1

Certiorari Denied, March 17, 2011, No. 32,865

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO

Opinion Number: 2011-NMCA-043

Filing Date: January 20, 2011 

Docket No. 28,967

HESS CORPORATION,

Plaintiff-Appellant,

v.

NEW MEXICO TAXATION AND REVENUE

DEPARTMENT,

Defendant-Appellee.

APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY

Timothy L. Garcia, District Judge

Holland & Hart, LLP

Bradford C. Berge

Michael H. Feldewert

Kristina Martinez

Santa Fe, NM

for Appellant

Jones, Snead, Wertheim & Wentworth, P.A.

Jerry Wertheim

Jerry Todd Wertheim

John V. Wertheim

Santa Fe, NM

for Appellee

OPINION

CASTILLO, Judge.
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{1} Appellant, the Hess Corporation (Hess), was a defendant in a class action lawsuit brought

in federal district court by royalty interest owners who claimed that Hess suppressed the value of

the carbon dioxide for which they received royalty payments. The class action lawsuit was settled,

and Hess agreed to compensate the royalty interest owners. Thereafter, Respondent, the New

Mexico Taxation and Revenue Department (the Department) issued Hess a severance tax assessment

citing NMSA 1978, Section 7-29-4.3 (1985) as authority for the assessment. Hess paid the

assessment in order to contest it and filed a refund claim in district court arguing that the Department

lacked a statutory basis for the assessment. The district court rejected this argument, but nonetheless

entered judgment making a partial refund to Hess on other grounds. We affirm.

I. BACKGROUND

{2} From 1984 onward, Hess and other oil and gas companies have produced carbon dioxide

from the Bravo Dome Carbon Dioxide Gas Unit in Northeastern New Mexico (the Bravo Dome

Unit). The carbon dioxide produced from the Bravo Dome Unit is subject to severance taxes. Hess

reported and paid its severance taxes on a monthly basis.

{3} In 1995, a class action lawsuit styled Feerer v. Amoco Production Co., No. 95-0012, 1998

U.S. Dist. Lexis 22248 (D.N.M. 1998) (the Feerer Litigation) was filed in the federal district court

of New Mexico against Hess and other defendants engaged in carbon dioxide production at the

Bravo Dome Unit. The class members were overriding royalty interest owners in the Bravo Dome

Unit who alleged underpayment of royalties under the Bravo Dome Carbon Dioxide Gas Unit

Agreement. The Feerer Litigation resulted in the Feerer Settlement Agreement (FSA) which was

finalized and approved by the federal district court in 1998.

{4} The FSA was memorialized in an opinion in which the federal district court set forth the

terms of the FSA and assessed whether, under Federal Rule of Evidence 23(e), the terms of the FSA

were fair. Feerer, 1998 U.S. Dist. Lexis 22248. Under paragraph eight of the FSA, Hess made a

payment into the registry of the federal court in the amount of $8,500,000 dollars. Hess also agreed

to “future relief” that involved changes to the manner in which Hess paid royalties.

{5} In December 2004, the Department issued Hess a notice of assessment in which the

Department claimed that, as a direct result of the FSA, Hess owed roughly eight million dollars in

severance taxes. This included principal, interest, and penalties. The Department cited Section 7-29-

4.3 as authority for the assessment and asserted that the FSA constituted a taxable event under this

statute. The Department alleged that one of the claims underlying the litigation which led to the

FSA was that Hess suppressed the value of carbon dioxide on which royalties were paid. Thus,

according to the Department, the FSA established an increased taxable value for carbon dioxide gas

severed in New Mexico that should have been reported to the Department.

{6} Hess paid the assessment in order to halt the running of interest and perfect its right to pursue

a full refund. Thereafter, Hess submitted an administrative refund claim, which was denied. Hess

then filed a complaint in district court pursuant to the New Mexico tax refund statute, NMSA 1978,

Section 7-1-26(C)(2) (2007).

{7} The district court issued a pretrial order identifying the uncontroverted facts, the contested
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facts, and the contested issues of law. The following is a summary of the pertinent portions of that

order. At the time the federal court approved the FSA, the Feerer Litigation class’s claims were

comprised of seven allegations. Six of the seven allegations related to whether Hess made

inappropriate deductions and charges in calculating royalty payments. The remaining allegation

related to Hess’s purported failure to achieve a reasonable sales price for the carbon dioxide

produced from the Bravo Dome Unit. Thus, the allegations underlying the Feerer Litigation

concerned both matters unrelated to Hess’s alleged suppression of the price of carbon dioxide (nonprice issues) as well as matters related to Hess’s alleged suppression of the price of carbon dioxide

(price issues). The Department’s assessment was based on (1) the legal conclusion that, when

pricing issues are litigated, the oil and gas statutes impose taxes on any increased value of product

imputed by court-approved settlement and (2) on the factual assumption that Hess settled price

claims through the FSA. The parties agree that Hess is not liable for additional severance taxes as

a result of the non-price portion of the FSA. The Department’s assessment was based on an

allocation of the settlement proceeds between the price and non-price claims. Hess contested the

Department’s factual assumption that any portion of the FSA settlement proceeds related to price

claims and contested the Department’s legal conclusion that the federal district court’s approval of

the FSA constituted a finding or order by a court that increased the taxable value of a product at the

production unit, giving rise to tax liabilities under Section 7-29-4.3.

{8} Following a three-day bench trial, the district court entered its findings of fact and

conclusions of law which were later amended. The district court’s findings were, for the most part,

a restatement of the parties’ divergent positions concerning the nature of the FSA and whether Hess

was liable for severance taxes under Section 7-29-4.3 as a result of the FSA. The district court did

not expressly accept or discredit either party's version of the facts. Rather, the district court

observed that, during the negotiations that led to the FSA, the parties failed to reach any allocation

of the settlement proceeds as to the price versus non-price claims. The court then concluded that

the FSA settled both price and non-price claims, that the Department’s allocation of the settlement

proceeds to the price versus non-price claims (eighty-one percent to price and nineteen percent to

non-price) was not reasonably supported by the evidence, and that Hess’s allocation (zero percent

to price and one hundred percent to non-price) was also not reasonably supported by the evidence.

The district court utilized a standard formula which equally allocated the settlement proceeds and

found and concluded that a proper allocation of the proceeds was one-half to price and one-half to

non-price.

{9} Based on its findings and conclusions, the district court entered judgment refunding Hess a

partial amount of the 2004 assessment. Of the original roughly $8,000,000 assessment, Hess was

refunded $4,432,323 plus interest. The refund amounted to $6,550,973. The Department retained

$1,516,629. Hess filed a timely notice of appeal.

II. DISCUSSION

{10} On appeal, Hess asks that we vacate the district court’s ruling and award Hess a full refund

of the amounts paid under the assessment with interest from the date of payment. Hess’s primary

argument is that the FSA is “not the type of administrative or judicial event that triggers additional

severance tax reporting and payment obligations under the plain language of Section 7-29-4.3.”

Alternatively, Hess contends that the assessment was barred by the controlling statute of limitations.
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Finally, Hess raises a number of other arguments. We address these issues in turn.

A. Section 7-29-4.3

{11} Section 7-29-4.3 reads as follows:

When an increase in the value of any product is subject to the approval of any

agency of the United States of America or the [S]tate of New Mexico or any court,

the increased value shall be subject to this tax. In the event the increase in value is

disapproved, either in whole or in part, then the amount of tax which has been paid

on the disapproved part of the value shall be considered excess tax. Any person who

has paid any such excess tax may apply for a refund of that excess tax in accordance

with the provisions of Section 7-1-26. 

Whether Section 7-29-4.3 provides a statutory basis for the assessment is a matter we review de

novo. TPL, Inc. v. N.M. Taxation & Revenue Dep’t, 2003-NMSC-007, ¶ 10, 133 N.M. 447, 64 P.3d

474 (“[W]e review de novo a lower court or administrative agency’s application of law to facts.”).

To the extent this inquiry requires us to interpret Section 7-29-4.3, our review is also de novo. TPL,

Inc., 2003-NMSC-007, ¶ 10 (“[W]hen we are required to interpret the phrases within a statute, we

are presented with a question of law, which we review de novo.”).

{12} Tax statutes, like any other statutes, “are to be interpreted in accordance with the legislative

intent and in a manner that will not render the statutes’ application absurd, unreasonable, or unjust.”

Amoco Prod. Co. v. N.M. Taxation & Revenue Dep’t, 118 N.M. 72, 74, 878 P.2d 1021, 1023 (Ct.

App. 1994). “We look primarily to the language of the statute, and when the language is free from

ambiguity, we will not resort to any other means of interpretation.” Kilmer v. Goodwin, 2004-

NMCA-122, ¶ 18, 136 N.M. 440, 99 P.3d 690. “Where an ambiguity or doubt exists as to the

meaning or applicability of a tax statute, it should be construed most strongly against the taxing

authority and in favor of those taxed.” N.M. Elec. Serv. Co. v. Jones, 80 N.M. 791, 793, 461 P.2d

924, 926 (Ct. App. 1969). As a leading treatise on the subject instructs,

in the interpretation of statutes relating to taxation, it is the established rule not to

extend their provisions by implication beyond the clear import of the language used

or to enlarge their operations so as to embrace matters not specifically pointed out

and where there is doubt they are construed most strongly against the government

and in favor of the citizen.

3A Norman J. Singer, Sutherland Statutory Construction § 66:2, at 19 (6th ed. 2003).

{13} The Department based the tax assessment on the language of Section 7-29-4.3. There is no

case law construing the tax provision at issue in this case, nor has the Department had the

opportunity to interpret the statute with regard to severance tax reporting and payment obligations

on payors of court approved settlements. Therefore, our review of Section 7-29-4.3 presents us with

a question of first impression.

{14} The pertinent portion of the statute provides that “[w]hen an increase in the value of any
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product is subject to the approval of any agency of the United States of America or the [S]tate of

New Mexico or any court, the increased value shall be subject to this tax.” Id. “Value” as used in

the phrase “taxable value” is defined as “the actual price received for products at the production unit,

except as otherwise provided in the Oil and Gas Severance Tax Act.” NMSA 1978, § 7-29-2(D)

(2005). “‘Actual price’ means the money or other consideration received or accrued for the product

. . . .” 3.18.1.7(A) NMAC (12/29/00). “[A] production unit is the wellhead and the equipment

associated with the wellhead.” 3.18.1.7(E) NMAC ; see also § 7-29-2(B) (defining “production

unit” as “a unit of property designated by the department from which products of common

ownership are severed”). Further, because there is no actual sale—or price received—at the

wellhead, the State permits operators to calculate the taxable or wellhead value by deducting costs

for compression, dehydration, gathering, and transportation from the downstream sales price

received for the product. See § 7-29-4.2(C); see also 3.18.1.7(A) NMAC.

{15} Like Section 7-29-4.3, the New Mexico Administrative Code similarly directs that severance

taxes may be levied “[w]hen any agency of the United States of America or the [S]tate of New

Mexico or any court issues an order and the effect of the order is to increase the taxable value of

products previously reported.” 3.18.7.8(A) NMAC. We note that this regulation, by its

title—“Settlements; when tax on additional value is due”—necessarily contemplates that Section

7-29-4.3 applies to class action settlements like the one at issue. It is clear, therefore, that both

Section 7-29-4.3 and the relevant provision of the administrative code impose severance tax

obligations when a court or agency issues an order, and the effect of that order is to increase the

value at the wellhead of products previously reported. We now turn to the parties’ arguments.

{16} The central issue in this case is whether the FSA constituted an order that increased the value

of a product previously reported and which resulted in Hess accruing severance tax obligations

under Section 7-29-4.3. Hess asserts that the FSA concerned a Fed. R. Civ. P. 23(e) NMRA motion

to approve a class action royalty settlement and that, therefore, the FSA did not constitute an

adjudicatory event where a court order increased the value of a product. The Department responds

that Section 7-29-4.3 covers the settlement of royalty class actions that have value claims underlying

them, that Hess did indeed accrue severance tax obligations under Section 7-29.4.3 as a result of the

FSA, and that the district court properly applied the law in concluding that the FSA constituted a

taxable event under this statute. The district court concluded that Hess was liable for severance

taxes under Section 7-29-4.3 because Hess, by entering into the FSA, settled the price claim and

failed to allocate the settlement proceeds. We agree with the Department and the district court.

{17} Under the plain language of Section 7-29-4.3 and the corresponding regulations, we hold that

a settlement of a royalty class action may constitute an adjudicatory event that results in an increased

taxable value of products. There is no dispute that class actions brought pursuant to Fed. R. Civ. P.

23(e) are always subject to court approval. It is therefore reasonable and logical to conclude that

the Legislature intended to include class action settlements that have underlying value claims as a

type of judicial event that triggers additional severance tax reporting and payment obligations under

Section 7-29-4.3.

{18} In this case, the royalty owners in the class action had charged Hess with underpaying

royalties both through non-price conduct and through price-related conduct. In settling the price

claim, Hess settled the allegation that it suppressed the price of carbon dioxide produced from the
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Bravo Dome Unit. In fact, the district court specifically found that the Department had determined

“a substantial portion of the Feerer Settlement payments made by [Hess] were based upon the

overall suppression of price.” Thus, the proceeds of the settlement agreement were, in part,

compensation provided to the royalty interest owners to account for the alleged failure to achieve

a reasonable sales price for the product. Accordingly, we reject Hess’s contention that Section 7-29-

4.3 is inapplicable here because there is no express finding that the FSA increased the value of the

carbon dioxide. The district court did make findings that there were price claims and non-price

claims; that the parties did not allocate proceeds between these claims; that the assessments were

based upon the overall suppression of price, thus decreasing the value of carbon dioxide produced

at the Bravo Dome Unit; and, lastly, that the settlement proceeds would be allocated one-half to

price claims and one-half to non-price claims. In effect, the district court determined that the

proceeds of the FSA represented payment to the class for a portion of the value of carbon dioxide

for which severance taxes had not been previously reported or paid. We conclude, therefore, that

the district court correctly determined that the FSA constituted a taxable event under Section 7-29-

4.3.

{19} In further support of its argument that Section 7-29-4.3 does not apply in this case, Hess

contends that it cannot be subject to taxation under Section 7-29-4.3 because 3.18.7.8 NMAC states

that only taxpayers who have received a payment or credit for a product previously reported may

be liable for taxes under Section 7-29-4.3. Hess claims that it is not a taxpayer but a payor under

the terms of the Feerer settlement. Specifically, Hess contends that because it did not receive a

payment or credit, there was no corresponding severance tax reporting requirement or payment

obligation. We disagree. Hess misinterprets the import of the regulation and fails to consider other

pertinent provisions of the tax code.

{20} As the operator of the production unit, Hess is charged with the responsibility of determining

the “taxable value” of the carbon dioxide it extracts. See NMSA 1978, § 7-29-4.1 (2005); NMSA

1978, § 7-29-6 (1958); NMSA 1978, § 7-29-7 (1986). Section 7-29-6 states that “[a]ny operator

making a monetary payment to an interest owner for his portion of the value of products from a

production unit shall withhold from such payment the amount of tax due from the interest owner.”

Pursuant to this statute, Hess was obligated not only to remit any severance taxes it may be liable

for under Section 7-29-4.3, but was also obligated to remit any severance taxes owed by the royalty

interest owners. And, because interest owners are liable for the tax to the extent of their interest in

the product, Section 7-29-4(C), Hess must then withhold severance taxes to royalty interest owners

“for [their] portion of the value of products from a production unit.” Section 7-29-6. Based on these

statutory provisions, we thus conclude that Hess is a taxpayer and was obligated to pay any

severance taxes for which it may be liable, including taxes owed by the royalty interest owners.

{21} We disagree with Hess, for the reasons just described, that there is any ambiguity concerning

the applicability of Section 7-29-4.3 here. We are similarly unpersuaded by Hess’s contention that

the Department was equitably estopped from issuing the assessment. “Courts are reluctant to apply

equitable estoppel against a governmental entity.” Kilmer, 2004-NMCA-122, ¶ 26. Hess directs

us to cases describing the elements Hess was required to prove to succeed on its estoppel claim.

Hess failed to discuss those elements in the context of the facts before us. We proceed to Hess’s

claim that the assessment is barred by the statute of limitations.
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B. Statute of Limitations

{22} Hess argues that, even if we conclude that Section 7-29-4.3 provides the statutory grounds

for the assessment, imposition of the assessment was nevertheless barred by the controlling statute

of limitations, NMSA 1978, Section 7-1-18(A) (1994). “We review de novo whether a particular

statute of limitations applies.” Jaramillo v. Gonzales, 2002-NMCA-072, ¶ 8, 132 N.M. 459, 50 P.3d

554.

{23} With limited exceptions, the Department is required to issue tax assessments within three

years from the end of the calendar year in which payment of a tax is due. Section 7-1-18(A). This

statute of limitations is extended to seven years when a taxpayer fails to complete and file any

required return. Section 7-1-18(C). The event triggering the assessment, the FSA, occurred in 1998.

The assessment was issued in 2004, well beyond the three-year window, but within seven years of

the calendar year in which payment of the tax was due. The issue is whether the Department may

avail itself of the seven year extension established in Section 7-1-18(C).

{24} “[T]he various extensions to the general three-year limitation on assessments . . . are intended

to extend the time subject to assessment, depending on the circumstances under which a taxpayer

has not paid taxes for which it was in fact liable.” Taxation & Revenue Dep’t, State of N.M. v. Bien

Mur Indian Mkt. Ctr., 108 N.M. 228, 230, 770 P.2d 873, 875 (1989). “[T]heir application depends

solely on objective facts and circumstances,” here nonfiling. Id. Their application “does not turn

on the taxpayer’s culpability.” Id. (emphasis omitted).

{25} The district court found that Hess “did not prepare or file any tax forms with the

[Department] which identified or allocated any of the settlement payments (made in the Feerer

Settlement) as additional amounts subject to severance tax liability owed to the State of New

Mexico.” This finding is sufficient to support the conclusion that Section 7-1-18(C) controls here.

Hess was subject to severance taxes as a result of the FSA but failed to file a return of any kind.

Hess submits varying arguments why we should not adopt this conclusion. These arguments fail

to persuade us.

{26} Hess appears to argue that Section 7-1-18(C) is inapplicable because Hess did not know that

it was required to file a return and should not be held accountable for failing to do so. As noted

above, taxpayer culpability is not pertinent in deciding whether one of the exceptions to the threeyear statute of limitations is applicable. See Bien Mur Indian Mkt. Ctr., 108 N.M. at 230, 770 P.2d

at 875. Moreover, “tax statutes normally are such that the taxpayer has the obligation of

self-declaration of any incident which has a tax consequence.” State v. Martin, 90 N.M. 524, 526,

565 P.2d 1041, 1043 (Ct. App. 1977), overruled on other grounds by State v. Wilson, 116 N.M. 793,

867 P.2d 1175 (1994). “Implicit in a requirement to self-declare is an obligation to assess one’s tax

obligation under applicable tax law.” Kinder Morgan CO2 Co. L.P. v. State Taxation & Revenue

Dep’t, 2009-NMCA-019, ¶ 43, 145 N.M. 579, 203 P.3d 110. We also observe that there was

evidence that before the final settlement agreement was provided to the federal court, the parties to

the FSA agreed to eliminate any reference to severance taxes in the FSA. It appears the parties were

at one time concerned about the assessment of severance taxes.

{27} Hess also argues that it did not receive a payment or credit as a result of the FSA. We fail
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to see how this bears on the applicability of Section 7-1-18(C). While it is true that in virtually

every taxable settlement, the taxpayer will receive a “payment or credit,” Section 7-29-7 makes clear

that it is the operator’s obligation to file the report showing the value, volume and kind of product

sold from the production unit. Consequently, as the operator, Hess was required to report any

increased value resulting from the settlement.

{28} Finally, Hess claims that “[a] dispute over the amount of the taxable value previously

reported cannot constitute ‘a failure by a taxpayer to complete and file any required return’ for

purposes of 7-1-18(C).” We fail to see why this is the case. The FSA was a taxable event under

Section 7-29-4.3 for which Hess did not pay taxes. Accordingly, under Section 7-1-18(C), the

statute of limitations is extended to seven years.

C. Hess’s Additional Arguments

{29} Hess raises six additional arguments. Five are based on lack of substantial evidence, and the

sixth relates to the portion of settlement proceeds based on interest and expenses. “In accordance

with the standard of review, when considering a claim of insufficiency of the evidence, the appellate

court resolves all disputes of facts in favor of the successful party and indulges all reasonable

inferences in support of the prevailing party.” Las Cruces Prof’l Fire Fighters v. City of Las Cruces,

1997-NMCA-044, ¶ 12, 123 N.M. 329, 940 P.2d 177. Hess points out that, in the 2004 notice of

assessment, the Department informed Hess that it had invoked its authority under NMSA 1978,

Section 7-1-11(D) (2007), to use reasonable methods to estimate Hess’s tax liability. Section 7-1-

11(D) states that “[i]f the taxpayer’s records and books of account do not exist or are insufficient

to determine the taxpayer’s tax liability, if any, the [D]epartment may use any reasonable method

of estimating the tax liability.” The Department explained in the assessment notice that it based its

estimation of Hess’s severance tax liability on the value of the FSA because it was unable to base

that determination on Hess’s records and books. Hess argues that the Department “failed to present

evidence to substantiate a basis for invoking the ‘reasonable methods’ assessment authority.” This

argument fails.

{30} The assessment was predicated on the factual assertion that Hess underrepresented the value

of a previously reported taxable product. As such, it is logical that the Department would not look

to Hess’s records and books to reach a determination as to the true value of that product, but instead

would invoke its authority under Section 7-1-11(D) and look to some other source for that

information. The Department did so through the testimony of its expert who had relied on the

damage allegations in the Feerer complaint, as well as the federal court’s findings in approving the

settlement.

{31} Hess next claims that the district court’s allocation of the settlement proceeds—one-half to

the price claim and one-half to the non-price claims—is not supported by substantial evidence. The

parties vigorously disputed how the settlement proceeds should be allocated. The Department, based

on the testimony of its experts, asked the district court to allocate the proceeds eighty-one percent

to the price claim and the remainder to the non-price claims. Hess submitted contrary evidence and

asked the district court to allocate zero percent of the proceeds to the price claim and one hundred

percent of the proceeds to the non-price claims. The district court rejected both parties’ requests and

allocated the proceeds evenly. We find no error in this determination.
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{32} The district court expressly observed that at least one expert indicated that this was an

appropriate allocation. The record confirms this observation. Mr. Valdene Severson, who identified

himself as the oil and gas bureau chief of the Department’s audit and compliance division, testified

that he was asked to compute how the FSA proceeds should be allocated between the non-price

claims and the price claim. Based on his calculations, Severson concluded that eighteen to fifty-two

percent of the proceeds should be allocated to the non-price claims. Dr. John Tysseling, the

Department’s expert economist, testified that Severson’s computation was reasonable and the result

reached was “within a reasonable range.”

{33} In light of this testimony, we cannot say that the district court’s allocation is unsupported by

substantial evidence. It is the “duty of the trier of the facts to weigh the testimony, determine the

credibility of the witnesses, reconcile inconsistent or contradictory statements, and say where the

truth lies.” Jones v. Anderson, 81 N.M. 423, 424, 467 P.2d 995, 996 (1970). The district court was

provided conflicting expert testimony and a range of possible appropriate allocations. The district

court concluded that allocating the proceeds between the two types of claims evenly was

appropriate, and this determination was within the range provided by the experts. We conclude that

the district court’s allocation is supported by substantial evidence and reject Hess’s arguments to

the contrary. See Kerr v. Schwartz, 82 N.M. 63, 65, 475 P.2d 457, 459 (1970) (“[W]here findings

of fact and conclusions of law flowing therefrom have substantial support of the evidence, they will

not be disturbed on appeal.”).

{34} Hess next asserts that, even if the district court’s allocation is supported by substantial

evidence, there is no evidence to demonstrate Hess accrued severance tax liabilities as a result of

that allocation because the FSA concerned royalty payments. We reject this contention. As

described in the preceding section of this opinion, the FSA settled the royalty interest owners’

allegation that Hess was suppressing the true value of the carbon dioxide produced from the Bravo

Dome Unit. The settlement of the price suppression claim provides the factual basis for the

assessment under Section 7-29-4.3.

{35} Hess next argues that the district court erred in failing to account for interest that was built

into the FSA. Hess observes that, in reaching the final settlement figure, the parties to the FSA

included a fifteen percent interest rate for the eighteen years the FSA covered. Hess appears to be

objecting to the fact that it is being required to pay severance taxes on interest. Hess fails to identify

any authority that would require deduction of interest when determining Hess’s severance tax

liabilities under Section 7-29-4.3. Hess cites to Forest v. C.I.R., 104 F.3d 348 (1st Cir. 1996), an

unpublished federal district court decision, which holds that a portion of a settlement payment

should be allocated to interest even though the general release was silent on the issue. We note that

Forest not only does not address the issue of whether severance taxes must be paid on interest, but

that decision is not binding on this Court. Incorporated Cnty. of Los Alamos v. Montoya, 108 N.M.

361, 364, 772 P.2d 891, 894 (Ct. App. 1989). As we have noted, an unpublished opinion is written

solely for the benefit of the parties to the action and has no controlling precedential value. State v.

Gonzales, 110 N.M. 218, 227, 794 P.2d 361, 370 (Ct. App. 1990).

{36} Hess next submits that the Department’s assessment methodology was flawed and that the

district court erred in relying on this methodology to calculate Hess’s adjusted gross imputed tax

value. Specifically, Hess contends that the district court wrongly adopted the Department’s factual
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assertion that ninety-six percent of the FSA class is comprised of one-eighth royalty interest owners.

According to Hess, only nineteen percent of the FSA class is comprised of one-eighth royalty

interest owners. 

{37} Our review of the record reveals that both Severson and Dr. Tysseling addressed how the

Department arrived at the ninety-six percent figure. Severson testified that the Department provided

him with this figure and that he assumed this estimate was correct. That the district court accepted

Severson’s figures, and rejected Hess’s evidence that the FSA class was comprised of only nineteen

percent one-eighth royalty interest owners, does not prove error. “Resolution of factual conflicts,

credibility, and weight is the task of the trial court.” State v. Roybal, 115 N.M. 27, 29, 846 P.2d 333,

335 (Ct. App. 1992). We are unpersuaded that the district court erred in estimating Hess’s adjusted

gross imputed tax value.

{38} Finally, Hess contends that “there is no substantial evidence to support the issuance of [the]

negligence penalty.” The penalty was issued pursuant to NMSA 1978, Section 7-1-69 (2007), and

amounted to approximately $390,000. The Department argues that there was indeed substantial

evidence to support the penalty and points to evidence showing that the parties to the FSA agreed

to eliminate any reference to severance taxes in the FSA so as to limit the parties’ exposure to

severance taxes. This is substantial evidence sufficient to support the negligence penalty. See

Gathings v. Bureau of Revenue, 87 N.M. 334, 335, 533 P.2d 107, 108 (Ct. App. 1975) (explaining

that the term negligence as used in Section 7-1-69 is properly equated with “lack of reasonable

cause” (internal quotation marks and citation omitted)); see also Arco Materials, Inc. v. Taxation

& Revenue Dep’t, 118 N.M. 12, 16, 878 P.2d 330, 334 (Ct. App. 1994) (discussing Section 7-1-69

and observing that “New Mexico case law is clear that penalties may properly be assessed even

when the failure to pay is based on inadvertent error or unintentional failure to pay the tax due”),

overruled on other grounds by Blaze Constr. Co., Inc. v. Taxation & Revenue Dep’t, 118 N.M. 647,

884 P.2d 803 (1994).

V. CONCLUSION

{39} Section 7-29-4.3 provides statutory grounds for the assessment, the assessment was not

barred by the statute of limitations, and we are not persuaded by Hess’s other varying objections to

the ruling below. The district court’s judgment partially refunding Hess is affirmed.

{40} IT IS SO ORDERED.

______________________________________

CELIA FOY CASTILLO, Judge

WE CONCUR:

______________________________________

MICHAEL D. BUSTAMANTE, Judge

______________________________________

LINDA M. VANZI, Judge
11

Topic Index for Hess Corp. v. N.M. Taxation & Revenue Dep't, Docket No. 28,967

AE APPEAL AND ERROR

AE-SB Substantial or Sufficient Evidence

NR NATURAL RESOURCES

NR-OG Oil and Gas

NR-RO Royalties

ST STATUTES

ST-IP Interpretation

TX TAXATION

TX-RF Refund

TX-ST Severance Tax

TX-TM Time Limitations