Exxon Corp. v. BD. OF CTY. COM'RS

• Decision Date: 27 August 1999
• Docket Number: No. 98-45, No. 98-46.
• Citation: 987 P.2d 158
• Parties: EXXON CORPORATION, Appellant (Plaintiff), v. BOARD OF COUNTY COMMISSIONERS, SUBLETTE COUNTY, Appellee (Defendant). State of Wyoming Department of Revenue, Appellant (Plaintiff), v. Board of County Commissioners, Sublette County, Appellee (Defendant).
• Court: Wyoming Supreme Court

987 P.2d 158

EXXON CORPORATION, Appellant (Plaintiff), v. BOARD OF COUNTY COMMISSIONERS, SUBLETTE COUNTY, Appellee (Defendant).

State of Wyoming Department of Revenue, Appellant (Plaintiff), v. Board of County Commissioners, Sublette County, Appellee (Defendant).

Nos. 98-45, 98-46.

Supreme Court of Wyoming.

August 27, 1999.

Representing Appellant Exxon Corp.: Lawrence J. Wolfe and Patrick R. Day of Holland & Hart, Cheyenne, WY; and Brent R. Kunz and Dominique D.Y. Cone of Hathaway, Speight & Kunz, Cheyenne, WY. Argument by Mr. Day. Morris R. Massey of Brown, Drew, Massey & Sullivan, Casper, WY for Amici Curiae Rocky Mountain Mineral Association, acting through its Wyoming division, the Petroleum Association of Wyoming, the Wyoming Taxpayers Association, the Wyoming Mining Association, and the Wyoming Heritage Society.

Representing Appellant Dep't of Rev.: William U. Hill, Attorney General, and Vicci M. Colgan, Senior Assistant Attorney General. Argument by Ms. Colgan.

Representing Appellee: John C. McKinley and Nancy D. Freudenthal of Davis & Cannon, Cheyenne, WY. Argument by Ms. Freudenthal. Wade E. Waldrip of Williams, Kelly, Waldrip & Thompson, Buffalo, WY for Amicus Curiae Wyoming County Commissioners Association.

Before LEHMAN, C.J., and THOMAS, MACY, GOLDEN, and TAYLOR,¹ JJ.

LEHMAN, Chief Justice.

This appeal involves a dispute over the valuation of Exxon's production from the La-Barge wellfield in Sublette County. We agree with the district court that the Sublette County Board of County Commissioners may present allegations to the Board of Equalization that Exxon's production has been improperly or unequally assessed, thus triggering the Board's authority to carefully examine the case pursuant to Wyo. Stat. Ann. § 39-1-304(a)(xiv) (Michie 1997). We do not agree, however, that Sublette County may void a judicially approved settlement agreement which established the method to be used in computing Exxon's production valuation. We affirm in part and reverse in part.

ISSUES

In Case No. 98-45, appellant Exxon Corporation (Exxon) presents the following issues:

1. Whether Wyo. Stat. § 39-1-304(a)(xiv) should be construed as an open-ended appeals statute which the County can invoke to avoid its failure to file a timely appeal.

2. Whether Sublette County may retroactively void its obligations under a 1989 Settlement Agreement even though it has repeatedly ratified that Agreement by accepting its benefits.

In Case No. 98-46, appellant State Department of Revenue presents essentially the same issues:

1. Whether Wyo. Stat. § 39-1-304(a)(xiv) may be used by Sublette County to circumvent its failure to file timely appeals under Wyo. Stat. § 39-1-304(a).

2. Whether Sublette County may retroactively reject a 1989 settlement agreement concerning mineral valuation for production occurring through 1996.

The Board of County Commissioners of Sublette County, the appellee in these consolidated cases, states the issues in this manner:

1. Is the Board of Equalization barred from exercising its statutory duty to review and remedy improper or negligent administration of the tax laws by any action or inaction of Sublette County?

2. Does the 1989 Settlement Agreement bar the Board of Equalization from exercising its statutory duty to review and remedy improper or negligent administration of the tax laws?

FACTS

In 1986, Exxon began extracting natural gas from the LaBarge wellfield in Sublette County. Pursuant to Wyoming statutes, Exxon's production is subject to severance and ad valorem taxes. For the 1986 and 1987 tax years, Exxon used the "netback" method of valuation. After deductions, Exxon reported a taxable value of zero for its LaBarge production. The Department of Revenue disputed this valuation and did not certify taxable value for those years.

Litigation regarding valuation of the La-Barge production began in 1988. That year, the Wyoming legislature enacted Wyo. Stat. Ann. §§ 39-1-401 and -402 (Michie Cum.Supp.1988). These statutes, which have since been repealed, provided that total deductions allowed by the Department of Revenue from the sale of taxable natural gas and associated natural resources could not exceed 40% of the annual gross receipts from the sale of these products. Wyo. Stat. Ann. § 39-1-402(a) (Michie Cum.Supp.1988) (Repealed by 1989 Wyo. Sess. Laws ch. 57, § 1). Shortly after these statutes were enacted, Exxon filed a declaratory judgment action in district court for the First Judicial District seeking a declaration that the 40% "cap" legislation was an unconstitutional delegation of legislative authority. Among the defendants named in the suit were the Department of Revenue, the Board of Equalization, and Sublette County.

In January 1989, a settlement was reached in the cap litigation, and a "Stipulation for Entry of Declaratory Judgment" was filed in district court. Signed by Exxon, the Wyoming Attorney General, and the Sublette County Attorney, the stipulation provided: "The parties have engaged in settlement negotiations which have resulted in an agreement which is embodied in a Settlement Agreement, an executed copy of which is attached." Sublette County was listed among the parties to the settlement agreement. Pursuant to the stipulation, the district court entered a declaratory judgment pronouncing the 40% cap legislation unconstitutional, thus ending the cap litigation.

Under the terms of the settlement agreement, Exxon paid the State and Sublette County $12 million in full satisfaction of Exxon's severance and ad valorem tax liability for the 1986, 1987, and 1988 LaBarge production. The settlement agreement also established the method to be used to value post-1988 LaBarge production. For January 1, 1989, through August 31, 1991, the State² and County agreed to apply the comparison value method of valuation; and two of Exxon's processing agreements, the Howell and Yates agreements, were to be used as comparable value in computing valuation. In exchange, Exxon agreed that, during this period, it would not contest the applicability of ad valorem and severance taxes to federal helium.³ As to the valuation method to be used after August 31, 1991, the agreement provided:

After August 31, 1991, the State agrees that it will recognize the Howell and Yates agreements as a comparison value and that the comparison value method may be used in conjunction with other recognized appraisal techniques to determine value. If the State uses any method other than the comparison value method based on the Howell and Yates agreements, the Parties agree that the question of future taxability, for severance and ad valorem purposes, and value of future helium production remain open and are not resolved by this Agreement.

In 1997, Sublette County filed a "Petition for Board Examination" with the Board of Equalization (Board).⁴ Initiated pursuant to Wyo. Stat. Ann. § 39-1-304(a)(xiv) (Michie 1997), Sublette County's petition requested the Board investigate allegations that the 1989 settlement agreement, as it was administered, resulted in illegal, improper, and unequal assessment of the LaBarge production. At the heart of Sublette County's petition were allegations that use of the Howell and Yates agreements as comparable value permitted Exxon to make numerous improper deductions. The petition questioned Exxon's valuations for the 1992-1996 tax years (1991-1995 production years). Upon Sublette County's motion, the Board joined Exxon as a party.

Exxon and the Department of Revenue responded to Sublette County's petition before the Board by filing the present declaratory judgment action in the district court for the First Judicial District. These unconventional allies sought, inter alia, a declaration that Sublette County had waived any right it may have had to challenge Exxon's valuation. Exxon and the Department also sought a declaration that Sublette County was bound to the 1989 settlement agreement. With the battle shifted to district court, the Board of Equalization stayed action on Sublette County's petition before the Board, believing that "[g]iven the unique circumstances of these matters, it is in the best interest of all parties to seek judicial clarification of the scope of the administrative remedies available, if any, prior to any further administrative proceedings."

Upon cross motions for summary judgment, the district court ruled in Sublette County's favor. It concluded that (1) Sublette County may present a petition to the Board pursuant to Wyo. Stat. Ann. § 39-1-304(a)(xiv), and (2) the 1989 settlement agreement was not enforceable against Sublette County. In rendering its decision on the settlement agreement, the district court reasoned that: (1) the County did not have authority to contract away future rights to mineral tax revenue, and (2) the members of the Board of County Commissioners who were in office at the time the settlement agreement was signed have been replaced, and under this court's decision in Mariano & Assoc., P.C. v. Bd. of County Comm'rs of Sublette County, 737 P.2d 323 (Wyo.1987), future boards of county commissioners could not be bound to the settlement agreement.⁵ The Department of Revenue and Exxon timely appeal.

STANDARD OF REVIEW

Our standard for reviewing summary judgment is well established. Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. W.R.C.P. 56(c); White v. University of Wyoming, 954 P.2d 983, 985 (Wyo.1998). This court evaluates the propriety of summary judgment using the same standards and materials used by the district court, affording no deference to the district court's decision on issues of law. Id.

Statutory interpretation is a question of law. If the conclusion of law is in accordance with the law, we affirm it; if it is not, we correct it. Cargill v. State, Dep't of Health, Div. of Health Care Financing, 967 P.2d 999, 1001 (Wyo.1998);...