Volume 4, Number 10 - June 3, 2004
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County lost appeal, but won future
Last week, the Wyoming Board of Equalization issued an 86-page opinion in the ExxonMobil LaBarge project valuation dispute with Sublette County. Sublette County lost on all 28 issues in the appeal before the BOE.
The county's appeal of Exxon-Mobil's valuation claimed that the Wyoming Department of Revenue improperly valued the LaBarge production for the years 1993-1999. The BOE decision was based largely on the existence of a 1989 settlement agreement which set the valuation method the DOR could use for assessing the production. DOR had never "opted out" of the agreement, even though the agreement had a methodology opt-out clause that could be used after Aug. 31, 1991.
The decision stated: "Our general finding in favor of the Department (of Revenue) does not establish that the county's concerns were baseless. To the contrary, our review of the entire record causes us to infer that the county had substantial reasons for pursuing the litigation."
The decision listed numerous concerns with DOR's valuation of the ExxonMobil production, from allowing the point of valuation to be the wing valve on the wellhead instead of at the outlet to the dehydration facility, whether certain deductions are proper, allowing a percentage of helium to escape taxation, allowing a 75-percent post-production processing deduction, and several other issues BOE said deserve the DOR's attention.
The BOE issued its decision on May 20. It appeared that Sublette County had lost the dispute, since it lost on each and every claim. But just one day later, the DOR officially opted itself out of the settlement agreement and its valuation methodology. So while Sublette County lost its appeal before the BOE for certain production years, DOR agreed with the county's contentions in setting the stage for future valuation for the LaBarge production. Sublette County's gain appears to be substantial.
In a May 21 letter to ExxonMobil, DOR Director Edmund Schmidt and DOR Mineral Tax Division Administrator Randy Bolles wrote, "This is to advise ExxonMobil Corporation that the State of Wyoming no longer will recognize the settlement agreement dated Jan. 12, 1989, as a methodology to value all natural gas and associated natural resources produced from the LaBarge wellfield in Sublette County, Wyoming, and processed in ExxonMobil's Shute Creek plant."
The letter said: "The Department believes that the methodology provided for in the 1989 settlement agreement does not reach fair market value for 2003 production year as is constitutionally required."
The DOR letter officially rejected ExxonMobil's 2004 annual gross products tax return (for the 2003 production year). ExxonMobil now has to complete a new return and submit it to DOR by the end of this month.
"We require that ExxonMobil report and pay severance tax and report ad valorem taxable value on 100 percent of the production processed through the Shute Creek Gas Plant," the letter stated.
Numerous other provisions of the letter addressed other concerns raised by Sublette County, as was pointed out in a resolution passed by the county commission Tuesday.
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