Opinion ID: 2629624
Heading Depth: 4
Heading Rank: 3

Heading: Application of the Williams interpretation to Black Canyon

Text: [¶ 23] As interpreted in Williams, the statutory term initial dehydrator is the first device or particular piece of equipment with the intended and specialized purpose of dehydrating natural gas. It is undisputed that the Black Canyon facility dehydrates natural gas, and is intended to do so. It is also undisputed that Black Canyon is the first such equipment in the LaBarge Project gas stream. For these reasons, the Department contends that Black Canyon is an initial dehydrator, falling within the first sentence of the statute. [¶ 24] While ExxonMobil acknowledges that Black Canyon is a dehydrator, it insists that the legislature intended the statutory term initial dehydrator to apply to facilities very different from Black Canyon. Because the legislature did not define the term, ExxonMobil contends that the legislature must have intended to use it in a common and familiar way so it would be readily understood by the petroleum companies that are required to calculate, report, and pay the severance taxes they owe. ExxonMobil further maintains that Type 1 dehydrators are so common and familiar that the legislature must have had Type 1 dehydrators in mind when it used the term initial dehydrator without defining it. ExxonMobil then compares Type 1 dehydrators to the Black Canyon facility, and contends that the contrasts are so significant that the legislature could not have intended the term initial dehydrator to include both types. [¶ 25] As the Board found, Type 1 dehydrators are not significantly larger than a truck. The Black Canyon facility covers more than 2 million square feet, an area described by ExxonMobil's expert witness as equivalent to 30 football fields. Type 1 dehydrators are generally unstaffed, but checked periodically by field personnel. Black Canyon employs 35 full-time workers. Type 1 dehydrators are not individually designed, one-of-a-kind units, but can be ordered prepackaged and shipped to the site. Black Canyon is unique, a facility specifically designed and constructed to meet many unusual conditions encountered in the LaBarge Project. Type 1 dehydrators have historically vented their relatively small emissions directly into the atmosphere. At Black Canyon, both the air emissions and the water outflow are highly toxic, and must be disposed of and managed carefully. Based on these striking differences between Type 1 dehydrators and Black Canyon, ExxonMobil asserts that the legislature could not reasonably have intended the statutory term initial dehydrator to encompass both Type 1 dehydrators and the Black Canyon facility. ExxonMobil therefore contends that Black Canyon is not an initial dehydrator. [¶ 26] We acknowledge that the differences are dramatic, but as a legal matter, it is difficult to say that these differences disqualify Black Canyon as an initial dehydrator. Both Type 1 dehydrators and Black Canyon use a TEG process to remove water vapor from the raw gas stream. Black Canyon is much larger in scale and complexity, which led the Department to characterize Black Canyon as a dehydrator on steroids. In ExxonMobil's favor, we agree that it is a stretch to include both Black Canyon and Type 1 dehydrators within the same statutory classification. Still, we find no support in the statutes or our case law for the proposition that an initial dehydrator becomes something different when it reaches a certain size or complexity. At this point in our analysis, based solely on the interpretation from Williams, we would be inclined to agree with the Board's conclusion that Black Canyon is an initial dehydrator, though we remain troubled by that conclusion because the Black Canyon facility is so significantly different from the Type 1 dehydrators commonly used in the petroleum industry.