Lance Oil & Gas Co. v. WYO. DEPT. OF REV., 03-118.

• Decision Date: 07 December 2004
• Docket Number: No. 03-118.,03-118.
• Citation: 2004 WY 156,101 P.3d 899
• Parties: LANCE OIL & GAS COMPANY, Appellant (Petitioner), v. WYOMING DEPARTMENT OF REVENUE, Appellee (Respondent).
• Court: Wyoming Supreme Court

101 P.3d 899

2004 WY 156

LANCE OIL & GAS COMPANY, Appellant (Petitioner), v. WYOMING DEPARTMENT OF REVENUE, Appellee (Respondent).

No. 03-118.

Supreme Court of Wyoming.

December 7, 2004.

Representing Appellant: Lawrence J. Wolfe, Walter F. Eggers, III, and Mark B. Lehnardt of Holland & Hart LLP, Cheyenne, Wyoming. Argument by Mr. Eggers.

Representing Appellee: Patrick J. Crank, Attorney General; Michael L. Hubbard, Deputy Attorney General; Martin L. Hardsocg, Senior Assistant Attorney General; and Karl D. Anderson, Senior Assistant Attorney General. Argument by Mr. Hardsocg.

Before HILL, C.J., and GOLDEN, LEHMAN, KITE, and VOIGT, JJ.

KITE, Justice.

[¶ 1] Lance Oil and Gas Company (Lance) owned an interest in certain wells in northeastern Wyoming, but was not the operator. It took its share of production of natural gas in kind and sold it for less than $2.75 per MCF. When filing its severance tax forms, Lance claimed an exemption pursuant to Wyo. Stat. Ann. § 39-14-205(f) (LexisNexis 2001) which applies when the price received by the producer for new production is below $2.75 per MCF. The Department of Revenue (DOR) rejected Lance's claim and concluded the exemption applied only when the gross price received by the operator of the wells fell below the trigger price. The State Board of Equalization (SBOE) affirmed DOR's ruling and Lance appealed. The matter was certified to this Court for review. We affirm in part, reverse in part, and remand for further proceedings.

ISSUES

[¶ 2] The issues certified are:

1. Did the SBOE correctly determine that the term "price" in the new well incentive statute, Wyo. Stat. § 39-14-205(f), denotes a gross price as opposed to a net price?

2. Did the SBOE correctly determine that the new well incentive trigger price is only the price received by the operator, or does "producer" also mean an owner which takes in kind and receives a price for its production?

STANDARD OF REVIEW

[¶ 3] Our standard of review is well established.

When an administrative agency case is certified to this court under W.R.A.P. 12.09(b), we review the decision under the appellate standards applicable to a reviewing court of the first instance. The construction and interpretation of statutes are questions of law which we review de novo. We affirm an agency's conclusions of law when they are in accordance with the law. However, when the agency has failed to properly invoke and apply the correct rule of law, we correct the agency's error.

Wyodak v. Dept. of Revenue, 2002 WY 181, ¶ 9, 60 P.3d 129, ¶ 9 (Wyo.2002) (citations omitted).

[¶ 4] We also recognized in Wyodak, ¶¶ 18-19 (some citations omitted) that:

In the conduct of statutory interpretation, we begin by inquiring into the ordinary and obvious meaning of the words employed by the legislature according to the manner in which those words are arranged. If more than one reasonable interpretation exists, we resort to general principles of statutory construction. When the legislature has spoken in unambiguous terms, however, we are bound to the results so expressed.

We have also observed:

It is the court's obligation to make sense out of a statute and give full force and effect to the legislative product; in construing statutes, intention of the law-making body must be ascertained from the language of the statute as nearly as possible. A statute must not be given a meaning which would nullify its operation if it is susceptible of another interpretation.

Hasser v. Flint Engineering, 647 P.2d 66, 69-70 (Wyo.1982). Likewise, we will not construe a statute in a way that renders a portion of it meaningless. With these precepts firmly in mind, we consider the proper meaning of the statutes in question in the context of the entire tax system as established by the constitution and the tax code as a whole.

In State ex rel. Dept. of Revenue v. UPRC, 2003 WY 54, ¶ 12, 67 P.3d 1176, ¶ 12 (Wyo.2003) (citations omitted), we recognized:

... When the words are clear and unambiguous, a court risks an impermissible substitution of its own views, or those of others, for the intent of the legislature if any effort is made to interpret or construe statutes on any basis other than the language invoked by the legislature. Moreover, "[a]ll statutes must be construed in pari materia; and in ascertaining the meaning of a given law, all statutes relating to the same subject or hav[ing] the same general purpose must be considered and construed in harmony."

Therefore, in performing our review, we look first to the plain and ordinary meaning of the words to determine if the statute is ambiguous. A statute is clear and unambiguous if its wording is such that reasonable persons are able to agree on its meaning with consistency and predictability. Conversely, a statute is ambiguous if it is found to be vague or uncertain and subject to varying interpretations. We have said that divergent opinions among parties as to the meaning of a statute may be evidence of ambiguity. However, the fact that opinions may differ as to a statute's meaning is not conclusive of ambiguity. Ultimately, whether a statute is ambiguous is a matter of law to be determined by the court.

FACTS AND HISTORICAL BACKGROUND

[¶ 5] The Wyoming legislature enacted Wyo. Stat. Ann. § 39-6-302(s) (Michie 1997) (repealed by Laws 1998, ch. 5, § 4), now § 39-14-205(f), in an effort to encourage the drilling of new oil and gas wells. In 2000, the legislature amended the statute, which now provides:

(f) Crude oil and natural gas produced from wells drilled between July 1, 1993, and March 31, 2003, except the production from collection wells, is exempt from the severance taxes imposed by W.S. XX-XX-XXX(a)(iii) and (iv) for the first twenty-four (24) months of production on oil production up to sixty (60) barrels per day or its equivalency in gas production, which for purposes of this subsection shall be six (6) MCF gas production for one (1) barrel oil production, or until the price received by the producer for the new production is equal to or exceeds twenty-two dollars ($22.00) per barrel of oil or two dollars and seventy-five cents ($2.75) per MCF of natural gas for the preceding six (6) month period of time [the "trigger" price]. Provided however, that a taxpayer claiming a tax reduction under this subsection is prohibited from claiming a tax reduction provided by subsection (c) or (e) of this section. Nothing in this subsection shall apply to natural gas produced from any well completed for production at a depth of less than two thousand feet (2,000) from the earth's surface if drilling activities commenced on or after April 1, 2000.

Id. (emphasis added).

[¶ 6] Lance is a "take-in-kind" owner of natural gas produced in Wyoming.¹ Barrett Resources Corporation (Barrett) currently operates the wells at issue and sells the remaining natural gas produced on behalf of the other working interest owners.

[¶ 7] On October 12, 2000, DOR issued a memorandum to all oil and gas taxpayers, including Lance, concerning § 39-14-205(f) and defining "price" as "the gross sales value of the well divided by the gross sales volume of the well for a particular month." DOR further advised that the "incentive tax rate for a well expires after the above listed `strike' [trigger] price has been met or exceeded for six consecutive months for that product on that well." [¶ 8] On January 23, 2001, DOR advised Lance that the exemption had expired on the wells in question because the price Barrett received for the rest of the working interest owners had exceeded the statutory "trigger" price for six consecutive months. Lance objected, contending that the "trigger" price of $2.75 per MCF should not be interpreted to mean the gross sales price, but the net price or taxable value, i.e., the gross price less any transportation, processing, or other expenses incurred by the taxpayer prior to sale of the natural gas. Lance also asserted the new well incentive should be based on the price received by each take-in-kind taxpayer as opposed to only the price received by the operator on behalf of working interest owners not taking in kind.

[¶ 9] Subsequently, Lance sought tax-exempt status for certain 2000 and 2001 gas production under § 39-14-205(f). DOR denied this request. On appeal, SBOE affirmed DOR's denial of tax-exempt status to Lance. Lance then filed a petition for review in the district court, which certified the case to this Court.

DISCUSSION

1. Gross Price or Net Price

[¶ 10] Lance argues the term "price" as used within § 39-14-205(f) means a "net" price and had the legislature intended the incentive to be based on a "gross" price, it could have easily specified that intention. In addition, Lance proffers that in order to harmonize the statutes that impose taxes with this exemption statute, § 39-14-205(f), this Court must conclude the term "price" means "net" price or taxable value.

[¶ 11] In countering Lance's arguments, DOR argues the term "price" as used within § 39-14-205(f) is unambiguous and refers to "gross" price because the commonly accepted definition of the word "price" when used alone implies a "gross" price as opposed to a "net" price calculated after allowed deductions. DOR also asserts that had the legislature meant "net" price or taxable value, it simply could have said so as it has done in other tax statutes.

[¶ 12] Our analysis must begin with a determination of whether § 39-14-205(f) is unambiguous. If the statute is unambiguous, we must give effect to the plain and ordinary meaning of the language used in the statute. Construction of legislative enactments is only appropriate where the enactment has first been found, as a matter of law, to be ambiguous. A statute is unambiguous if its wording is such that reasonable persons are able to agree to its meaning. Airtouch Communications, Inc. v. Dept. of Revenue, 2003 WY 114, ¶ 14, 76 P.3d 342, ¶ 14 (Wyo.2003) (citing Snake River Brewing Co., Inc. v. Town of...