Severance Tax: Wyoming; Calculation; Coalbed Methane

摘要

In 2000-2002, Kennedy produces CBM and delivers it near the wellhead to several Enron-related entities who gather the gas and transport and dehydrate the gas. Kennedy, in its severance tax calculation for the three years, subtracts from the purchase price the costs incurred by it to the service companies. In 2006, the Department of Audit determines that for the years in question the point of valuation is the outlet of the initial dehydrator downstream from the wellheads. On that basis, DOA disallows gathering and transportation expenses upstream of the dehydrator. DOA thus determines that Kennedy has substantially underpaid its severance tax liability. The DOA decision is affirmed by the Department of Revenue and then appealed to the Board of Equalization which also affirms. Held: affirmed. The court applies, as per the Wyoming Administrative Procedures Act, a combination of the substantial evidence and arbitrary, capricious and abuse of discretion tests.