Conservation Commission as it now exists, and delineating its powers and duties, 
is found in WYO. STAT. §§ 30-5-101 to -126 (1983 and Supp. 1994). The focus of 
this act is to enable the Commission to manage the production of oil and gas, a 
significant aspect of Wyoming's natural resources, in order to prevent waste. 
That emphasis is captured in WYO. STAT. § 30-5-102 (1983):

(a) 
The waste of oil and gas or either of them in the state of Wyoming as in 
this act defined is hereby prohibited.

(b) 
Whenever in order to prevent waste the commission limits the total amount 
of oil and gas which may be produced in any pool in this state to an amount less 
than that amount which the pool could produce if no restriction was imposed, the 
commission shall allocate or distribute allowable production among the several 
wells or producing properties in the pool on a reasonable basis, preventing 
or minimizing reasonably avoidable drainage from each developed area not 
equalized by counter-drainage, so that each property will have the opportunity 
to produce or to receive its just and equitable share, subject to the 
reasonable necessities for the prevention of waste. (Emphasis 
added.)

It 
is summarized in WYO. STAT. § 30-5-117 (1983):

It 
is not the intent or purpose of this law to require, permit, or authorize the 
commission or supervisor to prorate or distribute the production of oil and gas 
among the fields of Wyoming on the basis of market demand. This act shall 
never be construed to require, permit or authorize the commission, the 
supervisor, or any court to make, enter or enforce any order, rule, regulation 
or judgment requiring restriction of production of any pool or of any well 
except to prevent waste and to protect correlative rights. (Emphasis 
added.)

[¶13.]  In order to implement this purpose, the 
Commission has jurisdiction over all persons and property, public and private; 
is charged with the duty of making investigations to determine whether waste 
exists or is imminent, or whether other facts exist, which justify or require 
action; is required to make rules, regulations and orders; and is given other 
specific authority, all to effectuate the purposes and intent of the act. WYO. 
STAT. § 30-5-104 (Supp. 1994).3 In succeeding sections, the 
statutory scheme also encompasses: authority to prescribe rules of order or 
procedure for hearings; appointment of hearing examiners; requirements for 
hearings before the Commission; adoption of rules and regulations to govern 
drilling units; approval by the Commission of agreements involving recovery and 
unit operation; authorization to the Commission to sue violators of any rule, 
regulation or order of the Commission; and recover penalties. WYO. STAT. §§ 
30-5-105 through 114 (1983). Significantly absent from the Commission's 
authority is any power to deal with taxation.

[¶14.]  The closest the statutes come to any 
revenue function of the Commission is found in the provisions of WYO. STAT. § 
30-5-116 (Supp. 1994).4 This section imposes an assessment 
on any oil or gas produced, transported or sold from Wyoming of eight-tenths of 
one mill on the dollar. The Commission has no authority to adjust those amounts, 
and it is charged with collecting and remitting those funds to the state 
treasurer. The funds are designated for paying the costs and expenses incurred 
in connection with the administration and enforcement of the statutes describing 
the functions of the Commission.

[¶15.]  We compare this authority with that of 
the Department acting through the State Board of Equalization (Board). The 
Department is the administrative agency responsible for dealing with taxation 
issues. The Board is charged with valuing crude oil and natural gas for the 
prior calendar year at a fair cash market value after the production process has 
been completed. WYO. STAT. § 39-2-208 (1994). The Department is vested with the 
authority to determine that fair cash market value, and it does so by applying 
either the comparable sales, comparable value, netback, or proportionate profits 
valuation method. WYO. STAT. § 39-2-208(d)(i)-(iv) (1994). After the assessment 
has been made, WYO. STAT. § 39-6-302 (1994) promulgates the excise taxes to be 
levied on all Wyoming minerals. The pertinent sections that apply to oil and gas 
are:

(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. An excise tax of one and one-half percent (1 1/2%) shall be levied on 
underground coal. The proceeds from this tax shall be deposited into the 
permanent Wyoming mineral trust fund except as otherwise provided by W.S. 
39-6-305(b) and except for the period beginning March 15, 1988, and ending June 
30, 1996 during which the proceeds shall be deposited as follows:

(i) 
One-fourth (1/4) of the proceeds from coal (except underground coal), petroleum, 
natural gas, oil shale or any other fossil fuel shall be deposited into the 
budget reserve account;

(ii) 
All of the proceeds from uranium and trona shall be deposited into the budget 
reserve account.

(b) 
Except as otherwise provided in subsections (h), (s) and (t) 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. An excise tax of one 
and one-fourth percent (1 1/4%) shall be levied on underground coal. The 
proceeds from this tax shall be deposited into the general fund.

* 
* * * * *

(g) 
Except as otherwise provided in subsections (h), (s) and (t) 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.

* 
* * * * *

(j) 
Tertiary production resulting from projects certified by the Wyoming oil and 
gas conservation commission after July 1, 1985 and before December 31, 1994, is 
exempt from two percent (2%) of the excise tax imposed by W.S. 39-6-302(b) for a 
period of five (5) years from date of first tertiary 
production.

WYO. 
STAT. § 39-6-302 (1994) (emphasis added).

In 
addition, WYO. STAT. § 39-1-304(a)(iv) (1994) gives to the Board the authority 
to:

Decide 
all questions that may arise with reference to the construction of any 
statute affecting the assessment, levy and collection of taxes, in 
accordance with the rules, regulations, orders and instructions prescribed by 
the board; * * *. (Emphasis added.)

[¶16.]  A comparison of the roles of the 
Department and the Commission as established by the legislature demonstrates 
that the Department, acting through the Board, is vested with pervasive and sole 
authority over all aspects of the taxation of Wyoming citizens and business 
entities, including the construction of any statute affecting the assessment, 
levying, and collection of taxes. The Commission is empowered to adopt rules and 
regulations and act administratively to prevent waste and encourage the 
conservation of Wyoming's oil and gas resources. The Commission must make its 
decisions and promulgate its orders by its discerning conclusions as to what 
will either prevent or remediate waste.

[¶17.]  It is apparent from the language of the 
Report of the Commission, quoted above, that the Commission refused to certify 
Kerr-McGee's tertiary recovery project based upon revenue implications. The 
Commission had no authority to base its decision on tax matters. Whatever the 
appropriate construction of WYO. STAT. § 39-6-302(j) might be, that construction 
is reserved for the Board. In invoking that statute as a premise for its 
decision to not certify Kerr-McGee's tertiary recovery project, the Commission 
acted contrary to law and invaded an area in which it had no statutory 
right.

[¶18.]  Despite the denial of advice by the 
Attorney General, there is a strong implication in this record that the order 
was premised upon advice either from the Department or from Attorney General 
staff. If that were so, we would be forced to conclude there had been a 
violation of the separation of powers doctrine. The agency is an arm of the 
legislature; the Attorney General is an office within the executive branch. 
Invasions of the separation of powers doctrine are far more likely to be subtle 
than apparent and direct. We commend the Attorney General for his early 
recognition of this concept in this instance.

[¶19.]  As we analyze the statutory structure for 
the Commission and the Department, it is apparent the ruling of the Commission 
with respect to certification or non-certification of a tertiary recovery 
project has to be based upon whether the proposed project will prevent waste or 
promote the conservation of oil and gas resources pursuant to the statutory 
purposes justifying the creation of the Commission. Commissioner Basko's comment 
that he favored "a project that will squeeze additional oil out of the reservoir 
above the baseline in incremental oil * * *," creates a strong implication that, 
within the prerogative of the Commission, this project should have been 
certified.

[¶20.]  If there should be some limitation upon 
the tax implications relating to such a project, that issue appropriately must 
be resolved when the Department endeavors to collect taxes. The agency charged 
with addressing the application of WYO. STAT. § 39-6-302(b) is the Department 
acting through the Board. We can discern no legislative intent that the revenue 
function in this instance is to be shared by the Commission.

[¶21.]  We hold that the Commission acted 
contrary to law and without statutory authority when it premised its decision 
not to certify this project upon the application of a statute committed to the 
authority of the Department of Revenue. Accordingly, we reverse and remand the 
Report of the Commission for further proceedings in accordance with this 
opinion.

Footnotes

1 
WYO. STAT. § 39-6-302(j) (1994) provides:

Tertiary 
production resulting from projects certified by the Wyoming oil and gas 
conservation commission after July 1, 1985 and before December 31, 1994, is 
exempt from two percent (2%) of the excise tax imposed by W.S. 39-6-302(b) for a 
period of five (5) years from date of first tertiary production.

2 
WYO. STAT. § 39-6-301(a)(vi) (1994) furnishes this definition:

"Tertiary 
production" means the crude oil recovered from a petroleum reservoir by means of 
a tertiary enhanced recovery project to which one (1) or more tertiary enhanced 
recovery techniques meeting the certification requirements of the Wyoming oil 
and gas conservation commission or the United States government are being 
applied; * * *.

3 
WYO. STAT. § 30-5-104 (Supp. 1994) provides:

(a) 
The Wyoming oil and gas conservation commission, herein called "the commission," 
has jurisdiction and authority over all persons and property, public and 
private, necessary to effectuate the purposes and intent of this 
act.

(b) 
The commission has authority and it is its duty to make investigations to 
determine whether waste exists or is imminent, or whether other facts exist, 
which justify or require action by it hereunder. The commission is authorized to 
enter orders following any investigatory hearings if properly noticed to 
operators, producers and processors under the provisions of the Wyoming 
Administrative Procedure Act [§§ 16-3-101 through 16-3-115] and rules of the 
commission.

(c) 
The commission shall make rules, regulations, and orders, and shall take other 
appropriate action, to effectuate the purposes and intent of this 
act.

(d) 
The commission has authority:

(i) 
To require:

(A) 
Identification of ownership of wells, producing leases, tanks, plants and 
drilling structures;

(B) 
The making and filing of reports, well logs, and directional surveys; provided, 
however, that logs of exploratory or "wildcat" wells marked confidential shall 
be kept confidential for six (6) months after the filing thereof, unless the 
owner gives written permission to release such logs at an earlier 
date;

(C) 
The drilling, casing, and plugging of wells in such manner as to prevent the 
escape of oil or gas out of one (1) stratum into another, the intrusion of water 
into an oil and gas stratum, the pollution of fresh water supplies by oil, gas, 
or salt water, and to prevent blowouts, cavings, seepages, and 
fires;

(D) 
The furnishing of a reasonable bond with good and sufficient surety, conditioned 
for the performance of the duty to plug each dry or abandoned well or the repair 
of wells causing waste;

(E) 
The operation of wells with efficient gas-oil and water-oil ratios, and to fix 
these ratios;

(F) 
Gauging or other measuring of oil and gas to determine the quantity and quality 
thereof;

(G) 
That every person who produces oil and gas in this state shall keep and maintain 
for a period of five (5) years within this state complete and accurate record of 
the quantities thereof, which records or certified copies thereof shall be 
available for examination by the commission or its agents at all reasonable 
times.

(ii) 
To regulate, for conservation purposes:

(A) 
The drilling, producing, and plugging of wells;

(B) 
The shooting and chemical treatment of wells;

(C) 
The spacing of wells;

(D) 
Disposal of salt water, nonpotable water, drilling fluids and other oil-field 
wastes which are uniquely associated with exploration and production 
operations;

(E) 
The contamination or waste of underground water;

(F) 
All aspects of oil mining operations provided that nothing herein shall limit 
the authority of state mining inspector. "Oil mining operations" means 
operations associated with the production of oil or gas from reservoir access 
holes drilled from underground shafts or tunnels.

(iii) 
To classify wells as oil or gas wells for purposes material to the 
interpretation or enforcement of this act, to make the determination of wells 
required by the Natural Gas Pricing Policy Act of 1978 [Natural Gas Policy Act 
of 1978], Public Law 95-621 [15 U.S.C. § 3301 through 3432, 42 U.S.C. § 7255] 
and to make any other determination of wells that be required by the United 
States department of energy;

(iv) 
When required, in order to protect correlative rights, to establish drilling 
units affording each owner an opportunity to drill for and produce as a prudent 
operator, and so far as it is reasonably practicable to do so without waste, his 
just and equitable share of the oil or gas or both in the pool and to restrict 
or limit the production of oil or gas from any well which is allowed, after the 
effective date of this act, as an exception to the location requirements of or 
as an additional well permitted under any order of the commission establishing 
drilling units for a pool or part thereof or of any general well spacing rule or 
order adopted by the commission for conservation purposes, upon such terms and 
conditions as the commission may determine, upon the commission's own motion or 
upon application of any interested person and after notice and hearing as 
provided by chapter 6, Wyoming Statutes 1957 [§§ 30-5-101 through 30-5-204], as 
amended, and by the commission's rules;

(v) 
To adopt rules and regulations to regulate the plugging, sealing or capping of 
seismic shot holes, and to require, and fix the amount of, bonds or deposits to 
ensure compliance with regulations governing all geophysical 
operations;

(vi) 
To regulate, excluding discharges permitted under the national pollutant 
discharge elimination system, the:

(A) 
Location, construction, operation and reclamation of all noncommercial reserve 
pits and produced water retention and emergency overflow pits used solely for 
the storage, treatment and disposal of drilling fluids, produced waters, 
emergency overflow wastes or other oil field wastes associated with the 
maintenance and operation of oil and gas exploration and production wells on a 
lease, unit or communitized area in such a manner as to prevent the 
contamination of the waters of the state;

(B) 
The noncommercial underground disposal into Class two [2] injection wells as 
defined under the federal Safe Drinking Water Act of salt water, nonpotable 
water and oil field wastes related to oil and gas production in such a manner as 
to prevent contamination of the waters of the state.

(vii) 
To use funds collected under W.S. 30-5-116(b) to plug wells and seismic holes 
and reclaim the surrounding area affected by them, if the commission is unable 
to enforce its regulations and laws requiring the owner, seismic contractor or 
hole plugger to plug and reclaim and if the owner, seismic contractor or hole 
plugger does not have an adequate bond to cover the cost of plugging and 
reclamation. Nothing in this paragraph shall be construed to create any 
liability by the state for failure to adequately plug or reclaim wells or holes. 
If oil field equipment appears to have been abandoned in the area of a well or 
hole which is plugged or reclaimed under this paragraph, the commission may, 
after notice and a hearing as provided in W.S. 30-5-105 and 30-5-106 and a 
finding that the equipment is abandoned, dispose of the equipment. The 
commission may dispose of the equipment by public sale or by transferring it to 
the contractor who performs the plugging and reclamation for the commission. The 
transfer or proceeds of the sale shall be used to defray the cost of plugging or 
reclamation. The commission shall promulgate rules to implement this 
paragraph.

4 
WYO. STAT. § 30-5-116 (Supp. 1994) provides:

(a) 
All monies collected by the commission or as civil penalties under the 
provisions of this act shall be remitted to the state treasurer for deposit in 
an account within the earmarked revenue fund. Expenses incident to the 
administration of this act shall include expenses for capital construction and 
shall be paid out of the account. One half (1/2) of the money so collected may 
be expended as needed by the commission for capital construction 
purposes.

(b) 
There is assessed on the fair cash market value as provided by W.S. 39-2-208, of 
all oil and gas produced, sold or transported from the premises in Wyoming a 
charge not to exceed eight-tenths of one (1) mill ($.0008) on the dollar. The 
commission shall by order fix the amount of the charge in the first instance and 
may reduce or increase the amount as the expenses chargeable may require. The 
amounts fixed by the commission shall not exceed the limit prescribed above. 
It is the duty of the commission to collect all assessments. All monies 
collected shall be remitted to the state treasurer for deposit in an account 
within the earmarked revenue fund and used exclusively to pay the costs and 
expenses incurred in connection with the administration and enforcement of W.S. 
30-5-101 through 30-5-119. * * * (Emphasis added.)