Solvay Chems., Inc. v. Wyo. Dep't of Revenue

• Citation: 517 P.3d 1123
• Decision Date: 29 September 2022
• Docket Number: S-22-0017
• Parties: SOLVAY CHEMICALS, INC., Appellant (Petitioner), v. WYOMING DEPARTMENT OF REVENUE, Appellee (Respondent).
• Court: United States State Supreme Court of Wyoming

517 P.3d 1123

SOLVAY CHEMICALS, INC., Appellant (Petitioner),
v.
WYOMING DEPARTMENT OF REVENUE, Appellee (Respondent).

S-22-0017

Supreme Court of Wyoming.

September 29, 2022

Representing Appellant: Walter F. Eggers, III, and Kasey J. Schlueter, Holland & Hart LLP, Cheyenne, Wyoming. Argument by Mr. Eggers.

Representing Appellee: Bridget Hill, Wyoming Attorney General; Brandi Lee Monger, Deputy Attorney General; Karl D. Anderson, Supervising Attorney General; Patrick Miller, Assistant Attorney General. Argument by Mr. Miller.

Before FOX, C.J., and KAUTZ, BOOMGAARDEN, GRAY, and FENN, JJ.

KAUTZ, Justice.

¶1] Between 2012 and 2015, Solvay Chemicals, Inc. (Solvay) captured and used waste mine gas (WMG) released from its trona mining operations to help fuel its soda ash processing plant. The Wyoming Department of Revenue (DOR) imposed severance and ad valorem (property) taxes on the WMG Solvay captured and used during those years.¹ Solvay objected, arguing that the relevant severance and ad valorem tax statutes did not impose tax on the WMG. In the alternative, it maintained the Wyoming Department of Audit (DOA) and DOR improperly valued the WMG. The Wyoming State Board of Equalization (Board) affirmed the DOR's tax assessment, and the district court affirmed the Board's decision on Solvay's petition for review. We too affirm.

ISSUES

[¶2] Solvay raises two issues which we restate as follows:

1. Did the Board err by concluding the WMG captured and used by Solvay as fuel was subject to severance and ad valorem taxation under Wyoming law?

2. Did the Board err by deciding Solvay had failed to meet its burden of showing the DOA and DOR improperly valued the WMG?

FACTS

[¶3] Solvay operates an underground trona mine in Sweetwater County based on mineral leases it obtained from Anadarko Land Corporation (Anadarko) and the federal Bureau of Land Management (BLM) (trona leases). The trona mining operations release WMG, consisting of highly flammable methane and other noxious gases, in the underground mine. Because WMG poses a safety risk to

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miners and the amount of WMG in the mine is strictly regulated by the federal government, Solvay drills gob-vent boreholes from the surface down to the trona mining levels to evacuate the WMG from the mine.

¶4] Prior to 2012, Solvay either released (vented) the evacuated WMG into the atmosphere or incinerated (flared) it. In 2012, it began using some of the WMG to help power the industrial dryers at its processing plant, where it converts the trona into soda ash. To accomplish this, Solvay collected the WMG from the gob-vent boreholes and ran it through a compressor and a dehydrator. It then transported the WMG via a pipeline to its processing plant. At the inlet of the dryers, Solvay mixed the WMG with natural gas it purchased from Questar Energy Trading Company (QEP) and BP Energy. The mixed gas was then burned to power the dryers.

[¶5] Before Solvay began capturing and using the WMG as fuel, it sought Anadarko's and the BLM's approval. Solvay and Anadarko amended their trona lease to grant Solvay "the right and privilege of producing [WMG] for [Solvay]’s sole use at [Solvay]’s Facilities for the production of [trona and soda ash]." In exchange, Solvay agreed to pay Anadarko a "production royalty" on the WMG. The BLM determined it could not legally lease WMG to Solvay but "approved" of Solvay capturing and using the WMG as fuel.

[¶6] In 2015, while auditing Solvay's trona and soda ash for production years 2010-2012, the DOA discovered Solvay was capturing and using the WMG as fuel but not paying severance or ad valorem taxes on it. Although the DOR believed Solvay's capture and use of the WMG as fuel was taxable and initially assessed severance and ad valorem taxes on the WMG for production years 2010-2012, it withdrew that assessment to allow the DOA to separately audit Solvay's WMG production from 2012-2015. At the completion of this audit, the DOA found the fair market value of the WMG Solvay collected and used during tax years 2012-2015 was $4,780,375 and concluded Solvay owed an additional $286,822.50 in severance taxes for those production years. The DOR adopted the DOA's conclusions in toto, assessed Solvay $286,822.50 in severance taxes, and certified the WMG's fair market value to the county assessor for purposes of ad valorem taxes.² Solvay objected, asserting that the WMG was not taxable under the severance or ad valorem tax statutes. The Board affirmed after a contested case hearing. Solvay filed a petition for review in the district court, which also affirmed. This timely appeal followed.

STANDARD OF REVIEW

[¶7] "We review an administrative decision as if it came directly from the agency and do not defer to the district court's ruling." Off. of State Lands & Invs. v. Mule Shoe Ranch, Inc. , 2011 WY 68, ¶ 11, 252 P.3d 951, 954 (Wyo. 2011) (citing Greene v. State ex rel. Wyo. Bd. of Chiropractic Exam'rs , 2009 WY 42, ¶ 9, 204 P.3d 285, 290 (Wyo. 2009) ). The Wyoming Administrative Procedure Act, Wyo. Stat. Ann. § 16-3-114(c) (LexisNexis 2021), governs our review of the Board's decision. Delcon Partners LLC v. Wyo. Dep't of Revenue , 2019 WY 106, ¶ 7, 450 P.3d 682, 684 (Wyo. 2019). We normally review the Board's findings of fact under the substantial evidence standard. Wyodak Res. Dev. Corp. v. Wyo. Dep't of Revenue , 2017 WY 6, ¶ 14, 387 P.3d 725, 729 (Wyo. 2017) (citing Dale v. S & S Builders, LL C, 2008 WY 84, ¶ 22, 188 P.3d 554, 561 (Wyo. 2008), and Section 16-3-114(c) ). In this case, however, Solvay does not dispute the Board's factual findings about whether the WMG is taxable but rather its conclusions of law, namely, its interpretation of the relevant statutes. "We review an agency's conclusions of law de novo and affirm when they are in accordance with the law." Id .

[517 P.3d 1128

See also , § 16-3-114(c)(ii)(A) ("The reviewing court shall ... [h]old unlawful and set aside agency action, findings and conclusions found to be ... [a]rbitrary, capricious, an abuse of discretion or otherwise not in accordance with law [.]") (emphasis added).

[¶8] " ‘When interpreting ... statute[s] and [their] application, we first look at the plain language used by the legislature. If the [statutory language] is sufficiently clear and unambiguous, the Court simply applies the words according to their ordinary and obvious meaning.’ " Int. of: AA , 2021 WY 18, ¶ 17, 479 P.3d 1252, 1258 (Wyo. 2021) (quoting DB v. State (In re CRA) , 2016 WY 24, ¶ 16, 368 P.3d 294, 298 (Wyo. 2016), and citing MR v. State (In re CDR) , 2015 WY 79, ¶ 19, 351 P.3d 264, 269 (Wyo. 2015) ).

"We ... construe each statutory provision in pari materia , giving effect to every word, clause, and sentence according to their arrangement and connection. To ascertain the meaning of a given law, we also consider all statutes relating to the same subject or having the same general purpose and strive to interpret them harmoniously.... When the words used convey a specific and obvious meaning, we need not go farther and engage in statutory construction."

PacifiCorp, Inc. v. Dep't of Revenue, State , 2017 WY 106, ¶ 10, 401 P.3d 905, 909 (Wyo. 2017) (quoting Nicodemus v. Lampert , 2014 WY 135, ¶ 13, 336 P.3d 671, 674 (Wyo. 2014), and citing Estate of Dahlke ex rel. Jubie v. Dahlke , 2014 WY 29, ¶¶ 36-37, 319 P.3d 116, 125-26 (Wyo. 2014) ).

DISCUSSION

¶9] Solvay argues the Board erred by determining the WMG it captured and used as fuel was subject to severance and ad valorem taxation. It also claims that, even if the WMG was subject to taxation, the DOA and DOR improperly valued it.

A. Taxation

[¶10] The Wyoming Constitution provides that all mines "shall be taxed ... in lieu of taxes on the lands[ ] on the gross product thereof ...; provided, that the product of all mines shall be taxed in proportion to the value thereof." Wyo. Const. art. 15, § 3. The legislature, in turn, has imposed severance and ad valorem taxes on the value of the gross product of minerals, including natural gas. Relevant here, Wyo. Stat. Ann. § 39-14-203(a)(i) (LexisNexis 2021) levies "a severance tax on the value of the gross product extracted for the privilege of severing or extracting ... natural gas in the state," and Wyo. Stat. Ann. § 39-13-103(b)(iii), (iv) (LexisNexis 2021) provides that the "taxable value" of natural gas, for purposes of ad valorem taxation, is its fair market value.

[¶11] Solvay maintains the WMG it captured and used as fuel was not subject to severance or ad valorem taxes for two reasons. First, it claims the WMG was not "natural gas" as required for the taxes established by both the severance tax and the ad valorem tax statutes. Second, it argues it did not have the "privilege of severing or extracting" the WMG for purposes of severance taxation and it was not a "taxpayer" for purposes of ad valorem taxation.

Natural Gas

[¶12] During the 2012-2015 tax years, "natural gas" was statutorily-defined in pertinent part as "all gases, both hydrocarbon and nonhydrocarbon, that occur naturally beneath the earth's crust and are produced from an oil or gas well." Wyo. Stat. Ann. § 39-14-201(a)(xv) (LexisNexis 2012).³ "Well" meant (and still means) "a hole drilled in the earth for the purpose of finding or producing ... natural gas." Section 39-14-201(a)(xxx). Solvay claims the WMG cannot be "natural gas" under this statutory definition because it was not "produced" from a gas "well."

[¶13] The Board decided the WMG which Solvay captured and used as fuel was "natural gas" under § 39-14-201(xv) because (1) Solvay did not dispute the WMG was a gas

[517 P.3d 1129

which occurred naturally beneath the earth's crust, and (2) the WMG was "produced from an oil or gas well." Because the term "produced" was not defined by statute or DOR rule, the Board relied on its precedent which defined "produce" and "production" as " ‘generally refer[ring] to gas and valuable components removed from the ground which reach the end of the production process, or "point of...