Opinion ID: 2509156
Heading Depth: 1
Heading Rank: 22

Heading: The Department's Interpretation

Text: 71. The Department interprets the pertinent tax statutes in a distinctly different way. The Department's interpretation rests on administration of statutes since 1990, although principally in the context of conventional natural gas production. [Transcript Vol. IV, pp. 673-678]. The Department's interpretations were supported by the professional training and experience of Craig Grenvik, a supervisor manager with responsibilities for oil and gas taxation who also reviews mineral tax audits. [Transcript Vol. V, p. 1002]. Grenvik has an undergraduate degree in petroleum engineering. [Transcript Vol. V, p. 1028]. 72. The Department stated its position as follows: a. The statutes were drafted and passed when conventional gas production was the only gas production in Wyoming. [Transcript Vol. IV, p. 707]. b. The statutes define equipment separately and do not allow interchangeable application of terms. [Transcript Vol. IV, p. 707]. c. The headers are separators. [Transcript Vol. IV, p. 706; Vol. V, p. 1009]. Separation is a production function. [Transcript Vol. IV, p. 707]. The patent description of a header [Exhibit 116], which refers to the header as a separator, is consistent with common usage in the industry. [Exhibit 116; Vol. V, pp. 1036-1037]. d. The only dehydrator in the sequence of equipment is the glycol (or TEG) dehydrator. [Transcript Vol. IV, p. 682; Vol. V, pp. 1008, 1013]. This is consistent with common usage in the production of conventional natural gas. [Transcript Vol. IV, p. 682]. e. For statutory purposes, dehydration occurs in a dehydrator; the existence of dehydration, as the term is commonly used, does not define a dehydrator. [Transcript Vol. IV, pp. 797-798]. Dehydration is a production function unless it occurs within a processing facility. [Transcript Vol. V, p. 1016]. f. A processing facility is not defined by reference to the definition of processing. Instead, processing facilities are generally large, noticeable, expensive, and identifiable plants that were epitomized by specific installations long known to the Department and the legislature, including but not limited to Opal, Echo Springs, Painter, Whitney Canyon, Carter Creek, Patrick Draw, and Anschutz. [Transcript Vol. IV, pp. 723, 800-801]. g. The principal purpose for the definition of processing is to establish which of the expenses incurred at a processing facility are eligible for deduction as processing expense, in the statutory context of alternative valuation methods that must be used when natural gas is not sold at or prior to the point of valuation. [Transcript Vol. IV, p. 799; Wyo. Stat. Ann. งXX-XX-XXX(b)(vi)(B)-(D) ]. h. Western's booster compressors and TEG dehydrator do not make a processing facility. [Transcript Vol. IV, p. 722]. i. The point of valuation is at the outlet of the TEG dehydrator. [Transcript Vol. IV, p. 701]. j. If the Department were to accept Williams' theories, established policies for the valuation of natural gas would be unsettled. [Transcript Vol. IV, pp. 706-707].