Williams Production RMT Co. v. Wyoming Department of Revenue

Summary

The Wyoming Supreme Court reviewed the valuation of coal bed methane production for severance and ad valorem tax purposes. The court affirmed the determination that the point of valuation was the outlet of the initial dehydrator and upheld the treatment of upstream transportation costs, while reversing the denial of an on-lease fuel exemption.

Holdings

1. For severance and ad valorem tax purposes, the point of valuation of Williams's coal bed methane was the outlet of the initial dehydrator, not the upstream point where Williams transferred the gas to Western Gas.
2. Williams was not entitled to deduct transportation expenses incurred before the outlet of the initial dehydrator in determining the fair market value of its coal bed methane.
3. The Board's determination of the allowable deduction for transportation expenses incurred downstream of the initial dehydrator was supported by substantial evidence.
4. The Board could not reasonably conclude that Williams failed to establish entitlement to an on-lease fuel-use exemption because the parties agreed that the exemption applied. The adjustment was required to be based on the Department of Revenue's figure of $2,998,927.

Questions Presented

1. Whether the point of valuation for Williams's coal bed methane production was the outlet of the initial dehydrator or an upstream point where Williams transferred the gas to a third party.
2. Whether the Board's determination of the deductible amount of downstream transportation costs was supported by substantial evidence.
3. Whether the Board's denial of Williams's on-lease fuel-use exemption was supported by substantial evidence.

Disposition

reversed_and_remanded