Opinion ID: 2629624
Heading Depth: 2
Heading Rank: 1

Heading: Construction of the Severance Tax Statutes

Text: [¶ 47] Because the statute is ambiguous, we rely upon principles of statutory construction in order to ascertain the legislative intent. Qwest, ¶ 8, 130 P.3d at 511. Two principles of statutory construction are particularly useful in this case. First is a principle of construction applicable to taxation statutes: Tax statutes are to be construed in favor of the taxpayer and are not to be extended absent clear intent of the legislature. Chevron U.S.A., Inc. [ v. State ], 918 P.2d [980,] 985 [(Wyo. 1996)]. In the interpretation of statutes levying taxes 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. In case of doubt they are construed most strongly against the government and in favor of the citizen. Amoco Production Co. v. Dept. of Revenue, 2004 WY 89, ¶ 18, 94 P.3d 430, 438 (Wyo. 2004). Thus, taxes may not be imposed by any means other than a clear, definite and unambiguous statement of legislative authority. Chevron U.S.A., Inc., 918 P.2d at 984; Amoco Production Co., ¶ 18[, 94 P.3d at 4383-9]. See also Wyo. Const. art. 15, § 13 (stating no tax shall be levied, except in pursuance of law, and every law imposing a tax shall state distinctly the object of the same, to which only it shall be applied.). Qwest, ¶ 9, 130 P.3d at 511-12 (paragraph breaks omitted). Construing the statute in favor of the taxpayer inclines us toward ExxonMobil's position that Black Canyon is not an initial dehydrator, but is a processing facility, as those terms are used in Wyo. Stat. Ann. § 39-14-203(b)(iv). [¶ 48] The second useful principle of statutory construction is this: In ascertaining the legislative intent in enacting a statute . . . the court . . . must look to the mischief the act was intended to cure, the historical setting surrounding its enactment, the public policy of the state, the conditions of the law and all other prior and contemporaneous facts and circumstances that would enable the court intelligently to determine the intention of the lawmaking body. Qwest, ¶ 8, 130 P.3d at 511, quoting Petroleum Inc. v. State Bd. of Equalization, 983 P.2d 1237, 1240 (Wyo. 1999). In the case before us now, the statute's historical setting and the general public policy regarding severance taxes provide helpful insight into what the legislature intended when it enacted the statute at issue. [¶ 49] The severance tax is imposed at the point where the production process is completed. Wyo. Stat. Ann. § 39-14-203(b)(ii). Historically, the term production refers to the severance of minerals from the ground. State v. Pennzoil Co., 752 P.2d 975, 979 (Wyo. 1998). Accordingly, the severance tax was traditionally imposed on the value of the mineral at the point where it is severed from the ground. Petra Energy, Inc. v. Department of Revenue, 6 P.3d 1267, 1271 (Wyo. 2000). For natural gas, severance is generally considered to occur at the wellhead. See Union Pac. Resources Co., 839 P.2d at 360-61. Accordingly, it has been said that the basic concept of the severance tax is valuation at the wellhead. J. Ray McDermott & Co. v. Hudson, 370 P.2d 364, 367 (Wyo. 1962). The legislature may choose to adjust or clarify the precise point of valuation, and over the years it has enacted legislation to do that. But unless the statute includes a clear expression of legislative intent to shift the point of valuation away from the wellhead, the statutory language should be construed to conform as nearly as possible to the basic severance tax concept of valuation at the wellhead. [¶ 50] The Black Canyon facility is separated, physically and functionally, from the wellheads of the LaBarge Project. It does not play a part in removing the gas from the ground, but instead in handling the gas after it has been removed from the ground and gathered at the Black Canyon facility. On this basis, it seems inappropriate to consider Black Canyon, as the Department urges, as part of the production process like a typical, small, Type 1 dehydrator. It seems more appropriate to consider Black Canyon, as ExxonMobil urges, to be part of the post-production operations, more akin to the larger and more complex Type 2 dehydrators. ExxonMobil's position in this litigation places the point of valuation closer to the wellheads, while the Department's position pushes it further downstream. Absent a clear expression of legislative intent to depart from the basic severance tax concept of valuation at the wellhead, we must construe the statute in harmony with that concept. Based on these considerations, our construction of Wyo. Stat. Ann. § 39-14-203(b)(iv) must be that the legislature's intent was not to classify Black Canyon as an initial dehydrator as that term is used in the first sentence, but rather to consider Black Canyon a processing facility as that term is used in the second sentence of the statute. [¶ 51] Based on both of these principles of statutory construction, we are ultimately persuaded that Wyo. Stat. Ann. § 39-14-203(b)(iv) must be construed as urged by ExxonMobil. We therefore determine that ExxonMobil's Black Canyon is not an initial dehydrator, as that term is used in the first sentence of Wyo. Stat. Ann. § 39-142-03(b)(iv), and the correct point of valuation for severance taxes is not the outlet of the Black Canyon facility. Black Canyon is instead a processing facility as that term is used in the second sentence of the statute, and the proper point of valuation is at the inlet to the initial transportation related compressor, custody transfer meter or processing facility, whichever occurs first. [¶ 52] ExxonMobil urges us to choose among these three options. It asserts that there is a custody transfer meter located at each wellhead, so the proper point of valuation is at the inlet to these custody transfer meters. The record before us, however, does not establish with sufficient certainty whether those meters are custody transfer meters or volume meters. If they are volume meters, they are not the proper points of valuation. See Amoco Prod. Co., ¶ 31, 94 P.3d at 443. We are unable to resolve this issue based on the record before us, and will remand this case to the Board to determine the correct point of valuation in accordance with this opinion.