2023 Wyoming Statutes › Title 39 - Taxation and Revenue › Chapter 14 - Mine Product Taxes › Article 2 - Oil and Gas › Section 39-14-203 - Imposition.

39-14-203. Imposition.
(a) Taxable event. The following shall apply:
(i) There is levied a severance tax on the value of the gross product extracted for the privilege of severing or extracting crude oil, lease condensate or natural gas in the state. The tax imposed by this subsection shall be in addition to all other taxes imposed by law including, but not limited to, ad valorem taxes imposed by W.S. 39-13-101 through 39-13-111.
(b) Basis of tax. The following shall apply:
(i) Crude oil, lease condensate and natural gas shall be valued for taxation as provided in this subsection;
(ii) The fair market value for crude oil, lease condensate and natural gas shall be determined after the production process is completed. Notwithstanding paragraph (x) of this subsection, expenses incurred by the producer prior to the point of valuation are not deductible in determining the fair market value of the mineral;
(iii) The production process for crude oil or lease condensate is completed after extracting from the well, gathering, heating and treating, separating, injecting for enhanced recovery, and any other activity which occurs before the outlet of the initial storage facility or lease automatic custody transfer (LACT) unit;
(iv) 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. When no dehydration is performed, other than within a processing facility, the production process is completed at the inlet to the initial transportation related compressor, custody transfer meter or processing facility, whichever occurs first;
(v) If the crude oil, lease condensate or natural gas production as provided by paragraphs (iii) and (iv) of this subsection are consumed as defined by W.S. 39-14-201(a)(xv)(B), processed or transported, sold to a third party or processed or transported by a third party, at or prior to the point of valuation provided in paragraphs (iii) and (iv) of this subsection, the fair market value shall be the value established by bona fide arms-length transaction;
(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 proportionate profits method shall only be used as a method in conjunction with the provisions of the modified netback method in subparagraph (E) of this paragraph. 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.
(E) Modified netback The fair market value is:
(I) The total amount received from the sale of the natural gas minus the total direct processing and transportation costs, any arms-length transportation fees from the point of valuation to the point of arms-length sale, overhead costs directly related to facility operations not to exceed ten percent (10%) of the total direct processing and transportation costs, exempt royalties and return on investment incurred by the taxpayer from the point of valuation to the point of arms-length sale;
(II) There shall be one (1) point of valuation for all interest owners of the processing facility;
(III) Any producer utilizing the modified netback method set forth in this subparagraph shall be required to calculate the taxable value for the tax year under the methods of both this subparagraph and subparagraph (D) of this paragraph (hereafter referred to as the "annual floor test"). The taxable value for the year shall be the higher of the two (2) taxable values determined under the annual floor test. If the valuation method is changed as a result of the provision in this subparagraph, no interest or penalties shall be due if the taxpayer files the amended returns and remits the additional severance tax due under this subparagraph not later than May 25 of that calendar year. After the first year of applicability of this subparagraph, for each succeeding year the taxpayer's monthly severance tax returns shall be filed using the valuation method determined under the annual floor test for the immediately preceding calendar year.
(vii) When the taxpayer and department jointly agree, that the application of one (1) of the methods listed in paragraph (vi) of this subsection does not produce a representative fair market value for the crude oil, lease condensate or natural gas production, a mutually acceptable alternative method may be applied;
(viii) If the fair market value of the crude oil, lease condensate or natural gas production as provided by paragraphs (iii) and (iv) of this subsection is determined pursuant to paragraph (vi) of this subsection, the method employed shall be used in computing taxes for three (3) years including the year in which it is first applied or until changed by mutual agreement between the department and taxpayer. If the taxpayer believes the valuation method selected by the department does not accurately reflect the fair market value of the crude oil, lease condensate or natural gas, the taxpayer may appeal to the board of equalization for a change of methods within one (1) year from the date the department notified the taxpayer of the method selected;
(ix) If the department fails to notify the taxpayer of the method selected pursuant to paragraph (vi) of this subsection, the taxpayer shall select a method and inform the department. The method selected by the taxpayer shall be used in computing taxes for three (3) years including the year in which it is first applied or until changed by mutual agreement between the taxpayer and the department. If the department believes the valuation technique selected by the taxpayer does not accurately reflect the fair market value of the crude oil, lease condensate or natural gas, the department may appeal to the board of equalization for a change of methods within one (1) year from the date the taxpayer notified the department of the method selected;
(x) If crude oil is enhanced prior to the point of valuation as defined in paragraph (iii) of this subsection by either a blending process with a higher grade hydrocarbon or through a refining process such as cracking, then the fair market value shall be the fair market value of the crude oil absent the blending or refining process;
(xi) For natural gas, the total of all actual transportation costs from the point where the production process is completed to the inlet of the processing facility or main transmission line shall not exceed fifty percent (50%) of the value of the gross product without approval of the department based on documentation that the costs are due to environmental, public health or safety considerations, or other unusual circumstances.
(c) Taxpayer. The following shall apply:
(i) In the case of ad valorem taxes on crude oil, lease condensate or natural gas produced under lease, the lessor is liable for the payment of ad valorem taxes on crude oil, lease condensate or natural gas production removed only to the extent of the lessor's retained interest under the lease, whether royalty or otherwise, and the lessee or his assignee is liable for all other ad valorem taxes due on production under the lease;
(ii) In the case of severance taxes, any person extracting crude oil, lease condensate or natural gas and any person owning an interest in the crude oil, lease condensate or natural gas production to the extent of their interest ownership are liable for the payment of the severance taxes together with any penalties and interest;
(iii) Any taxpayer paying severance taxes on any crude oil, lease condensate or natural gas production may deduct the taxes paid from any amounts due or to become due to the interest owners of such production in proportion to the interest ownership.