Opinion ID: 2509156
Heading Depth: 1
Heading Rank: 23

Heading: Williams' Transportation Issues

Text: 73. Storts testified that the calculations of the auditors were flawed because the auditors failed to accurately account for MIGC fees and the associated rebate. The MIGC tariff is $0.35/MMBTU, and the rebate is $0.21/MMBTU. [Transcript Vol. III, pp. 432, 444]. Storts explained that an MCF is not necessarily equal to an MMBTU, and that the appropriate conversion factor varies from well to well. [Transcript Vol. III, pp. 432-433, 435]. However, Simmons made an adjustment for the MCF/MMBTU difference. [Transcript Vol. V, pp. 910-911, 969-970]. We find that these adjustments appear on a schedule attached to the Audit Department's final issue letter. [Transcript Vol. V, pp. 969-970; Exhibit 501; Exhibit 143, column K]. We also find that, in the aggregate, the effect of the MMBTU conversion was negligible, since the conversion factors for the individual wells are predominantly .957 and 1.045. [Transcript Vol. V, p. 911; Exhibit 143, column K]. 74. To the extent that Williams is concerned about the Department's use of the $0.21/MMBTU rebate as the inspiration for the deduction against the Western fee of $0.294/MCF, we find that the ultimate allowance of $0.084 for transportation on Western's pipeline was an estimate from the outset, and the precise calculation of an MCF/MMBTU conversion was unnecessary for that purpose. 75. Williams also complained that the Department failed to account for fuel use charges by the pipelines. However, we find that the calculations of all parties reflect fuel charges as a deduction from gross volumes, allocated back to specific wells. [Exhibit 137; Exhibit 138; Transcript Vol. III, p. 635]. Williams' complaint is therefore baseless. 76. As a separate issue related to transportation, Storts testified that the auditors had failed to deduct transportation charges downstream from Glenrock. [Transcript Vol. III, p. 427]. This claim depends on two points. The first point is that Barrett sold its gas at points downstream of the Glenrock terminus of the Fort Union and MIGC pipelines. [Transcript Vol I, p. 398]. The second point is that, in the audit of state royalty payments, the auditors accepted worksheets showing that Barrett had incurred transportation charges past Glenrock on the Trailblazer Pipeline Corporation and Wyoming Interstate Corporation pipelines. [Transcript Vol III, pp. 464-470]. Taken together, Williams concludes that the auditors failed to deduct all transportation charges that occurred before the (unspecified) point of sale. 77. We find, however, that the evidence supporting this conclusion is negligible. As we have already noted, Williams made no effort to produce Barrett witnesses. In particular, Williams made no effort to produce Barrett witnesses who could speak to the representations about point of sale that were made to the auditors. Supra., ถ24. Storts testified that he was unaware that Barrett representatives had made a representation to the auditors about the point of sale. [Transcript Vol. III, p. 651]. We find that this was in part a consequence of the fact that Williams did not identify this issue until after the final letters were sent from the Departments of Revenue and Audit. 78. The auditors had different guidance for the state royalty audits. [Transcript Vol. V, p. 920]. Unlike the tax audit, the Office of State Lands and Investments directed the auditors to allow transportation after Glenrock, but not transportation to Glenrock. [Transcript Vol. V, p. 920]. Williams did not call any witness from the Office of State Lands and Investments to explore the rationale for this difference in guidance, although there is no dispute that calculations of taxes and royalties are governed by different statutes. [Transcript Vol. III, pp. 563-564]. Moreover, since the auditors had accepted Barrett's representation of a Glenrock point of sale, and this issue was not raised by Williams until the appeal following the final audit letter, we find that the auditors never had reason to initiate an investigation of the reasons for the different guidance. 79. Indeed, Storts was the only witness called by Williams to testify on the downstream transportation issue, and his knowledge was strictly limited to inferences he had drawn from royalty audit spreadsheets. He was unfamiliar with the terms and provisions of the Wyoming state leases for the audited wells. [Transcript Vol. III, p. 564]. He was unable to establish reliable foundation for actual delivery points, actual sales, and the revenues and costs associated with actual sales. [Transcript Vol. III, pp. 580-582]. That was the job of Barrett's marketing department. [Transcript Vol. III, p. 582]. Similarly, he was unable to assure that transportation charges were properly associated with Powder River Basin sales, since that was the job of Barrett's gas management people. [Transcript Vol. III, p. 584]. Such basic items as rebates paid by Western against the MIGC charges are not evident from the face of the schedules offered into evidence. [Exhibit 139; Transcript Vol. V, p. 585]. Storts further admits that he has never negotiated any contracts, and never discussed his factual conclusions with a Williams contract administrator or a Barrett contract administrator. [Transcript Vol. III, p. 603]. Taking all of his testimony into account, we find that Storts' inferences are entitled to little weight. 80. As a separate issue related to transportation, Williams examined Simmons for the purpose of demonstrating that the auditors failed to account for a fixed shipping rate under the two agreements with Fort Union. [Transcript Vol. V, pp. 936-937]. However, based upon a comparison of actual Fort Union charges and the rates required under the terms of Fort Union's Firm Gathering Agreement if it were in effect, we find that the fixed rates were not in effect in 1999. [Transcript Vol. V, pp. 953-955; Exhibit 140, p. 2; Exhibit 145, Section 4.2].